Physicians Need to Be on Guard for a New DME/Lab/Pharmacy Scam — and This One Has a Twist to It

Our national healthcare law attorneys recently reviewed a complaint that a Medicare Advantage plan filed against a physician to the state Board of Medicine. This was a precursor to a much larger investigation that will result in a potential indictment — and it’s one for which physicians had best take heed.

The complaint alleges the doctor in question made an arrangement with a telemedicine company to review records and order expensive DME, labs, and pain medications. As the story goes, a telemarketing company would call targeted individuals and ask them questions. During this time, the telemarketer is filling out what purports to be a medical history and chief complaint form. The targeted individual has no knowledge that he/she is being targeted and is not looking for medical care.

The allegation is, the marketer then sends the completed record to the physician, who then signs the medical order for the overpriced DME, pain cream, and genetic testing.

Yes, this sounds like the same old scheme that has been going on for years. And yes, it is illegal.

But this time around, there’s a twist: the reviewing physician was hired to perform a utilization review function.

It Looks Legitimate, But It’s a Massive Healthcare Swindle

Generally, the company that hires the physician uses a name that would lead you to believe it is a legitimate existing company. Often, the company portrays itself as an urgent care or telemedicine company, with websites that appear to look genuine.

Based on what the physician sees, it appears to be a legitimate utilization function, and a way to get some easy money. The physician is told that he/she is simply reviewing the record as a second set of eyes to determine if the treatment plan is appropriate.

The unsuspecting physician dutifully logs into the portal, reviews the records, answers the question “Do you approve or disapprove?” in the affirmative, and digitally signs the record.

Now, behind the scenes is a legitimate process gone bad. The checked box triggers multiple computer operations that generate signed orders and other documents necessary for submitting a claim. When the physician selects “approved” and signs the documents, these additional documents are created behind the scenes without the physician knowing it.

Prescriptions, DME orders, and a diagnosis-based preselected menu now look legitimate. The physician is paid a small fee, maybe $20-$50 for each review, while the scammers bill the carriers for thousands of dollars for DME braces, fraudulent pain creams, and unnecessary genetic testing.

Each year, insurance carriers lose hundreds of millions of dollars in false claims such as these.

And when the scheme is finally unraveled, who is left holding the bag?

That’s right. The physician.

Often, he/she will face state licensing issues, OIG exclusion, indictment, and potential prison time.

And for what? A couple thousand dollars.

Which Laws Are Broken in This Kind of Scheme?

State Law Failure to Establish a Bona-Fide Practitioner-Patient Relationship: The statute or regulation often states, a bona fide practitioner-patient relationship shall exist if the practitioner has:

(i) obtained or caused to be obtained a medical or drug history of the patient.
(ii) provided information to the patient about the benefits and risks of the drug being prescribed.
(iii) performed or caused to be performed an appropriate examination of the patient, either physically or by the use of instrumentation and diagnostic equipment through which images and medical records may be transmitted electronically; and
(iv) initiated additional interventions and follow-up care, if necessary, especially if a prescribed drug may have serious side effects.

State Law Telemedicine Requirements: These vary, but they generally state:

(i) Practitioner must comply with all existing laws and regulations.
(ii) Practitioner must take appropriate steps to establish a practitioner-patient relationship.
(iii) Where an existing practitioner-patient relationship is not present, a practitioner must take appropriate steps to establish a practitioner-patient relationship consistent with the guidelines identified in the state statute.
(iv) Often the practitioner must be licensed by, or under the control of, the regulatory board in the state the patient is located.
(v) Audio and physical connection with the patient is almost always required.
(vi) A legitimate medical purpose must be established for the care provided, including any prescription, DME, etc.
(vii) Often, a plan of care is required, even if simply to follow up with the primary care doctor

Federal False Claims Act (31 U.S.C. 3729-3733): This states it is a violation if the physician:

(A) Knowingly presents, or causes to be represented, a false or fraudulent claim for payment or approval.
(B) Knowingly makes, used, or causes to be made or used, a false record or statement material to a false or fraudulent claim.
(C) Conspires to commit a violation of subparagraph A, B, D, E, F, or G.

Federal Anti-Kickback Statute 42 USC §1320a-7b:

a. Making or causing to be made a false statement or representation
(1) whoever knowingly and willfully makes or causes to be made a false statement or representation of a material fact in any application for any benefit or payment under a federal health care program.

b. Illegal Remuneration
(1) whoever knowingly and willfully solicits or receives remuneration directly or indirectly, overtly or covertly, in cash or in kind —
(A) in return for referring and individual to a person for furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a federal health care program

Conspiracy to Defraud the Government (18 U.S.C. 371): It is illegal for two or more person to conspire to defraud the government. There are also state-specific statutes for conspiracy

Money Laundering (18 U.S.C. 1956):Engaging in a financial transaction with money that was obtained from criminal activity with the intent to try and 

Good Intentions Lead to Results That Can Devastate, Even End a Career

Often, the organizers of the scheme attract physicians who do not investigate the relationship and believe they are doing the right thing. These physicians usually believe they are legitimately reviewing patient as a utilization management physician or believe they are prescribing DME or medications for a legitimate medical purpose.

The physician does not know how the patient came into contact with them or the referring agency. They do not know that these patients are generally targeted by telemarketers and call centers, and they are not reaching out for help. Usually, the so-called patient is on Medicare or Medicare Advantage or, in some cases, Medicaid or TRICARE.

The physician does not always have the criminal intent necessary for a federal false claim or kickback criminal conviction. However, civil false claim and state regulatory laws do not generally require intent. Additionally, most state regulatory agencies do not require or consider intent when investigating if the practitioner violated a regulation or statute regulating the practice of medicine.

Once the state board issues discipline, there is a cascading effect that causes other state licensing boards and federal regulatory agencies to begin to issue discipline and/or revocation. This immediately calls into question being placed on the OIG exclusion list, which generally triggers additional state adverse action. In the worst cases, the Department of Justice issues an indictment, and a physician potentially faces jail time.

Steps to Take in Order to Avoid Falling Into the Trap

What should you do if you are asked to perform a utilization review function of dubious origin and reason?

    1. Investigate every potential employer and make sure you know exactly what you are doing and why.
    2. Make sure that any time you perform a medical function that you are doing it according to state and federal law.
    3. If you are being paid for doing little, it is generally a scam.
    4. Always use your medical judgement and ensure there is a legitimate medical reason for the treatment. Do not be lax with this analysis. It must be applied every time.
    5. Keep exceptional notes of what your medical judgment was and why.
    6. Have some common sense. Why should a patient have a knee brace if they are not asking for it by going to see a doctor? Why should a compounding pharmacy be selling a tube of pain cream to a patient when over-the-counter pain cream will work just as good?

Finally, please do not hesitate to contact the healthcare law attorneys at Chapman Law group. Let us check it the venture out for you and tell you if it’s the real thing … or a real scam.

What are Some Examples of PPP Fraud?

  • Improper Use of PPP funds: The SBA specifically prohibits non-business use of PPP funds and those improperly using PPP funds can be prosecuted. Some examples include using the PPP program to enrich yourself and improper expenditures such as luxury items, stock trading, and non-business expenditures.
  • False PPP Loan applications: Making a false statement on a PPP loan application is a false statement to a financial institution which is a federal felony.
  • PPP Loan Stacking: Loan stacking is the act of filing for multiple PPP loans from multiple lenders. This is quite easy to detect and likely to result in prosecution.
  • False Submission of Payroll Tax Documents: PPP requires the submission of payroll tax records. Many businesses and individuals prosecuted for PPP fraud have submitted false payroll records to appear as a larger company to receive more PPP funds.
  • False Statement on PPP Loan Forgiveness Applications: The PPP requires businesses to comply with certain conditions to receive forgiveness of a PPP loan. Falsely representing compliance with any of those conditions is a federal felony and could be met with prosecution.
  • False Loan Certification: Businesses seeking PPP loans are required to verify that economic uncertainty makes the loan necessary; that the loan will be used to retain workers and maintain payroll; that the company has not received any other loan under the PPP; and that all statements and supporting documents are true and accurate. If any of these certifications are false, it would constitute a false statement in support of a loan application, and you could be subject to prosecution.
  • Creation of False Companies: Some have created false companies or pretended to be independent contractors seeking PPP. This is certainly a violation of PPP requirements and could be subject to prosecution. 

The National Healthcare Fraud Attorneys at Chapman Law Group Are Here to Defend Your Practice

At Chapman Law Group, healthcare professionals are our sole focus. We have extensive experience in defending healthcare providers across the U.S. who are faced with criminal charges, including:

We represent licensed medical professionals, including:

Whether you practice in Michigan (DetroitDearborn, Troy, Ann Arbor and Grand Rapids, among many more regions), Florida (including the metro areas for Miami, Orlando, Tampa, West Palm Beach and Jacksonville), Los Angeles and Southern CaliforniaChicago, Pittsburgh, and Washington, D.C., or anywhere else in the U.S., we are ready to help you. 

Contact us today to learn more.

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