Federal Healthcare Fraud Enforcement Turns to Emerging Areas

COVID-19 Testing, Opioid Treatment Come Under DOJ Fire

CEO SUMMARY: Healthcare compliance attorneys say the Department of Justice (DOJ) is turning its focus to fraudulent activity related to COVID-19 testing. But that’s not the only area attracting greater scrutiny by the DOJ. Fraud stemming from opioid treatment has snared clinical laboratory companies that ordered medically-unnecessary diagnostic tests. Further, prosecutors have been ordered to investigate the illegal actions of individuals at providers and laboratory companies accused of wrongdoing.

Federal prosecutors are ramping up investigations of fraud and abuse involving SARS-CoV-2 testing and other COVID-19 related healthcare services, such as telehealth claims. Attorneys familiar with these efforts say investigators are prioritizing the actions of individuals alleged to have violated federal laws. 

Clinical laboratory directors and pathologists involved with COVID-19 testing should be aware of this heightened healthcare fraud enforcement. Further, lab owners and managers who engaged in fraudulent activities may find themselves at greater risk of being charged personally. That’s because government fraud investigators are putting more emphasis on individual accountability for these and other fraud cases. 

This is one reason why legal experts recommend that lab leaders should review how their organizations process COVID- 19-related activities. These audits should review coding, billing, and collection of COVID-19 claims, as well as the sales practices that involved the referral of patient specimens for COVID-19 testing. 

Speaking during a Feb. 16 healthcare enforcement webinar, attorneys from Boston-based law firm Mintz noted that the government is aggressively pursuing fraud related to COVID-19, including improper billing for COVID-19 testing. The webinar was based on the recent report by Mintz firm, “Healthcare Enforcement Year in Review and 2022 Outlook.”

COVID-19 Fraud

Through its Consumer Protection Branch, the U.S. Department of Justice (DOJ) is particularly active in COVID-19 fraud enforcement, said Samantha Kingsbury, an attorney in Mintz’s healthcare enforcement defense practice. “DOJ has indicated in public comments that it plans to expand its COVID-19 enforcement as COVID-19 related fraud continues to evolve,” Kingsbury noted. 

Another new enforcement tool is the COVID-19 Fraud Enforcement Task Force, which is comprised of a variety of entities within DOJ that also work with the Federal Bureau of Investigation (FBI) and other agencies. This task force was involved in several major investigations in 2021. 

That year, the task force brought charges in a scheme involving the provision of COVID-19 testing to Medicare beneficiaries at senior living facilities, at drive-through COVID-19 testing sites, and at medical offices. Defendants were accused of taking the Medicare data and specimens they collected for purported COVID-19 testing and using them, instead, to bill Medicare for unrelated and medically unnecessary testing, including cancer genetic testing, allergy testing, and respiratory pathogen panels—the results of which were often not provided to patients. In addition, when defendants did provide COVID-19 test results to Medicare beneficiaries, these results were often unreliable or not timely. 

Clinical Lab Owner Indicted 

DOJ also indicted a diagnostic laboratory owner, Billy Joe Taylor of Arkansas, in November on charges of healthcare fraud and money laundering. Taylor allegedly used his access to beneficiary and provider information contained in test orders to submit fraudulent Medicare claims amounting to more than $100 million. (See sidebar “Lab Owner Allegedly Contacted His Victims,” below.) 

In September 2021, another investigation targeted 138 defendants, including multiple providers, for alleged healthcare fraud schemes that resulted in approximately $1.4 billion in losses to the government, about $29 million of which was attributed to COVID-19 related fraud. DOJ charged nine defendants with engaging in COVID-19 related schemes to exploit relaxed telehealth policies and misuse of patient information to submit claims to Medicare for medically unnecessary and expensive testing, including cancer genetic testing. 

“These takedowns covered a variety of arrangements, but there were a couple of COVID areas of enforcement focus, such as COVID-related healthcare services—specifically COVID lab testing,” Kingsbury said. In some cases, beneficiaries did not receive the promised COVID-19 testing, or test results were inaccurate. In other cases, defendants were accused of performing testing completely unrelated to COVID-19, such as allergy or genetic testing.

Kingsbury said she expects to see continued DOJ enforcement in this area, especially given a federal report released at the end of 2021 detailing how COVID-19 testing drove a huge increase in Medicare Part B laboratory spending for 2020. While overall spending went up, from $7.7 billion in 2019 to $8 billion in 2020, non-COVID testing went down. (See TDR, “Non-COVID Part B Lab Spend Declined by 15.9% in 2020,” Jan. 31, 2022.) 

“Given this, we expect more attention to be paid to clinical laboratories going forward,” said Kingsbury, noting that there likely will be an increase in 2022 of civil enforcement actions under both the COVID-19 Consumer Protection Act and the FCA. 

Test Fraud via Telehealth

Healthcare fraud enforcement is also shifting to address the increasing importance of technology in healthcare, Kingsbury said. The use of telehealth grew exponentially during the COVID-19 pandemic, and its broad use is expected to continue, along with the potential for fraud and abuse. 

Telehealth visits for Medicare beneficiaries increased in 2020 by 63-fold—from 840,000 in 2019 to 52.7 million, federal health officials reported in December.

Sham Telehealth Consults 

“DOJ historically has prioritized enforcement against outright telefraud, but we have begun to see enforcement evolve toward investigations and False Claims Act cases involving billing for sham telehealth consults,” said Kingsbury, who noted that enforcement will continue to follow the massive growth of telehealth during the pandemic.

There is a distinction betwSamantha-Kingsburyeen “telefraud” and “telehealth fraud.” The former involves fraudulent telemarking schemes to falsely bill for genetic and other diagnostic tests, durable medical equipment, and prescription drugs. The latter involves falsely submitting claims for sham or inadequate telehealth visits.

“Given this, we expect more attention to be paid to clinical laboratories going forward,” said Kingsbury, noting that there likely will be an increase in 2022 of civil enforcement actions under both the COVID-19 Consumer Protection Act and the FCA. 

Fraudulent Cancer Tests 

In May 2021, the DOJ announced indictments of three telemarketing company owners in an alleged telefraud scheme involving the referrals of medically unnecessary cancer genetic testing to medical laboratories through a chain of kickbacks. Two of the individuals allegedly conducted a telemarketing campaign to convince Medicare beneficiaries to accept genetic tests that these beneficiaries did not need.

According to the indictment, the telemarketing company owners paid kickbacks to telemedicine companies, who contracted with physicians in exchange for physician orders for the expensive genetic tests. The physicians, however, had no prior relationship with and were not treating the beneficiaries for cancer or cancer symptoms, and they did not conduct proper telemedicine visits with these beneficiaries.

All three indicted individuals then sold the orders to laboratories, one of which allegedly submitted $46 million in claims to Medicare and received $27 million in reimbursements. The unnamed laboratory allegedly paid the telemarketing company $14 million in kickbacks for those test orders.

New Type of Enforcement

Meanwhile, a new type of enforcement involving telehealth emerged in mid-2021. DOJ announced charges against individuals engaged in various healthcare fraud schemes—including telehealth fraud—that caused more than $143 million in false billings.

The announcement marked a significant change in telehealth enforcement because certain defendants billed for sham telehealth consults that did not occur, in contrast to the telefraud schemes involving fraudulent orders for ancillary services ordered through telehealth.

“A continued shift in enforcement activity toward fraud involving telehealth consults seems inevitable given the marked increase in telemedicine users among Medicare beneficiaries during the pandemic,” Kingsbury said. 

The False Claims Act continues to be one of the government’s most potent enforcement tools. Healthcare cases continue a 25-year trend of driving total volume, with close to 500 cases filed in 2021, according to Kevin McGinty, Chair of Mintz’s class action practice. The number of healthcare cases initiated by DOJ has trended up significantly since 2015. 

More Fraud Investigations

“In 2012, there was relatively low volume, and that has substantially increased over the past 10 years,” he said. “This is a bipartisan trend. What we’re seeing is that healthcare cost containment is a bipartisan issue.”

In regard to whistleblower cases, former employees brought more than 70% of the cases, with current employees making up for another 20%. 


“In trying to mitigate your risk of qui tam [whistleblower] litigation, it’s important to focus not only on compliance, but also the environment of reporting on compliance and letting employees know that their complaints are being acted upon and then sent to HR,” McGinty explained. 

Given that overdose deaths remain high, the government’s focus on opioid-related enforcement is expected to continue in 2022 and beyond. Therefore, the activities of toxicology laboratories are likely to remain in the government spotlight, said Karen Lovitch, Chair of Mintz’s health law and healthcare enforcement defense practices. 

‘National Fraud Takedown’

In October 2020, the DOJ filed criminal charges against 245 defendants in what it called a “national healthcare fraud and opioid takedown.” Included in those charges were $845 million in false and fraudulent claims related to substance abuse treatment facilities and more than $806 million to other healthcare fraud and illegal opioid distribution schemes across the country. (See TDR, “DOJ $6B Fraud Crackdown Charges 345 Defendants,” Oct. 5, 2020.)

As recently as March 2022, Redwood Toxicology Laboratory in Santa Rosa, Calif., paid nearly $4.8 million to settle allegations that it overcharged the Connecticut Medicaid programs for drug testing services for substance abuse patients.

Meanwhile, back in September, a Michigan pain management physician was convicted of healthcare fraud for a scheme to defraud Medicare of over $100 million. Francisco Patino of Wayne County billed for expensive and medically unnecessary spinal injections to certain patients in exchange for Patino prescribing high doses of opioids for these patients. The Eliminating Kickbacks in Recovery Act (EKRA) is a criminal law that prosecutors can use to charge laboratories with testing fraud related to opioid prescriptions.

Kickback Scheme with Lab

Patino also participated in a kickback scheme with an unnamed diagnostic laboratory through which he received payments in exchange for referrals to the laboratory, and he used those funds to promote a fad diet and wellness book. 

Ultimately, 2022 is shaping up to be an active year for healthcare enforcement, Lovitch said. To mitigate risk, clinical laboratories and pathology groups must invest in their compliance program, regularly evaluate the effectiveness of the program through proactive auditing and monitoring, and ensure that they have a strong human resources department. 

“Employees, former and current, are the biggest group of relators out there,” stressed Karen Lovitch, an attorney at Mintz. “It’s important to treat your employees with respect, especially employees who are on their way out the door who may not be happy. You need to give them ample opportunities to report compliance-related concerns and make them feel heard and seen.” 

DOJ Warning to Providers 

One consequence of the DOJ’s policy of bringing more cases against the individuals involved in healthcare fraud is that it may encourage more whistleblowers to file qui tam actions going forward. If this proves true, that would increase the risk for those clinical laboratory companies willing to push their interpretation of the federal Anti-Kickback Statute, EKRA, and the Stark Law because employees are often first to recognize violations of federal law.

Contact Samantha Kingsbury at 617-348-1829 or spkingsbury@mintz.com; Kevin McGinty at 617-348-1688 or kmcginty@mintz.com; Karen Lovitch at 202-434-7324 or kslovitch@mintz.com; and Randy Jones at 858-314-1510 or rkjones@mintz.com.

Federal Prosecutors Ready to Hold Individuals Accountable for Healthcare Fraud and Abuse

IN 2021, U.S. DEPUTY ATTORNEY GENERAL LISA MONACO issued a memo that renewed the DOJ’s focus on individual accountability in cases of healthcare fraud and abuse, including clinical laboratory testing. The Biden Administration has said that white collar crime is a priority and that it will prosecute individuals as well as corporations.

“Monaco urged prosecutors to be bold in prosecuting individual corporate executives, even if it means they might lose the cases,” observed Randy Jones, an attorney with Boston-based law firm Mintz. Jones is a former federal prosecutor and has a healthcare enforcement defense practice. He was speaking during the Mintz webinar last February, “Healthcare Enforcement Year in Review and 2022 Outlook.”

The DOJ also is increasing the resources dedicated to prosecuting individuals. This includes embedding a team of FBI agents to work full time within the DOJ criminal fraud section. The agents are using data analytics to identify corporate wrongdoing. Because of the large volume of clinical laboratory test claims submitted daily, an effective data analytics tool might help federal fraud investigators detect lab test fraud earlier and with more accuracy. 

Past Misdeeds Are a Factor

Monaco also directed federal prosecutors to consider the criminal, civil and regulatory records of a company that is subject to a criminal investigation when deciding the appropriate resolution.

“This renewed focus on individual accountability is going to cause companies under investigation by the DOJ to be prepared to conduct more fulsome internal investigations, to identify all wrong doers and to provide the government with all non-privileged information about individual wrongdoing,” Jones explained. “There is no partial credit for incomplete disclosures.”

Clinical laboratories are not immune from this focus on individual accountability, noted Karen Lovitch, an attorney at Mintz. Executives must be aware that if their laboratory is investigated, the government is going to expect the clinical laboratory to provide information about anyone who was involved in the conduct at issue, she warned.

10 Texas Doctors Settle

As if to underscore this focus on individual accountability, the DOJ on March 22 announced that 10 Texas doctors and a healthcare executive who ran medical clinics in Florida agreed to pay back $1.68 million to resolve allegations involving illegal kickbacks related to clinical laboratory testing. (See the related story here for more details.)

“There is nothing more paramount to justice than holding all individuals accountable for committing and profiting from healthcare fraud, no matter their station in life,” said U.S. Attorney Brit Featherston about the settlement with the Texas physicians and the hospital CEO.

Should the DOJ increase the frequency with which it files criminal charges for healthcare fraud and abuse against individuals, many in the clinical laboratory industry would welcome this step. It would increase the consequences for those owners, executives, and sales reps of labs—along with the physicians who accepted illegal bribes and other forms of remuneration—to be criminally indicted and face substantial penalties, including prison time and restitution.

Lab Owner Allegedly Contacted His Victims

BILLY JOE TAYLOR OF LAVACA, ARK., A LABORATORY OWNER who allegedly used fraudulent lab reimbursement to fund colorful purchases, had his bond revoked for allegedly violating conditions of his release. 

Taylor was indicted in November for allegedly filing claims for diagnostic tests that were not ordered by physicians and had not been performed. Taylor’s labs sent in Medicare claims worth more than $100 million.

“Taylor allegedly then used the proceeds of the fraud to live a lavish lifestyle, including purchasing numerous luxury automobiles, including a Rolls Royce Wraith, as well as real estate, jewelry, guitars, and other luxury clothing and items,” according to the U.S. Department of Justice. 

Taylor pleaded not guilty at his arraignment on Nov. 23. He was released on $100,000 bond, but the U.S. District Court for the Western District of Arkansas revoked that bond on Dec. 20, according to TV station KNWA.

In arguing for the revocation, prosecutors said Taylor engaged in criminal activity while on pretrial release; made unauthorized overnight stays at an out-of-state casino; and contacted victims or witnesses in the investigation, KNWA reported.

He was taken into custody after his bond was revoked. His trial is scheduled to start on Sept. 12.



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