Feds charge 10 in $1.4 billion rural hospital billing scheme

July 1, 2020

The defendants include hospital managers, lab owners, billers, and recruiters.

The U.S. Justice Department (DOJ) has charged 10 people from across the country for their part in an alleged rural hospital pass-through billing scheme.

According to a news release, the defendants, which include hospital managers, lab owners, billers, and recruiters, are accused of using rural hospitals in several states as billing shells to submit fraudulent claims to insurance companies for $1.4 billion in laboratory testing from November 2015 through February 2018. The defendants allegedly collected approximately $400 million in the scheme.

The defendants hail from Florida, Illinois and Georgia, and all but one of them were charged with one count of conspiracy to commit healthcare fraud and wire fraud. Meanwhile four were charged with five counts of substantive healthcare fraud each, two were charged with two counts of conspiracy to commit money laundering, six were charged with one count of conspiracy to commit money laundering, and eight were charged with multiple counts of substantive money laundering, according to the release.

The hospitals involved in the case are: Cambellton-Graceville Hospital, a 25-bed rural hospital located in Graceville, Fla.; Regional General Hospital of Williston, a 40-bed facility located in Williston, Fla.; Chestatee Regional Hospital, a 49-bed rural hospital located in Dahlonega, Ga.; and Putnam County Memorial Hospital, a 25-bed rural hospital located in Unionville, Mo., the release says.

The release says that the defendants would allegedly take over small, rural hospitals, usually in financial trouble, through managing companies which they owned and operated then bill private insurers through the hospitals for millions of dollars of expensive urinalysis drug tests and blood tests conducted mostly at outside laboratories often controlled by or affiliated with the defendants through billing companies the defendants also controlled by the defendants. Despite most of the tests being performed by outside laboratories, the defendants claimed the tests were performed in-house, the release says.

Through these hospitals’ negotiated contracts with private insurers, lab tests performed in-house received a higher reimbursement than those performed in an outside laboratory, so the hospitals were allegedly used as shells to fraudulently bill for the tests, which often were not medically necessary, the release says.

The defendants allegedly obtained urine and other samples for testing through kickbacks paid to recruiters and healthcare providers at sober homes and substance abuse treatment centers. Additionally, the defendants are accused of engaging in sophisticated money laundering to promote their scheme and distribute the profits, according to the release.

“Trust and integrity undergird the confidence and reliability in our healthcare system,” U.S. Attorney for the Middle District of Florida Maria Chapa Lopez, says in the release. “Fraudulent and deceptive business practices undermine those values and erode the public’s trust in that system. We will continue to pursue those who set these tenets aside and compromise the care and safety of our citizens for profit.”