Allegations in UHC health insurance fraud case involve multiple defendants

Investigation uncovers serial health insurance fraud cases and other lawsuits

This is an excerpt from a 5,000-word article in the January 22, 2018, issue of THE DARK REPORT. The complete article is available for a limited time to all readers, and available at all times to paid members of the Dark Intelligence Group.

In this latest health insurance fraud case, UnitedHealthcare is taking on NextHealth.CEO SUMMARY: UnitedHealth made national news when it filed a $100 million lawsuit against Next Health and other defendants in Dallas in January 2017. The insurer alleged fraud involving clinical laboratory tests. This alleged health insurance fraud case is just the latest chapter in an almost decade-long string of legal proceedings involving the healthcare businesses some of the defendants have organized. Following months of investigation, THE DARK REPORT explains the serial nature of other lawsuits, federal indictments, and whistleblower cases involving some of these same defendants over the years.

WHEN A MAJOR HEALTH INSURER filed a lawsuit alleging healthcare fraud involving $100 million of clinical laboratory test claims in Dallas in 2017, it became national news. In court documents, UnitedHealthcare alleged fraud against Next Health, LLC, and multiple defendants involving how these defendants submitted claims for healthcare services, including clinical laboratory tests. UnitedHealth seeks $100 million in damages. (See TDR, Feb. 21, 2017.)

In its investigation of the Next Health lawsuit, THE DARK REPORT has learned that, since 2010, certain companies and individuals in Texas have repeatedly been the subject of lawsuits, criminal investigations, and regulatory actions. Allegations of fraud are a common theme in some of these lawsuits and criminal investigations.

The UnitedHealthcare lawsuit is the visible tip of a large iceberg; that iceberg being how certain individuals and their various companies are alleged to have repeatedly developed different ways to scam health insurers.

Stated differently, the allegations in the multiple civil lawsuits and federal indictments cumulatively portray these individuals as serial fraudsters. The documents filed in these cases claim to show evidence of numerous health insurance fraud cases involving multiple companies over many years.

Just One Chapter

UnitedHealthcare (UHC) filed this lawsuit on January 26, 2017, but this case is just one chapter in a highly-complex story involving several of the defendants named in this alleged health insurance fraud case. Prior to this lawsuit, certain of the defendant companies and their owners or officers were involved in other lawsuits that alleged fraudulent behavior. Also, certain of these defendants were named in earlier actions federal regulators and federal healthcare prosecutors initiated.

Thus, the UnitedHealthcare vs. Next Health lawsuit is one significant event in a series of health insurance fraud cases, lawsuits and regulatory actions that insurers, government officials, and whistleblowers have initiated in Texas over multiple years.

As one group of healthcare companies they operate becomes enmeshed in lawsuits and regulatory actions, these individuals seem to be able to create a new group of cross-linked healthcare companies to continue inducing referrals from physicians, thereby allowing them to submit bills to federal and private payers for what are often described in lawsuits and federal indictments as “over-priced” and “medically-unnecessary” procedures.

These schemes frequently include clinical laboratory tests, particularly in toxicology and pain management. But various court records describe these individuals as ready to provide other clinical services they see as lucrative.

The influence these types of allegedly-fraudulent arrangements have in the clinical laboratory testing market makes this a story worth telling in detail. For example, long-established medical laboratories are forced to compete against ever-greater numbers of newly-created lab companies organized to offer pharmacogenomic, pain management, and toxicology testing.

Competition from these allegedly fraudulent arrangements often frustrates established, well-run, and honest labs. In an effort to win lab test referrals, disreputable labs may offer their client physicians benefits and inducements that might possibly violate state and federal laws.

Since UnitedHealthcare filed its lawsuit in 2017, new chapters in this particular story about alleged fraud have been written. For example, in July 2017, Next Health and several of the other defendants in the UnitedHealthcare case were sued in Dallas by the insurance company that sold them executive liability policies. The insurer asked the court to void those policies, among other remedies.

Just a month later, on August 18, 2017, Next Health and one of the toxicology lab companies (Medicus Laboratories) named as a defendant in the UnitedHealth case filed their own lawsuit against the federal Secretary of Health and Human Services. The defendants challenged pending regulatory actions that would revoke the CLIA license of one of the toxicology lab subsidiaries.

Interestingly, this story got even more heated when on Oct. 5, 2017, Next Health and other defendants countersued UnitedHealthcare.

A Decade of Fraud Alleged

The best starting point for describing a pattern of alleged fraud and abuse in the Dallas area that goes back almost 10 years is to understand the claims that UnitedHealthcare Services made in a lawsuit filed in January 2017 against multiple defendants in the U.S. District Court for the Northern District of Texas.

Named as defendants in the case are:

  • NextHealth, LLC, and its subsidiaries:

◆ United Toxicology, LLC,
◆ Medicus Laboratories, LLC,
◆ US Toxicology, LLC, and,
◆ American Laboratories Group, LLC

  • Erik Bugen
  • Kirk Zajac

Multiple Defendants

The lawsuit collectively refers to these lab entities as “Next Health Labs,” which will be used in this story.

In the lawsuit, UnitedHealth alleged that Next Health and its subsidiaries “engaged in unlawful conduct and inappropriate business practices. These included:

a) “payment of bribes and kickbacks to test referral sources, including physicians, sober homes, and sales consultants, in exchange for [lab] test orders;

b) “inappropriate utilization of standing test protocols;

c) “performance and billing for testing services not ordered by physicians;

d) “improper billing for services they did not perform; and,

e) “routinely ignoring patients’ payment responsibilities in order to avoid drawing attention to their scheme.”

Multiple Counts In Lawsuit

Specific counts in the lawsuit included fraud, conspiracy to commit fraud, sham to perpetrate fraud, theft, and unjust enrichment.

In Count 11 of the complaint, UnitedHealth alleged that Next Health and its subsidiary United Toxicology intentionally used a name for the subsidiary that was confusingly similar to the insurer’s. In court papers, the plaintiffs said the purpose was to mislead UHC plan members into thinking that documents—such as explanations of benefits reflecting United Toxicology’s “grossly over-priced and unnecessary services”—were associated with the insurance company.

Court papers describe the relief UHC sought: including enjoining defendants from submitting fraudulent claims based on unlawful conduct and inappropriate business practices; an award of actual, consequential, and exemplary damages; and attorneys’ fees and court costs.

Federal Criminal Case

One important fact is that Semyon Narosov and Andrew Jonathan Hillman—principals of defendant companies in the UnitedHealthcare lawsuit—were named as defendants in a criminal health insurance fraud case filed on Nov. 16, 2016, in Dallas by U.S. Attorney John R. Parker. In its complaint against Next Health, UHC described what it saw as the connections and similarities between the schemes of which it accuses Next Health and the Next Health labs and the alleged illegal kickback conspiracy at Forest Park Medical Center in Dallas (FPMC), as described in the federal criminal case.

The FPMC scheme resulted in the November 2016 federal indictment of 21 individuals, including executives, surgeons, physicians, sales and marketing consultants, and others. To date, four defendants in the FPMC case pled guilty to criminal felonies, including one physician. A trial involving 17 defendants is ongoing.

‘Illegal Scheme’

According to UHC’s lawsuit, two of those indicted in the FPMC health insurance fraud case—Semyon Narosov and Andrew Jonathan Hillman—are also key figures in the Next Health network of companies.

In its lawsuit, UnitedHealthcare described how—in the FPMC federal indictment—the two men are alleged to have collectively controlled a hospital consulting company and “received bribe and kickback payments in exchange for referring patients to FPMC or to surgeons who performed medical procedures at the hospital.”

Key Figures

“Narosov and Hillman held (and may still hold) ownership and/or management positions with Next Health and/or one or more of its subsidiaries,” stated UHC in its complaint. “Through those ownership and management positions, Narosov and Hillman made sure that Next Health and its subsidiaries employed an illegal scheme that was similar to the one in place at Forrest [sic] Park.”

Statements in both the federal indictment and in the UHC lawsuit describe how the defendants allegedly engaged in serial fraud by creating a series of companies and business groups. UnitedHealthcare stated that Next Health was a “rebrand” of U.S. Health Group Inc. According to records at the Texas Secretary of State, a New Jersey corporate services company filed a name reservation certificate in 2004 in Texas for “U.S. Health Group, Inc. ”

Also, on May 17, 2010, Texas Secretary of State records show that Pioneer Laboratories, LLC, was formed in Texas, with Jeffrey L. Wasserman, MD, listed as its registered agent. Public records show that Wasserman is an anesthesiologist at Pinnacle Partners In Medicine in Dallas.

Three months later, on August 23, 2010, Medicus Laboratories, LLC (a defendant in the UnitedHealthcare suit), was formed as a Texas corporation, with Jeffrey Wasserman, MD, shown as its organizer. Its governing persons were listed as Pioneer Laboratories, LLC (Wasserman’s company), and Hospital Business Concepts, Inc. Texas Secretary of State records show this company was formed in 2006 and list Andrew Hillman, Semyon Narosov, and Yan Narosov as officers or directors.

Doctors’ Role Is Untold

What remains untold about the events of the past decade in Dallas is the role of office-based physicians in sustaining the schemes alleged and described in various lawsuits. For example, it takes a huge number of lab test referrals from physicians to allow Next Health—as alleged by UnitedHealthcare in court documents—to submit $400 million in lab test claims.

How does the proliferation of health insurance fraud cases impact your laboratory? Please share your thoughts with us in the comments below.


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