The Broad Reach of the Medicare Fraud Strike Forces

It has been over a decade since the U.S. Departments of Justice and Health and Human Services (HHS) jointly created the federal government’s first Medicare Fraud Strike Force (MFSF) in South Florida. Their goal was to reduce and prevent Medicare and Medicaid fraud through enhanced interagency cooperation. Since then, the program has grown to 15 strike forces operating in 24 federal districts, including in Brooklyn and, since August 2018, in the Newark-Philadelphia region, which in particular has been tasked with targeting health care fraud and illegal opioid prescriptions.

The strike forces focus on the worst health care offenders, in the highest intensity regions, using data analytical techniques to identify abnormal billing levels in health care fraud “hot spots,” that is, in cities with unusually high levels of billing and other fraud. They target suspicious billing patterns as well as emerging schemes and schemes that migrate from one community to another.

Each strike force team brings the investigative and analytical resources of the FBI, the HHS Office of Inspector General (OIG), and other law enforcement agencies, as well as the prosecutorial resources of the Justice Department’s Criminal Division’s Fraud Section and local U.S. Attorney’s Offices to analyze data obtained from the Centers for Medicare and Medicaid Services (CMS) and bring cases in federal district court.

The strike forces have been quite active. To date, they have charged more than 4,200 defendants who have collectively billed the Medicare program for nearly $19 billion. See U.S. Attorney’s Office, Southern District of Texas, Press Release, “Former Texas mayor and two others found guilty in $150 million money laundering and health care fraud scheme” (Nov. 6, 2019).

Recent strike force actions in New York and New Jersey reflect the broad range of activities and schemes seeking to defraud the federal insurance programs.

Bribes and Kickbacks
In late November, Kenneth Sun, a doctor who practiced in New Jersey and Pennsylvania, pleaded guilty in the District of New Jersey to one count of conspiracy to defraud the United States and to pay and receive health care kickbacks.

As part of his guilty plea, Sun admitted that, from 2012 to 2016, he conspired to solicit and receive more than $140,000 in bribes and kickbacks from Insys Therapeutics, a pharmaceutical company, in exchange for prescribing more than 28 million micrograms of an opioid containing fentanyl. Sun admitted that he prescribed the drug to patients for whom it was medically unnecessary, not eligible for insurance reimbursement, and unsafe. He also admitted that the bribes and kickbacks he received from Insys Therapeutics in exchange for prescribing the drug were disguised as “honoraria” for educational presentations that he purportedly provided to licensed practitioners. In reality, Sun admitted, the presentations were a sham because they lacked the appropriate audience of licensed practitioners seeking educational information regarding the drug, there was no presentation about the drug whatsoever, the same individuals attended over and over again, and Sun did not attend some of the presentations at all.

According to prosecutors, Sun caused Medicare to pay more than $847,000 for the prescriptions that were medically unnecessary, procured through the payment of kickbacks and bribes, and not eligible for Medicare reimbursement. See U.S. Department of Justice, Press Release, “New Jersey/Pennsylvania Doctor Pleads Guilty to Accepting Bribes and Kickbacks In Exchange for Prescribing Powerful Fentanyl Drug” (Nov. 22, 2019). (A few months earlier, Insys Therapeutics reached a $225 million global resolution of criminal and civil investigations with federal prosecutors. See U.S. Department of Justice, Press Release, “Opioid Manufacturer Insys Therapeutics Agrees to Enter $225 Million Global Resolution of Criminal and Civil Investigations” (June 5, 2019).

Kickbacks and Money Laundering
A recent MFSF case in New York involved different allegations of health care kickbacks—plus allegations of money laundering.

Here, Aleksandr Pikus, the manager in control of multiple medical clinics in Brooklyn and Queens, was found guilty after a two-week trial for his role in what prosecutors asserted was a nearly $100 million health care kickback and money laundering scheme. The jury found Pikus guilty of one count of conspiracy to commit money laundering, two counts of money laundering, one count of conspiracy to receive and pay health care kickbacks, and one count of conspiracy to defraud the United States by obstructing the Internal Revenue Service.

According to evidence presented at trial, Pikus and his co-conspirators operated a series of medical clinics in Brooklyn and Queens over the course of nearly a decade that submitted approximately $96 million in medical claims. The clinics employed doctors, physical and occupational therapists, and other medical professionals who were enrolled in the Medicare and Medicaid programs.

The authorities asserted that, in return for illegal kickbacks, Pikus and his co-conspirators referred beneficiaries to these health care providers, who submitted claims to the Medicare and Medicaid programs. The government contended that Pikus then laundered a substantial portion of those proceeds through companies that he and his co-conspirators controlled, including by cashing checks at several New York City check-cashing businesses; he and his co-conspirators allegedly then failed to report that cash income to the IRS.

The government contended that Pikus used the cash to enrich himself and others and to pay kickbacks to patient recruiters, including ambulette drivers, who, in turn, paid beneficiaries to receive treatment at Pikus’ medical clinics. The government further contended that Pikus used shell companies and fake invoices to conceal his illegal activities.

Notably, more than 25 other individuals previously pleaded guilty to or were convicted of participating in the scheme, including physicians, physical and occupational therapists, ambulette drivers, and the owners of several of the sham shell companies that the government said were used to launder the stolen money. See U.S. Department of Justice, Press Release, “Head of New York Medical Clinics Found Guilty in Nearly $100 Million Money Laundering and Health Care Kickback Scheme” (Nov. 15, 2019).

Telemedicine
In late September, the MFSF and the U.S. Attorney’s Office for the District of New Jersey, among other prosecutors, brought a health care fraud enforcement action across seven federal districts in the Northeastern United States, which the authorities asserted involved more than $800 million in loss and the distribution of over 3.25 million pills of opioids in “pill mill” clinics. They characterized the action as “one of the largest health care fraud schemes ever investigated” by the FBI and the HHS-OIG and prosecuted by the Justice Department.

The action included new charges against 48 defendants for their alleged roles in submitting over $160 million in fraudulent claims, including charges against 15 doctors or medical professionals, and against 24 defendants charged with diverting opioids.

In addition, the enforcement action included a number of guilty pleas, including in the District of New Jersey by Elliot Loewenstern, the vice president of marketing of purported call centers and telemedicine companies. Loewenstern pleaded guilty to one count of conspiracy to defraud the United States and pay and receive health care kickbacks, and one count of solicitation of health care kickbacks.

According to prosecutors, Loewenstern was the vice president of marketing of PCS CC LLC and a marketer for Video Doctor USA and Telemed Health Group LLC (collectively, the Video Doctor Network). In connection with his plea agreement, Loewenstern admitted causing the submission of over $424 million in fraudulent claims that resulted from the solicitation of illegal kickbacks and bribes in exchange for the referral of brace orders to brace providers.

In connection with his guilty plea, Loewenstern admitted that he and others agreed to solicit and receive illegal kickbacks and bribes from patient recruiters, brace suppliers, and others in exchange for arranging for doctors to order medically unnecessary orthotic braces for beneficiaries of Medicare and other insurance carriers. The beneficiaries were contacted through an international telemarketing network that lured hundreds of thousands of elderly or disabled patients into a criminal scheme that crossed borders, involving call centers in the Philippines and throughout Latin America, Loewenstern stated. Loewenstern admitted that many of these orders were written after only a short telephone call between the health care provider and the beneficiary, with whom the health care provider had no prior doctor-patient relationship.

In addition, Loewenstern admitted that he was aware that the owners and other executives of the Video Doctor Network schemed to defraud investors and others by making false and fraudulent representations that the Video Doctor Network was a legitimate telemedicine enterprise that made revenue of “$10 million per year” and “20 percent profit” from payments by beneficiaries who enrolled in a membership program and paid for the telemedicine consultations. These statements were false because revenue was obtained by the Video Doctor Network through the receipt of illegal kickbacks and bribes, Loewenstern admitted.

In connection with his plea agreement, Loewenstern agreed to pay $200 million in restitution to the United States, as well as to forfeit assets and property traceable to proceeds of the conspiracy to defraud the United States. See U.S. Attorney’s Office, Western District of New York, Press Release “WDNY Takes Part In Federal Health Care Fraud Takedown” (Sept. 26, 2019).

Testing Fraud
Finally, consider the guilty pleas entered recently by the owners of two New York diagnostic testing facilities owners for their roles in a more than $18.5 million health care fraud.

Tea Kaganovich and Ramazi Mitaishvili, a married couple from Brooklyn, were the co-owners of several diagnostic testing facilities in Brooklyn, including Sophisticated Imaging, East Coast Diagnostics, East Shore Diagnostics, East West Management, and RM Global Health. They both pleaded guilty to one count of health care fraud and one count of conspiracy to defraud the lawful functions of the IRS.

As part of their guilty pleas, Kaganovich and Mitaishvili admitted that they submitted fraudulent health care claims for diagnostic testing services. They also admitted that they paid approximately $18.5 million in kickbacks for the referral of beneficiaries who submitted themselves to diagnostic testing and other purported medical services.

In addition, Kaganovich and Mitaishvili admitted that they falsely reported to the IRS that the illegal kickback payments were legitimate business expenses, which caused relevant tax forms to falsely under-report business income and claim deductions. See U.S. Department of Justice, Press Release, “New York Diagnostic Testing Facility Owners Plead Guilty in More than $18.5 Million Health Care Fraud Scheme” (May 8, 2019).

Conclusion
It is hard to imagine that the officials who created the first strike forces in 2007 could have foreseen that the number of strike forces would continue to grow to the extent that they have, that the strike forces would continue to bring charges and prosecutions into the 2020s, and that the health care frauds they would uncover would be as complex and as diverse as they have been. Fighting insurance fraud—and, in the case of the strike forces, Medicare and Medicaid fraud—requires continued vigilance and hard work.

Reprinted with permission from the January 3, 2020 issue of the New York Law Journal. © ALM Media Properties, LLC.  Further duplication without permission is prohibited.  All rights reserved