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Chicago Laboratory Owner Charged with Defrauding Medicare in $60 Million COVID-19 Test Kit Scheme
Friday, June 14, 2024

Headlines that Matter for Companies and Executives in Regulated Industries

Chicago Laboratory Owner Charged with Defrauding Medicare in $60 Million COVID-19 Test Kit Scheme

The Chicago-based owner of two laboratories, Zoom Labs Inc. and Western Labs Co., has been charged with health care fraud and money laundering in connection with more than $60 million in Medicare claims for over-the-counter (OTC) COVID-19 test kits, including tests delivered to thousands of deceased beneficiaries. Federal prosecutors began investigating Medicare claims from Syed S. Ahmed’s two laboratories after noticing a “massive spike” in the laboratories’ claims in 2023, which coincided with Ahmed assuming control of Zoom. Within the first six weeks of Ahmed gaining control of Zoom, the government alleged the company billed $16 million to Medicare for OTC COVID-19 test kits, representing more than 1.3 million tests for more than 154,000 beneficiaries. Similarly, Western billed Medicare more than $44.3 million over a five-week period for COVID-19 tests, accounting for more than 1.7 million testing kits for approximately 209,000 beneficiaries. The government alleged that this high volume in a short period of time would be unusual for legitimate providers.

Medicare further received hundreds of complaints from beneficiaries alleging that that they were billed for services that were not provided. Over a six-week period in 2023, Ahmed’s laboratories allegedly billed Medicare for OTC COVID-19 test kits that were never provided, delivered to beneficiaries known to be deceased or delivered to beneficiaries that did not request or approve orders for test kits to their homes. In total, the laboratories allegedly received more than $60 million in claim reimbursements. As the laboratories received reimbursements, Ahmed allegedly moved the funds to other bank accounts he and his spouse controlled, in some instances to give the false appearance of legitimate business expenditures. Ahmed is charged with health care fraud under 18 U.S.C. § 1347 and money laundering under 18 U.S.C. §§ 1956 and 1957.

The case is US v. Ahmed, Case No. 1:24-cr-00285, in the US District Court for the Northern District of Illinois.

Connecticut Judge Unconvinced by State’s Evidence in Pharmacy Kickback Case

In a false claims and kickbacks case in Connecticut state court against Assured Rx, a now-defunct compounding pharmacy, the judge showed skepticism of the government’s proof during oral arguments on posttrial briefs. In this case, the State of Connecticut charged Assured Rx with conspiring with other defendants in a scheme to pay kickbacks to state Department of Correction retirees who got their compound drug prescriptions filled at Assured Rx. The government is seeking up to $44.5 million in damages and penalties against the defendants in connection with more than $10.8 million in alleged false claims for prescription drugs and $2.67 million in alleged kickbacks.

The State relied on a spreadsheet provided by pharmacy benefit manager CVS Caremark, which allegedly shows the reimbursement claims made by defendants and the names of patients who received kickbacks. The spreadsheet does not, however, reflect that the patients, or those who recruited them to use the pharmacy, received a percentage of the reimbursement. The State’s theory rests on the implied certification theory of liability under the False Claims Act (FCA), whereby in submitting a claim for reimbursement, the claim contains “specific representations and details about what a bill is for, and that there was an omission that was material to the payor’s decision to pay the claim.” Connecticut state court Judge John B. Farley noted that the spreadsheet is not necessarily complete, and thus may undercut the government’s argument that the defendants submitted false reimbursement claims by concealing illegal kickbacks.

Judge Farley also noted that in Assured Rx’s provider agreement with CVS Caremark, the agreement required Assured Rx to certify that it would comply with all applicable state and federal laws; while the federal FCA and Anti-Kickback Statute were specifically identified, Connecticut’s state law counterparts were not. The state argued that the relevant case law does not require an express reference to each applicable law, and took the position that Assured Rx’s president knew he had to comply with federal anti-kickback laws that prohibit the same conduct. The judge pushed back and said, “The inference about what he knew is — we're going to infer that from smoke, because we don’t have any fire, right?”

The case is Connecticut v. Assured Rx LLC et al., Case No. HHD-CV18-6101282-S, in the Hartford Judicial District of the Connecticut Superior Court.

Urgent Care Network Settles Allegations of False Uninsured Program Claims for $12 Million

CityMD, a New York-based network of urgent care practices, agreed to pay more than $12 million to settle civil allegations that it submitted false COVID-19 testing claims to the Health Resources and Services Administration’s (HRSA) Uninsured Program (UIP). Of CityMD’s total settlement amount, approximately $9 million is restitution. The US Department of Justice (DOJ) alleged that from 2020 to 2022, CityMD submitted claims to the UIP for COVID-19 testing to patients, but CityMD did not adequately confirm whether those individuals (including individuals for whom CityMD had health insurance cards on file) had health insurance coverage before submitting the claims. The DOJ also alleged that CityMD caused outside laboratories to submit false UIP claims for COVID-19 testing because CityMD issued requisition forms that erroneously indicated that patients were uninsured. This settlement, which is yet another indication that pandemic fraud is an enforcement priority for the DOJ, resolves the FCA lawsuit initially brought by a patient whistleblower.

Notably, CityMD received credit in the settlement for cooperating with the government’s investigation and voluntarily contracting a third party to assist the government in determining the amount of losses associated with the allegedly false UIP claims. CityMD also received credit for cooperating with HRSA and repaying about $7 million in connection with the claims at issue.

DOJ’s press release is available here.

Los Angeles Individuals Charged with $15 Million Hospice Medicare Fraud Scheme

As part of the DOJ’s ongoing effort to combat hospice fraud in the greater Los Angeles area, five individuals were charged with submitting false claims to Medicare through a series of sham hospice companies. According to federal prosecutors, the five defendants used foreign nationals’ identifying information to open bank accounts, sign property leases, make phone calls to Medicare, and submit Medicare claims for hospice services. In the claims, the defendants allegedly misused physicians’ identifying information and claimed the hospice services were necessary, when in fact the purported recipients were not terminally ill and had neither requested nor received care from the sham hospices. Through this scheme, the defendants allegedly received more than $15 million in reimbursement from Medicare. The majority of defendants are charged with conspiracy to commit health care fraud, aggravated identity theft, money laundering, and conspiracy to launder money, and they each face a maximum sentence of at least 40 years in prison.

DOJ’s press release is available here.

Chronic Care Management Provider Settles Coding-Related FCA Suit for $14.9 Million

Bluestone Physician Services, which operates in Florida, Minnesota, and Wisconsin, agreed to pay $14.9 million and sign a five-year Corporate Integrity Agreement to resolve allegations that it submitted false claims for chronic care management services. According to the settlement agreement, Bluestone submitted claims to Medicare, Medicaid, and TRICARE for physician services that were not provided in accordance with federal requirements. Bluestone allegedly submitted claims under two Evaluation and Management codes, the domiciliary rest home visit code for established patients (99337) and the chronic care management code (99490), that did not accurately reflect the services provided and resulted in artificially inflated claims. The federal government’s share of the settlement is $13,842,482 and the states of Florida and Minnesota will receive $1,059,518. Of the total settlement amount, $7.45 million is restitution. This FCA suit was originally filed in 2020 by a relator, the former general manager for Bluestone’s Florida market, who will receive approximately $2.8 million in connection with the settlement.

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