Category Archives: Medicare fraud

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Not The Golden Years This Florida Doctor Envisioned: The Perils of the Fast Lane

Back in the days when we were at the U.S. Attorney’s Office, we used to occasionally hear jokes about the fact that “we don’t catch the smart ones.”  This kind of comment would usually come after we might have come back from court in a case where the accused did something so colossally stupid to almost guarantee his or her getting caught — like writing a bank robbery demand note on the back of his pay stub.  (Yes, that really happened in one of my cases.)

The joke was a kind of tacit acknowledgment among us that with all the crimes out there to investigate, and all the many different priorities of law enforcement, smart criminals know how to cover their tracks a little more intelligently, or at least to avoid steps that will put them on the immediate radar screens of investigators and prosecutors.

Fortunately for prosecutors everywhere, stupid criminals abound.  And by stupid, we don’t mean poorly educated.  We mean, in many instances, so blinded by their own greed and self-delusion that they can’t understand how their behavior will look to the rest of the world.

Last week, a 63 year old physician in sunny Florida was sentenced to 17 years of non-parolable time in prison (the judge seems to like round numbers, like 80), for having bilked Medicare of at least $73 million in a five-year period between 2008 and 2013.  That’s roughly $14 million per year, or more than $1 million per month of fraud.

Dr. Salomon Melgen had been considered a prominent eye doctor.  But something went terribly wrong along the way for the Harvard-trained physician.  In a two month trial last November, the government proved a vast pattern of bilking the taxpayers, primarily Medicare, for unnecessary treatments and tests, for “upcoded” bills and the like, totaling 67 criminal counts of conviction in all.  His pretrial release was revoked upon conviction and he’s been in custody since November.  A week and half ago, in late February, the sentencing judge held a hearing to determine, among other things, the extent of the loss to taxpayers.  The government argued for $136 million; the judge found that $73 million had been proven.  See  It was that same day that the 17-year sentence was handed down.

While every case is different from every other, there are some familiar patterns here.

First, our trillion-dollar-per-year health care economy is run, at least with respect to government insurance programs, on an honor system.  For the most part, claims that are submitted get paid, and problems that are identified get chased later.  (This is the so-called “pay and chase” system.)  What that means, as Dr. Melgen proved, is that defrauding Medicare and Medicaid is pretty darned easy.  An up-coded bill here, an unnecessary test there, pretty soon it’s real money.

Second, as most prosecutors will tell you, greedy people don’t suddenly stop being greedy after they’ve had a taste of their ill-gotten gains.  They usually acquire a taste for more.  Sometimes they just can’t hold back, which seems to have been the case with Dr. Melgen.  Now it’s not just the occasional upcoded bill, but masses of them.  And not the occasional unnecessary test, but a raft of them.  Fancy houses, fancy cars, fancy connections to politicians… a taste of life in the fast lane.

Next thing you know, however, you’re on some law enforcement agent’s radar screen.  Some patient might have complained.  Some whistleblower might have noticed your up-coding.

And now that Florida retirement is looking so, so different.

Don’t Believe the Hype – United States ex rel Greenfield v. Medco Health Solutions: Third Circuit Reaffirms the Breadth of False Claims Act Liability for Illegal Kickbacks

Courts have long held that to prove a False Claims Act case premised on illegal kickbacks, a plaintiff need not prove that kickbacks caused specific claims because “[t]he Government does not get what it bargained for when a defendant is paid by CMS for services tainted by a kickback. ”  See, e.g., U.S. ex rel. Wilkins v. United Health Grp., Inc., 659 F.3d 295, 314 (3d Cir. 2011); United States ex rel. Hutcheson v. Blackstone Medical, Inc., 647 F.3d 377, 393 (1st Cir. 2011) (rejecting defense “services that would have been provided in the absence of” violations.”). The Third Circuit recently addressed this standard in its affirmance of a district courts dismissal of FCA claims in  United States ex rel. Greenfield v. Medco Health Sols., Inc., No. 17-1152, ___ F.3d ____ (3d Cir. Jan. 19, 2018).  Predictably, commentators are already claiming that the decision alters this analysis now requiring plaintiffs to link kickbacks to “specific false claims” to make out a False Claims Act violation.

Greenfield reflects no such sea-change in law.  Rather, it applied the Wilkins rule — that claims “tainted” by kickbacks are false — to the less common situation where kickbacks are paid in exchange for “recommendations” rather than referrals.

Anti-Kickback Statute

The Medicare and Medicaid Fraud and Abuse Statute (the “Anti-Kickback Statute” or “AKS”), 42 U.S.C. § 1320a-7b(b), is a criminal statute that prohibits soliciting or receiving or offering or paying anything of value to induce any person to induce use of a service for which payment may be made under a federally-funded health care program. 42 U.S.C. § 1320a-7b(b).


The prohibitions on referring and furnishing – (“‘A’ Prohibitions”), are generally directed at healthcare professionals and prevent the corruption of their medical judgement when they perform procedures refer their patients to other providers.  § 1320a-7b(b)(1)(A), (b)(2)(A).  The prohibitions on “purchasing, leasing, or ordering” and “arranging or recommending” (“‘B Prohibitions”) are much broader and directed to patients themselves, marketers, and authoritative third-parties to protect the public fisc against their corruption. § 1320a-7b(b)(1)(B), (b)(2)(B).  Since 2010, the AKS has explicitly stated that “a claim that includes items or services resulting from a violation of this section” is a false claim.  Id. at § 1320a-7b(g).  That language reflects pre-2010 case law as well.  See United States ex rel. Westmoreland v. Amgen, Inc., 812 F. Supp. 2d 39, 52 (D. Mass. 2011).

Most AKS litigation involves “A prohibitions” where the connection between the kickback and the good or service is straightforward –when a medical professional receives kickbacks for a particular good or service, the services actually performed and goods or services actually referred are false or fraudulent under the FCA. But with “B Prohibitions” it is less clear which claims “resulted from” kickbacks.  That was the issue presented in Greenfield.

Greenfield Confirms Kickbacks Cause False Claims

In Greenfield, Medco subsidiary Accredo Health Group Inc, a specialty pharmacy focused on hemophilia patients donated several hundred thousand dollars to hemophilia-related charities, in exchange for recognition as an “approved” provider that provides “the highest quality of care,” and links from the charities’ websites along with an admonition to visitors to “[r]emember to work with our” approved providers.  Greenfield, Slip Op. at 5. The charities provided their “treatment centers with lists identifying [approved] specialty pharmacies” including Accredo.  Id.

Thus, Accredo’s hundreds of thousands of dollars in “charitable donations,” induced trusted patient-focused charities to recommend Accredo’s services to the vulnerable populations they served.  This is precisely the corruption of trust that the AKS prohibits, nor was there any dispute in Greenfield that this arrangement violated the AKS.

The only question was which claims “resulted” from the kickback arrangement.  The district court concluded that “resulted” means “caused” and held that a plaintiff must provide “some evidence” that federal beneficiaries “chose [the good or service] because of” the kickbacks. Greenfield, 223 F.Supp.3d at 230.  In other words, a plaintiff would have to produce evidence regarding the subjective intent of the patients.  On appeal, the U.S. Government filed an amicus brief arguing that this requirement misstated the law.  Reviewing the statutory text and legislative history, the Third Circuit agreed with the Government and Plaintiff that nothing “requires a plaintiff to show that a kickback directly influenced a patient’s decision to use a particular medical provider.”  Greenfield, Slip Op. at 18.

Third Circuit Interprets “Link” Between Kickbacks and Claims Broadly

While “a ‘link’ is required” to establish that claims “resulted” from kickbacks, the appeals court’s analysis makes clear that the link may be quite broad.  Id.  In the context of Greenfield, that meant only that the plaintiff must produce some evidence that patients who utilized Accredo’s services had been exposed to the charities’ recommendations.  Id. at 21.

The plaintiff, however, offered no evidence whatsoever of any link, relying on the mere fact that Accredo submitted claims during the same time period that it paid kickbacks.  The Third Circuit recognized that the outcome would have been different with evidence ”that any of Accredo’s 24 federally insured patients viewed [the] approved provider list or that [the charities] referred the federally insured patients to Accredo through some other means” or even that “federally insured patients were members of [of the charities] and thus recipients of [the] communications.”  Id.

Thus Greenfield does not in any way suggest the need to show a heightened link between kickbacks and the resulting claims. Indeed, Greenfield appears to make no change when False Claims result from a medical professionals referrals under “A prohibitions” and illustrates the breadth of kickback arrangements that give rise to False Claims Act liability.

CMS’ Proposed New Anti-Fraud Rule for Part D

The Center for Medicare and Medicare Services (CMS) has recently proposed new rules to combat fraud and abuse in the Medicare Advantage and Part D prescription drug program. Part D was created in 2003 as part of the new Medicare coverage for prescription drugs, and now, with 10+ years of data to examine, CMS has apparently seen some practices it wants to put an end to.


In what promises to be a major anti-fraud initiative, CMS said on January 6, 2014 that it will close a loophole that allows doctors not enrolled in Medicare to have drugs covered under Medicare Part D, and will blacklist physicians whose prescribing practices are reckless. The announcement, included as part of a 678-page proposed rule, follows two inspector general reports last year that showed Medicare Part D was paying for drugs written by practitioners who either lacked proper credentials or wrote unusually large amounts of prescriptions for addictive painkillers.


The power to require practitioners to enroll in Medicare, which would take effect next year, was granted to the Centers for Medicare and Medicaid Services in the Affordable Care Act.


“CMS’ fraud and abuse strategy for Part D is data driven,” the agency said in its press release[the link you have], and apparently the data have shown (once again) that where there are loopholes, fraudsters will flourish — taking advantage of the government’s largesse and “pay now and chase later” system of administering health care claims. The data shows in particular that some doctors are over-prescribing opiates and painkillers, and that some doctors show patterns of abusive and fraudulent prescribing practices. By forcing doctors to enroll in Medicare if they want to submit claims to Medicare, CMS will be taking the logical step of making it easier to monitor and crack down on these abusive practices. The goal is not only to save money, but also to “protect Medicare beneficiaries … from the damaging effects associated with prescription drug abuse.”

There are three central points in this lengthy set of new rules:


  1. “CMS is proposing to require that physicians and non-physician practitioners who write prescriptions for coverd Part D drugs must be enrolled in Medicare for their prescriptions to be covered under Part D.”
  2. CMS would be able to revoke a physician’s Medicare enrollment if
    a. He or she has shown a pattern of prescriptions that appear to be abusive and/or represents a threat to patient safety,
    b. His or her DEA certificate of registration is suspended or revoked, or
    c. A licensing body of a state where the physician practices has suspended or revoked the physician’s license to prescribe drugs.
  3. CMS would also be able to obtain data directly from pharmacies, pharmacy benefit managers, and others who contract with Part D sponsors, in order to streamline the efforts of anti-fraud investigative agencies.


CMS will accept comments on the proposed rules until March 7, 2014, at which point it will issue final regulations. While there will always be comments attacking almost any proposed rule, to us these proposed changes are only sensible. Given that CMS must process millions of claims per day – and pays them electronically unless the computer system kicks them out – one would hope that the agency would employ every tool at its disposal to monitor trends, detect abusive patterns, and seek to protect the public from that small percentage of doctors and practitioners who have lost their way and made life more burdensome for their peers and their patients.


So expect the final regulations to keep the three core concepts listed above.