11/11/2024

DOJ on Fraudulent Marketing Schemes

Guest Article: Jeffrey S. Baird, Esq.

Source:  Medtrade Today 10/26/2024

There are approximately 78 million Baby Boomers (born between 1946 and 1964) who are retiring at the rate of 10,000 per day. Following close behind is a similar number of Millennials. Unlike earlier generations, most Boomers and Millennials are going to live well into their 80s. Unfortunately (and in my opinion, unfairly) as we age, our bodies break down…resulting in the need for myriad health care services.

DME suppliers play an important part in taking care of aging Boomers and Millennials. Suppliers provide respiratory products (oxygen, CPAPs, etc.), bent metal (wheelchairs, etc.) and “soft goods.” This article focuses on soft goods.

I will arbitrarily include in the soft goods category products such as wound care (e.g., surgical dressings), urinary (e.g., catheters), ostomy, incontinence, and orthotics (e.g., back and knee braces). [Back and knee braces do not really fall into the “soft goods” category, but as will be seen below, in terms of fraudulent marketing, braces fall into the same category as catheters, etc.] Federal and state health care programs (Medicare, Medicaid, TRICARE, etc.) pay for soft goods.

Billions of dollars flow from federal health care programs (“FHCPs”) to health care providers and suppliers. It is human nature for individuals to “stick their hand” into this revenue stream and try to grab some of the dollars. This is where greed…and fraud…enter the picture.

Federal and state legislatures have enacted a number of laws intended to protect taxpayer money from being fraudulently spent. For example, the federal anti-kickback statute (“federal AKS”) makes it a felony for a person/entity to (i) give anything of value in exchange for referral of an FHCP patient, (ii) “arrangement for” the referral of an FHCP patient, or (iii) recommending the purchase/rental of a product or service reimbursable by an FHCP. All states have their own version of the federal AKS.

This brings us to “marketers.” Marketers have no “skin in the game.” They are not accredited, they do not have PTANs, they are not parties to commercial insurance contracts, and they do not have professional licenses. If a DME supplier enters into a fraudulent arrangement with a marketer, too often it is the DME supplier that pays the price (recoupment, PTAN revocation, perhaps facing a criminal investigation)…while the marketer “slinks away into the night.” This imposes on the DME supplier the obligation to only enter into marketing arrangements that are legally compliant. The supplier cannot rely on the marketer to present a legally-compliant arrangement.

Set out below is a recent Department of Justice (“DOJ”) press release addressing a fraudulent marketing arrangement.

A Miami Beach, Florida, man admitted his role in a durable medical equipment health care fraud scheme, U.S. Attorney Philip R. Sellinger announced today.

Christopher Vehovec, 31, of Miami Beach, Florida, pleaded guilty before U.S. District Judge Michael A. Shipp in Trenton federal court on Aug. 28, 2024, to an information charging him with one count of conspiracy to commit health care fraud.

According to documents filed in the case and statements made in court:

Vehovec and his conspirators solicited and received kickbacks and bribes in exchange for providing durable medical equipment (DME) companies with completed doctors’ orders for medically unnecessary DME, such as orthotic braces. Vehovec and his conspirators utilized the service of telemedicine companies to obtain these prescriptions for DME, and the DME orders were subsequently fraudulently billed to Medicare and other health care benefit programs.

Vehovec and his conspirators caused losses to Medicare and other health care benefit programs of at least $4.2 million.

The charge of conspiracy to commit health care fraud is punishable by a maximum potential penalty of 10 years in prison and a fine of $250,000, or twice the gross profit or loss caused by the offense, whichever is greatest. Sentencing is scheduled for Feb. 27, 2025.

U.S. Attorney Sellinger credited special agents of the FBI, under the direction of Special Agent in Charge James E. Dennehy in Newark, and the Department of Health and Human Services-Office of Inspector General, under the direction of Special Agent in Charge Naomi Gruchacz with the investigation leading to the guilty plea.

The government is represented by Assistant U.S. Attorney DeNae Thomas of the Health Care Fraud Unit in Newark.

Read the full story here and learn key takeaways for DME suppliers.