Remarks as Prepared for Delivery
Good afternoon. I want to thank the American Bar Association, and specifically, Gabriel Imperato, for inviting me to deliver today’s keynote.
Having investigated and prosecuted health care fraud crimes in some of my prior roles in the department, both as part of the Criminal Division’s Fraud Section and as an Assistant U.S. Attorney, it is an honor and a privilege to be here among current and former colleagues, experts, counsel, government officials, and insurer representatives to discuss our policies and enforcement efforts in this critical space.
The dialogues we have at conferences like these are important for a number of reasons – most of all, to share information. No matter your practice, take advantage of the time to listen and learn from those around you this week.
Combating health care fraud is a top priority for the Justice Department. The reasons are plain.
Every day, fraudsters intent on lining their own pockets at the expense of the American taxpayer, patients, and private insurers abuse our nation’s health care systems. This drives up costs of health care for us all. It imperils the long-term solvency of Medicare and Medicaid, upon which millions of Americans depend. And any time greed replaces medical necessity as a factor in providing health care services, our communities suffer.
As I saw firsthand while living and prosecuting crimes in South Florida, addiction treatment fraud derails patients’ ability to pursue recovery and sobriety.
Falsely diagnosing people with physical and mental disorders takes an immeasurable emotional and psychological toll on patients and their families.
Kickbacks corrupt medical professionals’ judgment and erode patients’ ability to choose and receive the care that they deserve.
And overprescribing schemes can at times even cause death.
Every day, in response to these threats, department prosecutors vigilantly pursue crime prevention, detection, and accountability. And as I will describe in a moment, we are especially focused upon rooting out schemes affecting vulnerable populations.
But first, I want to address our approach and its results. To date, our Health Care Fraud Strike Forces across the country have charged more than 5,000 defendants who collectively have billed federal health care programs and private insurers more than $24 billion.
With Chief Dustin Davis at its helm, the Fraud Section’s Health Care Fraud Unit currently has a team of approximately 70 specialized prosecutors. It’s now double the size that it was 10 years ago. This past year alone – 2022 – the Health Care Fraud Unit emerged from the pandemic by litigating a record number of trials: 38. And during the year, 179 additional individuals pled guilty in connection with Health Care Fraud Unit cases, all while prosecutors charged an additional 158 individuals in connection with an alleged loss of over $2.27 billion. In 2023, the unprecedented trial schedule hasn’t stopped, as the Health Care Fraud Unit already has conducted 12 trials, resulting in 15 convictions.
While many of you know well the sixteen-year history and successes of the Strike Force program – I see Kirk Ogrosky in the crowd – certain principles deserve emphasis. For one thing, partnerships are critical to our accomplishments. From its start, the Health Care Fraud Unit has collaborated with U.S. Attorneys’ Offices around the country, as well as federal and state law enforcement agencies. These teams work shoulder to shoulder, at times co-located, and travel together as casework demands. And as our enforcement actions have consistently shown, we also coordinate with civil colleagues working in parallel to protect health care programs’ integrity.
We use all tools available – including, especially, cutting-edge data analysis – to identify suspicious health care trends. We concentrate and allocate our resources accordingly, not only in the hardest-hit geographic regions, but also upon pursuit of the highest-impact cases. Creation of the National Rapid Response Strike Force and the New England Prescription Opioid Strike Force are just the latest examples of how we shift our internal structure based on data.
Through it all, we never lose sight of crime prevention. We stop ongoing schemes in their tracks to minimize patient harm and financial losses, and to send a powerful deterrent message. To give just one example, had the defendants charged in fiscal year 2020 continued defrauding the federal health care programs and private insurers at the same rates they had been before detection, this would have resulted in an additional $4.18 billion loss after five years, and a $10.42 billion loss over 10 years. And as I’ll touch on later, the Criminal Division’s policies aim to deter misconduct before it even occurs.
Though these principles remain constant, we have seen new and emerging trends in the fight against health care fraud.
As I mentioned, right now, the Health Care Fraud Unit and its partners are prioritizing the investigation and prosecution of schemes that affect vulnerable populations, including, but by no means limited to, sober homes fraud, illegal prescribing of controlled substances, and hospice fraud.
Today, I want to highlight as an example the Merida Group case, the largest-known hospice fraud scheme prosecuted to date, in which owner Rodney Mesquias and CEO Henry McInnis exploited thousands of patients and submitted over $150 million in fraudulent claims to Medicare for hospice and home health services.
As you all know, hospice is end-of-life care for patients who are dying. Medicare only reimburses hospice care in limited circumstances, when a doctor certifies that the patient has a life expectancy of six months or less. In recent years, data has shown an increase in costs to the Medicare program resulting from claims for hospice care.
In this case, the cost of the criminal conduct to Medicare was staggering, but the emotional cost on especially vulnerable people was egregious.
As trial witnesses testified, the majority of patients actually were not terminal, so they did not qualify for hospice services. So, the defendants tricked nonterminal patients into going on hospice and into palliative care, sometimes causing them to abandon potentially curative life-extending treatments that they may have needed and that may have improved their quality – and duration – of life. In other words, the defendants caused cancer patients to stop pursuing chemotherapy so they could profit from lucrative palliative care fees.
The conspirators exploited language barriers, and the fact that the patients were elderly and/or had diminished mental capacity. Certain patients were even told they were dying when they were not. As one patient who testified at trial put it, “how would you like to have somebody come into your hospital room and just tell you that you have three to six months to live and your family’s standing there in shock? I cried a lot at home. I was very depressed. I didn’t leave my home for over three months because I didn’t know if I was going to wake up or not. I had thoughts of suicide so my family wouldn’t have to go through watching me die.”
The defendants turned others’ suffering into profits that they spent on fleeting luxuries: a Porsche, jewelry, designer clothing, real estate, season tickets for premium seating to see the San Antonio Spurs, and bottle service at high-end Las Vegas nightclubs. Mesquias and McInnis treated physicians to lavish parties at these nightclubs, plying them with tens of thousands of dollars of perks in exchange for medically unnecessary patient referrals.
It’s no surprise why the Health Care Fraud Unit and the U.S. Attorney’s Office for the Southern District of Texas tackled this case head-on. Following their trial convictions, Mesquias and McInnis were sentenced to 15 and 20 years in prison, respectively, and each ordered to pay $120 million in restitution – a result affirmed by the Fifth Circuit Court of Appeals last year.
The next two priorities I want to emphasize are telehealth and pandemic fraud, which can also place susceptible patients at risk. The population of vulnerable Americans expanded exponentially with the onset of COVID-19. As everyone in this room knows well, the pandemic rocked the medical field, and rapidly accelerated certain ongoing shifts in the provision of health care, particularly telemedicine. But just as robbers seek banks because, as Willie Sutton famously said, it’s where the money is – like flies to the ointment, bad actors in the health care system still sought to exploit and abuse trust placed in them, even in times of national emergency.
To be sure, we were tracking and pursuing the early telehealth frauds before the pandemic, particularly those involving durable medical equipment and genetic testing.
Indeed, here in Chicago, we used our data-driven approach to identify, build a case against, and charge the largest telemedicine prescriber of genetic testing in the country – Dr. Sargon Audisho – for fraud occurring from 2016 to 2019. Audisho was a Chicago-area physician who became licensed in 16 additional states to be able to submit telemedicine claims – all told, his fraudulent prescribing resulted in billing Medicare for more than $145 million. In September 2022, Dr. Audisho pled guilty for his actions.
Overall, since 2018, the Health Care Fraud Unit has charged 163 defendants in connection with telemedicine schemes, including 40 medical professionals, involving more than $4.75 billion billed, and $1.65 billion paid.
While telefraud predated the pandemic, along with the rise in telehealth since the onset of the pandemic, these and other schemes expanded. We were well-positioned to adapt our prosecution strategies to dynamically counter these new threats.
In fact, starting in early March 2020, the National Rapid Response Strike Force convened a COVID-19 Interagency Working Group, made up of the leadership of law enforcement and public health agencies, bringing a whole of government approach to identifying, investigating, and prosecuting COVID-19 related health care fraud.
To date, this group has spearheaded three nationwide COVID-19 health care fraud enforcement actions, and we announced the largest of the three just two weeks ago, on April 20, 2023. That enforcement action included charges against 18 defendants in nine federal districts for their alleged participation in various schemes that allegedly resulted in over $490 million in COVID-19 related false billings to federal programs and theft from federally funded pandemic programs.
Many of the cases charged in this action are worth highlighting, but I’ll mention a couple: in the Central District of California, a lab owner was charged for allegedly submitting over $358 million in false and fraudulent claims to Medicare, the Health Resources Services Administration, and a private insurance company for laboratory testing. The indictment alleges that the defendant’s lab performed COVID-19 screening testing for nursing homes and other facilities with vulnerable elderly populations, as well as primary and secondary schools. But the defendant saw an opportunity to profit, and allegedly fraudulently added claims for expensive respiratory pathogen panel tests even though ordering providers and facility administrators did not want or need them.
In a second case in the Central District of California, a medical doctor was charged for allegedly orchestrating an approximately $230 million fraud on the Uninsured Program, which was designed to prevent the further spread of COVID-19 by providing access to uninsured patients for testing and treatment. The doctor was the second highest biller in the country to the Uninsured Program, and he allegedly submitted fraudulent claims for treatment of patients who were insured, billed for services that were not rendered, and billed for services that were not medically necessary. He allegedly used over $100 million in fraud proceeds for high-risk options trading. This doctor is also charged with two other individuals for allegedly submitting over 70 fraudulent loan applications through the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) Program and fraudulently obtaining over $3 million in loan funds.
In addition to work by the Health Care Fraud Unit, our Market Integrity and Major Frauds Unit has targeted health care executives seeking to fraudulently boost share prices with misstatements related to the pandemic. For example, last year, the former CEO of a publicly traded health care company was charged with allegedly misleading investors about obtaining rapid test kits.
These and the other cases demonstrate our ability to swiftly target large-scale and emerging schemes, all with the aim of holding responsible individuals to account and protecting the integrity of markets, health care systems, and other federal programs.
It bears repeating that we do not only prosecute crimes after they occur. We strive to prevent crime. That is why, for years, the Criminal Division has had public, transparent policies in place to encourage companies to invest in effective compliance programs and provide incentives for companies that voluntarily self-disclose misconduct.
I want to highlight one particular Criminal Division policy change today, which is relevant to companies in all industries, including the health care field. In January of this year, our Assistant Attorney General, Kenneth Polite, announced the first significant changes to the Criminal Division’s Voluntary Self-Disclosure and Corporate Enforcement Policy (CEP) in five years. As has long been the case, the CEP provides that if a company voluntarily self-discloses conduct to the division, fully cooperates with the government’s investigation, and timely and appropriately remediates the wrongdoing, it can rely on a presumption of a declination absent the presence of aggravating factors.
But the revised CEP announced in January for the first time expressly spells out that even if a company has aggravating factors, there is still a path to a declination. Specifically, if a company with aggravating factors immediately self-reports the misconduct, demonstrates extraordinary cooperation and remediation, and has in place an effective compliance program both at the time of the misconduct and the disclosure, then it may still receive a declination under the CEP.
And unless a company has aggravating factors, to obtain a presumption of a declination, the standard remains that a company need only make a timely self-disclosure.
The goal is to demonstrate that being a good corporate citizen and self-reporting misconduct is not only is the right thing to do, but also makes good business sense. Since 2016, we have announced 17 CEP declinations. Recent examples include Corsa Coal and Safran, a case where we determined that a declination was appropriate for a company that self-disclosed bribery uncovered in post-acquisition due diligence. The benefits are clear: with a CEP declination, a company only has to pay disgorgement, and can avoid the reputational and financial consequences of a corporate resolution.
We have heard time and again from the corporate community that it’s a difficult decision to determine whether to voluntarily self-disclose misconduct, and we understand that.
But I’m also here to tell you that it’s never too late to do the right thing.
Help guide your clients. Be a force for good inside your organization. Empower your compliance team.
The department and the sentencing guidelines have long recognized that no compliance program can prevent all criminal activity; in determining whether a compliance program is effective, it’s all about what systems are in place that enable a company to successfully respond when misconduct does occur.
An ounce of prevention is worth a pound of cure.
An ethical culture drives an effective compliance program, and a compliance program cannot be effective without the full support and buy-in from the business. Companies that prioritize embedding ethical values throughout their operations are more successful at implementing and sustaining effective compliance programs.
The key point, whether or not a company self-discloses, is that companies fare far better when they show that they’re serious about compliance, cooperation, and remediation.
Under our revised CEP, even where a company does not voluntarily self-disclose, if it fully cooperates and remediates, our policy doubles the maximum possible fine reduction – from 25% to 50% – and will allow our prosecutors to differentiate more clearly among companies.
Cooperation and remediation can also make a huge difference in the form of resolution – these concepts are critical when we consider whether to pursue an NPA vs. a DPA, or DPA vs. a guilty plea.
On that point, our Outcome Health corporate case – and related prosecution of the responsible former executives of the company – demonstrates the impact that cooperation and remediation can have on the form of a resolution and associated penalties. Together with our partners at the U.S. Attorney’s Office here in Chicago, the Fraud Section’s Market Integrity & Major Frauds Unit entered a non-prosecution agreement with Outcome, a privately-held company headquartered in Chicago, in 2019. Former executives and employees of Outcome perpetrated a massive five-year scheme to defraud its clients – most of which were pharmaceutical companies – by, among other things, selling advertising inventory it did not have.
While Outcome did not voluntarily self-disclose its crimes to the department, and while the scheme involved the company’s highest-level executives, it earned a non-prosecution agreement by not only accepting responsibility for its employees and agents’ actions, but also taking immediate steps to remediate and fully cooperating. These steps included parting ways with the executives and employees who were involved in the wrongdoing and making significant improvements to internal controls covering aspects of the company’s operations that had allowed the fraud to take place. Through the NPA, Outcome also committed to compensating the pharmaceutical client victims.
Significantly, underscoring our prioritization of individual accountability, the prosecution team pursued charges against Outcome’s responsible corporate executives and prevailed – following a jury trial – in convicting them all last month for their roles in this complex fraud and money laundering scheme. That included the company’s co-founder and former CEO, its former president, and its former COO and CFO, each of whom lied to investors and lenders about the company’s advertising campaigns, revenue, and return-on-investment. Three other former employees of Outcome also pleaded guilty prior to trial.
The NPA entered a few weeks ago with IRB Brasil Resseguros illustrates similar points about the value of cooperation and remediation to a form of resolution. There, the scheme also involved a high-level executive; the company admitted that its former CFO misled shareholders and the investing public by falsely claiming that the U.S. firm Berkshire Hathaway had invested in IRB. When Berkshire Hathaway made public it had never been contemplating investing in the company, the stock price dropped precipitously. But by fully cooperating with the government’s investigation, including by providing translations of documents and making personnel available for interviews, and implementing remedial measures, here, too, the company obtained an NPA. And the responsible individual – the former CFO – was indicted for his alleged role in the scheme.
I expect you will see in the near future that, like the rest of the division, our Health Care Fraud Unit will apply the CEP to reward companies that voluntarily self-disclose misconduct, cooperate, and remediate, and pursue appropriate charges and resolutions with corporations responsible for health care crimes, alongside its longstanding focus on holding individual wrongdoers accountable.
In short, as its varied work shows, the Health Care Fraud Unit’s name is misleadingly narrow. Health care fraud schemes have ranged widely over the years, from telemarketers hawking unnecessary and ineffective compounded creams to rampant home health care fraud and laundering operations associated with business email compromise schemes victimizing Medicare and Medicaid.
But for good reason, while schemes, technologies, laws, and regulations shift over time, and our approach and resourcing adapt, our core mission remains the same: to seek justice, whether it means pursuit of an indictment or declination of charges. We use our policies, partnerships, data, and traditional law enforcement techniques to hold wrongdoers to account, from medical professionals, health care executives, and providers to patient recruiters and money launderers.
Access to health care in this country is particularly important at this moment in our history; and greed cannot replace need as the basis for medical billing or treatment.
I am confident that the department’s dedicated public servants will continue the great tradition of deterring misconduct, punishing bad actors, and helping protect the most vulnerable among us.