Recent Healthcare Fraud Takedown Reflects Continued Increase in Telehealth Government Enforcement Actions

Earlier this week, the U.S. Department of Health and Human Services, Office of Inspector General (OIG) announced the completion of a nationwide telehealth fraud takedown that occurred in September 2020.¹ As a result of the COVID-19 public health crisis, there has been intense interest in and growth of the utilization of telehealth, accompanied by the temporary expansion in coverage by payors of telehealth services (with the expectation that many such coverage expansions may become permanent). The continued focus on fraud in telehealth by OIG underscores the importance of carefully navigating the complex regulatory regime that applies to the provision of telehealth services. Investors, telehealth providers, and companies partnering with telehealth providers should take care in structuring arrangements involving telehealth services to avoid the characteristics of the alleged fraud that OIG has focused on in its recent takedowns and enforcement actions, which are described in more detail below.

According to the OIG Fact Sheet, the September 2020 takedown:

• Resulted in charges against 345 defendants in 51 judicial districts, including telemedicine executives, the owners of durable medical equipment (DME) companies, genetic testing laboratories, pharmacies, and more than 100 medical practitioners.
• Involved more than $6 billion in alleged loss to federal healthcare programs, $4.5 billion of which related to schemes involving telemedicine.
• Gave rise to the revocation of federal healthcare billing privileges of 256 medical professionals.

This takedown follows an April 2019 announcement by the U.S. Department of Justice (DOJ) regarding the indictments of 24 individuals and telemedicine companies involved in allegedly accepting kickbacks from DME suppliers and defrauding Medicare by convincing beneficiaries through telemedicine visits to accept items when they were not medically necessary.² The indictments springing from that investigation, which began years earlier, continue to grow, with new charges against telemedicine providers announced throughout 2020.³

Other telemedicine providers and owners of telemedicine companies have also faced criminal charges and civil claims related to allegations that they leveraged their services to push on patients medically unnecessary and expensive dietary supplements, compounded medications and other drugs, often without examining patients.⁴ In one such set of cases, DOJ pursued criminal and civil charges against telemedicine companies that engaged with patients for the purpose of collecting insurance information and then sold that information to compounding pharmacies for the purpose of filling medically unnecessary prescriptions.⁵ Yet other owners of telemedicine companies have been indicted in connection with accepting kickbacks that led to the overutilization of cancer genomic and other diagnostic laboratory tests.⁶ In addition to the alleged acceptance of kickbacks by the telemedicine providers implicated in these enforcement examples, a common thread is that the providers are alleged to have prescribed products that are medically unnecessary, with minimal – if any – examination, and no established physician-patient relationship.⁷

As the adoption and utilization of telehealth continues, we expect the enforcement scrutiny on telehealth providers and companies to increase, including additional takedowns and their related investigations.

¹ See OIG Press Release, “2020 National Health Care Fraud Takedown,” (last accessed on Oct. 1, 2020), available at https://oig.hhs.gov/media/documents/2020HealthCareTakedown_FactSheet.pdf.

² See DOJ Press Release, Apr. 9, 2019, available at https://www.justice.gov/opa/pr/federal-indictments-and-law-enforcement-actions-one-largest-health-care-fraud-schemes. Additional indictments followed throughout 2019. See e.g., DOJ Press Release, July 9, 2019, available at https://www.justice.gov/usao-edny/pr/anesthesiologist-indicted-alleged-role-7-million-telemedicine-health-care-fraud; DOJ Press Release, Sept. 6, 2019, available at https://www.justice.gov/opa/pr/owner-and-chief-executive-officer-telemedicine-company-pleads-guilty-424-million-conspiracy.

³ See, e.g., DOJ Press Release, Apr. 23, 2020, available at https://www.justice.gov/usao-sdga/pr/telemedicine-company-owner-charged-60-million-fraud-scheme; DOJ Press Release, May 13, 2020, available at https://www.justice.gov/usao-sdga/pr/durable-medical-equipment-company-owner-charged-kickback-scheme; DOJ Press Release, Feb. 5, 2020, available at https://www.justice.gov/opa/pr/two-owners-telemedicine-companies-charged-roles-56-million-conspiracy-defraud-medicare-and; DOJ Press Release, June 11, 2020, available at https://www.justice.gov/usao-sdga/pr/florida-man-charged-telemedicine-scheme.

⁴ See, e.g., DOJ Press Release, Sept. 26, 2019, available at https://www.justice.gov/usao-ct/pr/former-connecticut-physician-pays-300000-settle-false-claims-act-allegations.

⁵ See, e.g., DOJ Press Release, Aug. 1, 2019, available at https://www.justice.gov/usao-mdfl/pr/telemarketer-and-his-companies-agree-pay-25-million-settle-allegations-they-operated and DOJ Press Release, Oct. 15, 2018, available at https://www.justice.gov/opa/pr/four-men-and-seven-companies-indicted-billion-dollar-telemedicine-fraud-conspiracy.

⁶ See, e.g., United States v. James L. Simmons, Case No. 19-60273, Indictment (S.D.Fl. Sept. 26, 2019); see also DOJ Press Release, January 10, 2020, available at https://www.justice.gov/usao-wdpa/pr/pittsburgh-area-lab-owner-pleads-guilty-multiple-kickback-conspiracies-connection.

⁷ See DOJ Press Release, Aug. 1, 2019, supra; see also DOJ Press Release, Apr. 23, 2020, supra.