Brace Yourself: DOJ Demonstrates it Can Adapt to Technological Advances in Healthcare Industry
V&E Government Investigations Update, May 15, 2019
Although it is sometimes difficult for regulators to keep pace with innovation, telemedicine — the use of telecommunication and information technology to provide medical care remotely — is both rapidly evolving and under intense scrutiny. Just last month, DOJ announced charges against 24 individuals in what it touts is the largest telemedicine-related fraud case to-date, demonstrating DOJ’s ability to pursue complex and rapidly changing industries such as this one.
Telemedicine, which is projected to grow 19% per year, reaching a $130 billion market size in 20251, is not a new phenomenon; modern telemedicine began in the 1960s when NASA launched a project to use closed circuit televisions to monitor astronauts’ health during space exploration missions. Its growth has been slow until recently, but today technological tools such as video- and tele-conferencing, instant messaging, and specialized applications have enabled real-time remote diagnosis and treatment for a variety of conditions such as colds, allergies, and dermatological issues. Soon we will likely see a more widespread use of artificial intelligence tools such as “chatbots,” or computerized programs (“bots”) to assist with the diagnosis of conditions and the provision of medical advice.
DOJ’s recent enforcement action against 24 individuals, including CEOs and COOs of telemedicine companies and owners of dozens of durable medical equipment companies, involved a $1.2 billion Medicare fraud scheme whereby kickbacks and bribes were paid to doctors in exchange for prescribing medical equipment such as back, shoulder, wrist, and knee braces, to Medicare beneficiaries that they apparently didn’t actually need.2 The charging documents allege an expansive and sophisticated fraud that preyed on the elderly and disabled who were trying to get relief from their health concerns. Some of the defendants used international call centers to target and “upsell” the equipment to Medicare beneficiaries regardless of their needs.3 The defendants face numerous conspiracy, fraud, and criminal forfeiture charges, with some facing additional charges for related crimes, including making false statements and conspiracy to commit money laundering.
Assistant Attorney General Brian Benczkowski referred to the misconduct as an exploitation of “telemedicine technology meant for patients otherwise unable to access health care,”4 while Center for Program Integrity (“CPI”) Deputy Administrator and CPI Director Alec Alexander touted CPI’s “swift administrative action … suspend[ing] payments to 130 distinct providers thereby likely preventing billions of additional dollars in losses.”5
The case involved more than 80 search warrants across 17 federal districts, demonstrating the ability of cross-office and agency collaboration and coordination between DOJ’s Health Care Fraud Unit and Medicare Fraud Strike Force6, the FBI, the Department of Health and Human Services Inspector General, the IRS, and U.S. Attorney’s Offices for various districts.
Unlike the financial sector, where regulators have faced challenges in addressing innovations and developments, prompting a wave of regulation, pending legislation, and initiatives focused on preventing and prosecuting cryptocurrency-related fraud, the healthcare sector does not appear to pose the same challenge to enforcers or require new regulations. For instance, DOJ brought three separate telemedicine-related criminal cases late last year — one of which involved over $1 billion in alleged losses to Medicare — and stated recently that it’s an industry where enforcement has “a quick and durable impact.”7
In light of the likely growth still to come of the telemedicine services industry as well as DOJ’s statements announcing its focus on regulating it, we can expect to see continued scrutiny and enforcement of this area.
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1 Zoë LaRock, The telemedicine boom is imminent, and it’s creating opportunities for providers, Business Insider, https://www.businessinsider.com/telemedicine-will-boom-but-barriers-persist-2019-3 (Mar. 29, 2019).
2 DOJ, Federal Indictments & Law Enforcement Actions in One of the Largest Health Care Fraud Schemes Involving Telemedicine and Durable Medical Equipment Marketing Executives Results in Charges Against 24 Individuals Responsible for Over $1.2 Billion in Losses, https://www.justice.gov/opa/pr/federal-indictments-and-law-enforcement-actions-one-largest-health-care-fraud-schemes (Apr. 9, 2019), hereinafter DME Press Release.
3 Indictment at 5, United States v. Swackhammer, No. 2:19-cr-00192-MAK (E.D. Pa. Apr. 10, 2019), available at https://www.justice.gov/opa/page/file/1153031/download.
4 DME Press Release.
6 The Medicare Fraud Strike Force is a partnership among DOJ’s Criminal Division, the FBI, the Department of Health and Human Services Inspector General, and U.S. Attorney’s Offices.
7 DOJ, TENNESSEE NURSE PRACTITIONER PLEADS GUILTY FOR ROLE IN $65 MILLION TRICARE FRAUD, https://www.justice.gov/usao-sdca/pr/tennessee-nurse-practitioner-pleads-guilty-role-65-million-tricare-fraud-0 (Nov. 28, 2018); DOJ, Burlington, New Jersey, Doctor Arrested for Role in $20 Million Telemedicine Compounded Medication Scheme, https://www.justice.gov/usao-nj/pr/burlington-new-jersey-doctor-arrested-role-20-million-telemedicine-compounded-medication (Nov. 16, 2018); DOJ, Four Men and Seven Companies Indicted for Billion-Dollar Telemedicine Fraud Conspiracy, Telemedicine Company and CEO Plead Guilty in Two Fraud Schemes, https://www.justice.gov/opa/pr/four-men-and-seven-companies-indicted-billion-dollar-telemedicine-fraud-conspiracy (Oct. 15, 2018).