Allegations of healthcare fraud can lead to more than just a frustrating paperwork problem – it can lead to imprisonment. In a recent case, the courts reviewed allegations a top-level employee with a diagnostics company was pushing for unnecessary tests in an effort to increase profits. The prosecution gathered evidence and built a successful case, with a District Court Judge recently sentencing the operations manager from New York to 14-month federal prison sentence. The sentence for a conviction for conspiracy to violate the Anti-Kickback Statute included one year of supervised release, $27,225,434 in restitution and $1,102,725 in forfeiture.
The conduct that created criminal exposure
In this case, federal prosecutors alleged the operations manager worked with others at a mobile diagnostics company to offer cash payments or check payments to physicians tied to how many brain scans they ordered. The core allegation involved “rental” or “administrative services” agreements that looked compliant on paper. The government argued the agreements were not, in fact, signs of compliance but instead were shams intended to disguise a pay per test arrangement.
This fact pattern is an example of a common issue the government looks for during investigations into allegations of healthcare fraud: a facially legitimate contract used as cover for compensation based on volume of referrals. Once the government gathers evidence to establish an intent to conceal the connection between volume and payment, the prosecution can make an argument that the case should escalate to criminal kickback conspiracy.
Practical compliance lessons for ordering physicians
This case underscores a recurring enforcement theme: papered agreements do not neutralize investigations into whether the arrangement is a cover for fraudulent billing practices. Physicians and high-level employees in medical businesses are wise to focus their practice on medical necessity for the patient, not financial gain. The government is dogged in their investigations of allegations of healthcare fraud of this type and will move forward with prosecution if they believe they have evidence to support their claims. Those who find themselves facing such allegations are wise to take the matter seriously and promptly begin building a defense.
Attorney John Rivas is responsible for this communication.
