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Telemedicine Fraud: DOJ Announces $2.5 million FCA Settlement

August 5, 2019

The U.S. Department of Justice will recover $2.5 million from a telemarketing company and its executive for engaging in telemedicine fraud.  DOJ alleges that the company and its head ran a fraudulent telemedicine scheme involving kickbacks, consumer deception, and medically unnecessary prescriptions.  The prescriptions were paid for by federal healthcare programs like Medicare.

The government alleges that the company and its executive created a telemedicine fraud scheme in which they fraudulently obtained insurance coverage information from consumers across the country.  They used this information to create prescriptions for pain creams that were not medically necessary and which did not arise from a valid doctor-patient relationship.  Next they sold these prescriptions to pharmacies.  The pharmacies then billed Medicare or other federal government healthcare programs.  Finally, the government also alleges that telemarketing company received kickbacks from the pharmacies.  

The False Claims Act settlement, announced by the U.S. Attorney’s Office for the Middle District of Florida, resolves a lawsuit brought by a whistleblower under the False Claims Act (FCA); the whistleblower will receive $287,500 of the $2.5 million.  

Notably, this settlement involves some of the same conduct that led to groundbreaking criminal charges against the same executive, three other individuals, and seven companies.  That indictment was announced in October 2018 by the U.S. Attorney’s Office for the Eastern District of Tennessee.  It alleged a massive scheme designed to deceive tens of thousands of patients and their private insurers.  The estimated loss was $1 billion. 

This FCA settlement is likely just the tip of the iceberg, given the rapid expansion of telehealth technology and spending.  While there is certainly increased scrutiny of direct billing for telemedicine services (as suggested by this U.S. Department of Health and Human Services Office of Inspector General April 2018 report), these two cases remind us that telemedicine fraud often has the same hallmarks of other, all-to-common healthcare fraud schemes: illegal kickbacks, duping of vulnerable consumers, and unnecessary prescriptions.   

As the U.S. Attorney for the Middle District of Florida said, “Telemedicine is a valuable service for our citizens, but it must not be abused.”  

Hats off to the federal prosecutors in Tennessee and Florida who pursued these matters and, of course, to the whistleblower who came forward to report wrongdoing.