Referral-kickback and bribery schemes that included medical laboratory tests bilked private insurers and government health plans out of $150 million over six-year period
Andrew Hillman, former co-owner of Next Health LLC, a network of drug and genetic-testing laboratories and pharmacies based in Dallas, who pleaded guilty in 2018 to violating federal anti-kickback laws, has been sentenced to 66 months in prison and ordered to pay $3 million in restitution for his role in Medicare fraud, money laundering, healthcare bribes, and doctor kickbacks, reported The Dallas Morning News.
Dark Daily’s sister publication The Dark Report (TDR) previously reported on the federal lawsuit filed by UnitedHealthcare (NYSE:UNH) against Next Health in 2017 for allegedly running fraudulent drug testing and doctor kickback schemes from 2012-2018 in Dallas.
The two owners of Next Health, Andrew Hillman and Semyon Narosov, pleaded guilty to “multiple medical kickback schemes in Dallas in which doctors were paid to steer patients to certain hospitals,” The Dallas Morning News reported. One scheme involved clinical laboratory test specimens that “were sent to the Next Health labs for a battery of unnecessary and expensive tests under the guise of a wellness study, court records say, and doctors were paid kickbacks for referring patients.”
Hillman and Narosov admitted to defrauding both government and private insurance through the phony “wellness” program and through a separate physician kickback scheme in which doctors were paid to refer patients to the now-closed Forest Park Medical Center (FPMC) in Dallas. In court filings, they admitted that “Next Health billed private and government health insurance plans more than $450 million between 2012 and 2018 and collected about $150 million in fraudulent proceeds,” Dallas Morning News reported.
Though Hillman’s guilty plea could have resulted in a
15-year prison sentence, he cooperated with federal investigators in the FPMC
bribery scheme investigation and for that he received a reduced sentence.
Narosov also pleaded guilty in both cases, but he has not yet been
sentenced.
Clinical laboratories were at the center of the Next Health money laundering scheme, which involved multiple shell companies, limited liability companies (LLCs) and umbrella corporations to shield the unlawful conduct from detection. And it worked for five years until 2017, when UnitedHealthcare (UHC) filed a $100 million federal lawsuit against Dallas-based Next Health and its subsidiary labs:
Additionally, two individuals also were charged: former Next
Health marketing representative Erik Bugen and Kirk Zajac.
As outlined in the lawsuit, UnitedHealthcare initially uncovered the fraud during a review of routine medical laboratory test claims to identify abnormal testing activity. Upon a deeper investigation, the insurer discovered an array of bribes and kickbacks and other potential crimes. In one illicit arrangement, Next Health sales consultants provided $50 gift cards to people who provided urine samples in a Whataburger bathroom as part of the “wellness study.”
Clinical laboratory specimens were sent to Next Health
laboratories for “multiple unnecessary and expensive drug tests that were later
billed to United and its customers,” the lawsuit states.
The lawsuit contends the defendants:
Paid bribes and kickbacks to referral sources,
including physicians, sober homes and sales consultants, in exchange for
requesting out-of-network lab services;
Billed for lab services that were not ordered by
medical providers;
Inflated claims by utilizing standing protocols
for blanket testing, regardless of patients’ medical histories, clinical
conditions, or needs;
Billed for services the defendants did not
perform; and
Billed charges the defendants never intended to
collect from patients.
UnitedHealthcare Director of Communications Matthew Rodriguez (above) told the Dallas Morning News, “UnitedHealthcare has taken an active role in recent years in prosecuting instances of lab fraud, and this decision will continue to shine light on companies engaged in inappropriate lab services that put patients at risk and drive up costs.” He said the nation’s largest single health insurer will continue to go after clinical laboratories they suspect may be defrauding the healthcare industry. [Photo copyright: BusinessWire.]
Other Healthcare Frauds and Kickback Schemes Against
UnitedHealthcare
As TDR detailed in “Allegations in UHC Health Insurance Fraud Case Involve Multiple Defendants,” January 22, 2018, Hillman and several other defendants were not novices in devising healthcare kickback schemes. TDR noted the UnitedHealthcare lawsuit was the “visible tip of a large iceberg,” with the insurance giant the latest victim in a pattern of potential fraud and abuse that extended back almost a decade. Included in the laundry list of other allegedly illegal schemes was one distinctly similar to the Next Health fraud.
A year earlier, the US Attorney’s Office of the Northern District of Texas brought indictments against 21 persons affiliated with the physician-owned Forest Park Medical Center in Dallas. Next Health’s Hillman and Narosov were also included in that indictment, as well as 38 subsidiaries of U.S. Health Group, an earlier incarnation of Next Health.
The pair’s ownership and management positions within Next
Health and its subsidiaries created “an illegal scheme that was similar to the
one in place at Forrest [sic] Park,” UnitedHealthcare stated in its complaint.
The indictment alleged FPMC paid approximately $40 million
in bribes and kickbacks to physicians, recruiters, and others in exchange for
referring lucrative patients—particularly those with high-reimbursing, private
health insurance or benefits under certain federal programs—to the
out-of-network hospital.
Hillman, who was among 10 defendants who pleaded guilty before the FPMC case went to trial, testified for the government, the federal Department of Justice (DOJ) said in a statement.
In addition, seven others were convicted of conspiracy to pay or receive healthcare bribes.
“The verdict in the Forest Park case is a reminder to healthcare practitioners across the District that patients—not payments—should guide decisions about how and where doctors administer treatment,” US Attorney for the Northern District of Texas Erin Nealy Cox, JD, said in a press release announcing the guilty verdicts.
US District Court Judge John Parker,
JD, who served as US Attorney for the Northern District of Texas when the
FPMC indictments were handed down, explained the impact of fraud on the
healthcare system.
“Medical providers who enrich themselves through bribes and kickbacks are not only perverting our critical healthcare system, but they are committing a serious crime,” Parker said in a statement announcing the FPMC indictments. “Massive, multi-faceted schemes such as this one, built on illegal financial relationships, drive up the cost of healthcare for everyone and must be stopped.”
The lesson for clinical laboratory leaders is that vigilance
is key to spotting bad actors who wish to defraud the healthcare system. This
is double critical at a same time when labs are under increased scrutiny from
payers, federal and state regulators, and law enforcement.
Pathologists can be paid for their role in identifying and recruiting patients for basket studies and reporting results of medical laboratory tests
Anatomic
pathologists who biopsy, report, and diagnosis cancer will benefit from a
better understanding of basket
studies and their application in developing cancer treatment therapies. Such
studies can lead to more documentation of the effectiveness of various therapies
for cancers with specific gene
signatures.
The US
National Library of Clinical Medicine defines basket studies as “a new sort
of clinical studies to identify patients with the same kind of mutations and
treat them with the same drug, irrespective of their specific cancer type. In
basket studies, depending on the mutation types, patients are classified into ‘baskets.’
Targeted therapies that block that mutation are then identified and assigned to
baskets where patients are treated accordingly.”
“Historically, cancer clinical trials have been centered on the treatment of cancer based on the anatomic location in the body, like breast cancer or brain cancer or lung cancer. A basket study is a novel trial design that includes patients with a certain molecular aberration regardless of location or tissue of origin of cancer in the body. The genomic revolution in oncology has fueled these studies,” Vivek Subbiah, MD, Associate Professor and Medical Director, Clinical Center for Targeted Therapy ( Phase 1 trials program), at the University of Texas MD Anderson Cancer Center in Houston, told Cancer Therapy Advisor. (Photo copyright: MD Anderson Cancer Center.)
Basket Studies Get Results
During a basket study, researchers may find that a drug’s
effectiveness at targeting “a genetic mutation at one site can also treat the
same genetic mutation in cancer in another area of the body,” noted Pharmacy
Times, which also pointed out basket studies are often starting points for
larger oncology trials about drugs.
For example, it was a basket study which found that vemurafenib (marketed as
Zelboraf), intended for treatment of V600E, a mutation of the BRAF gene, may also treat Erdheim-Chester
disease (a rare blood disorder) in patients who have the BRAF V600 gene
mutation, Pharmacy Times reported.
Additionally, the US Food and Drug Administration’s approval
of the cancer drug Vitrakvi (larotrectinib), an oral TRK
inhibitor, marked the first treatment to receive a “tumor-agnostic
indication at time of initial FDA approval,” a Bayer
news release stated. The drug’s efficacy, Pharmacy Times noted, was
found in a “pivotal” basket study.
Basket Studies, a Master Protocol Trial Design
The basket study technique is an example of a master protocol trial design. The FDA defines a master protocol as “a protocol designed with multiple substudies, which may have different objectives and involves coordinated efforts to evaluate one or more investigational drugs in one or more disease subtypes within the overall trial structure. A master protocol may be used to conduct the trial(s) for exploratory purposes or to support a marketing application and can be structured to evaluate, in parallel, different drugs compared to their respective controls or to a single common control.”
Other master protocols include umbrella studies and platform
studies, according to Cancer Therapy Advisor, which noted that each
master protocol trial design has its own unique objectives:
Umbrella studies look at the effectiveness of
multiple drugs on one type of cancer;
Platform trials investigate the effectiveness of
multiple therapies on one disease on an ongoing basis; and
Basket studies focus on the effectiveness of one
therapy on patients with different cancers based on a biomarker.
“In contrast to traditional trials designs, where a single
drug is tested in a single disease population in one clinical trial, master
protocols use a single infrastructure, trial design, and protocol to
simultaneously evaluate multiple drugs and or disease populations in multiple
substudies, allowing for efficient and accelerated drug development,” states
the FDA draft guidance, “Master
Protocols: Efficient Clinical Trial Design Strategies to Expedite Development
of Oncology Drugs and Biologics.”
Final FDA guidance on master protocols design is expected early in 2020, an FDA spokesperson told Cancer Therapy Advisor.
While master protocol studies show promise, they generally
have small sample sizes, noted researchers of a study published in the journal Trials.
And some researchers have ethical concerns about basket studies.
Nevertheless, basket studies appear to hold promise for precision medicine.
Anatomic pathologists may want to follow some of them or find a way to get
involved through identifying clinical laboratory tests and reporting the results.
The scientist also employed machine learning “to gauge how easily accessible genes are for transcription” in research that could lead to new clinical laboratory diagnostic tests
Anatomic pathologists and clinical laboratories are of course familiar with the biological science of genomics, which, among other things, has been used to map the human genome. But did you know that a three-dimensional (3D) map of a genome has been created and that it is helping scientists understand how DNA regulates its organization—and why?
The achievement took place at St. Jude Children’s Research Hospital (St. Jude) in Memphis, Tenn. Scientists there created “the first 3D map of a mouse genome” to study “the way cells organize their genomes during development,” a St. Jude news release noted.
Some experts predict that this new approach to understanding how changes happen in a genome could eventually provide new insights that anatomic pathologists and clinical laboratory scientists could find useful when working with physicians to diagnose patients and using the test results to identify the most appropriate therapy for those patients.
In addition to 3D modeling, the researchers applied machine learning to data from multiple sources to see how the organization of the genome changed at different times during development. “The changes are not random, but part of the developmental program of cells,” Dyer said in the news release.
The St. Jude study focused on the rod cells in a mouse retina. That may seem like a narrow scope, but there are more than 8,000 genes involved in retinal development in mice, during which those genes are either turned on or off.
To see what was happening among the cells, the researchers used HI-C analysis, an aspect of ultra-deep chromosome conformation capture, in situ. They found that the loops in the DNA bring together regions of the genome, allowing them to interact in specific ways.
Until this study, how those interactions took place was a
mystery.
“Understanding the way cells organize their genomes during development will help us to understand their ability to respond to stress, injury and disease,”Michael Dyer, PhD (above), Chair of St. Jude’s Developmental Neurobiology Department, co-leader of the Developmental Biology and Solid Tumor Program, and Investigator at Howard Hughes Medical Institute (HHMI), said in the news release. (Photo copyright: St. Jude Children’s Research Hospital.)
The scientists also discovered there were DNA promoters, which encourage gene expression, and also DNA enhancers that increase the likelihood gene expression will occur.
“The research also included the first report of a powerful regulator of gene expression, a super enhancer, that worked in a specific cell at a specific stage of development,” the news release states. “The finding is important because the super enhancers can be hijacked in developmental cancers of the brain and other organs.”
St. Jude goes on to state, “In this study, the scientists determined that when a core regulatory circuit super-enhancer for the VSX2 gene was deleted, an entire class of neurons (bipolar neurons) was eliminated. No other defects were identified. Deletion of the VSX2 gene causes many more defects in retinal development, so the super-enhancer is highly specific to bipolar neurons.”
The St. Jude researchers developed a genetic mouse model of
the defect that scientists are using to study neural circuits in the retina,
the news release states.
Research Technologist Victoria Honnell (left); Developmental Neurobiologist Jackie Norrie, PhD (center); and Postdoctoral Researcher Marybeth Lupo, PhD (right), work in the St. Jude clinical laboratory of Michael Dyer, PhD, using 3D genomic mapping to study gene regulation during development and disease. (Photo copyright: St. Jude Children’s Research Hospital.)
DNA Loops May Matter to Pathology Sooner Rather than
Later
Previous researcher studies primarily used genomic sequencing technology to locate and investigate alterations in genes that lead to disease. In the St. Jude study, the researchers examined how DNA is packaged. If the DNA of a single cell could be stretched out, it would be more than six feet long. To fit into the nucleus of a cell, DNA is looped and bundled into a microscopic package. The St. Jude scientists determined that how these loops are organized regulates how the cell functions and develops.
Scientists around the world will continue studying how the loops in DNA impact gene regulation and how that affects the gene’s response to disease. At St. Jude Children’s Research Hospital, Dyer and his colleagues “used the same approach to create a 3D genomic map of the mouse cerebellum, a brain structure where medulloblastoma can develop. Medulloblastoma is the most common malignant pediatric brain tumor,” noted the St. Jude’s news release.
In addition to providing an understanding of how genes
function, these 3D studies are providing valuable insight into how some
diseases develop and mature. While nascent research such as this may not impact
pathologists and clinical laboratories at the moment, it’s not a stretch to
think that this work may lead to greater understanding of the pathology of
diseases in the near future.
This rural health system has nearly a decade of experience offering cash-only package pricing for medical services including, most recently, inpatient stays
While healthcare networks and hospital organizations nationwide argued over pricing transparency, Pomerene Hospital in Millersburg, Ohio, embraced the concept. The not-for-profit hospital developed packages of care that include “one all-inclusive price for tests, procedures, and episodes of care, rather than a lengthy list of itemized charges that didn’t even include professional fees” for its self-paying customers, Modern Healthcare reported.
A companion proposed rule (CMS‑9915‑P) will, if passed, require health plans and healthcare insurers to disclose covered healthcare costs to customers upon request, including “an estimate of such individual’s cost-sharing liability for covered items or services furnished by a particular provider.”
These rules have created a fire storm of controversy. Hospital systems and healthcare organizations like the American Hospital Association (AHA) argue that revealing payer-negotiated rates will undermine health networks’ negotiating power with insurers and increases hospital prices.
They may be right. But that hasn’t stopped one health
network in rural Ohio from providing a blueprint on price transparency that
could be a model for the rest of the nation—at least for one segment of its
customer base.
Bundled Care Packages Increase Revenues at Pomerene
Pomerene is a not-for-profit healthcare provider established
in 1919. Originally, the tiny hospital had “a six bed women’s ward, a three bed
men’s ward, six private rooms, a three bed OB ward, and a nursery with five
cribs. There were ten physicians on staff,” notes the hospital’s website.
Today, Pomerene has more than 325 employees, 80 physicians, and 55 licensed beds. The hospital has 30 departments on three floors and is one of the largest employers in Holmes County.
Pomerene has developed bundled care packages for more than 300 services—including inpatient care—for Amish and Anabaptist patients, as well as any other self-pay patients who pay their bills in full at the time of service, Modern Healthcare reported.
The initiative came in response to concerns raised by the
area’s Amish and Anabaptist communities, which make up roughly 40% of the
county’s population. They do not use commercial health insurance. Instead, they
pay their medical bills out of pocket, and when they are unable to pay for
medical services, benefit actions and church support fill the financial gaps.
Church members asked Pomerene for guaranteed bundled pricing.
They did not want the uncertainty of hospital bills that might include lists of
itemized charges, but not professional fees and other potential costs.
“We have our own healthcare,” a retired Amish carpenter (who asked that his name not be used) told Reuters. “They (hospitals) give you a bill. If you can’t pay it, your church will.”
Both religious groups also value thriftiness and are known
to be fierce negotiators. In recent years, they lobbied Pomerene Hospital to
include inpatient care in its all-inclusive pricing structure.
“We assume a certain level of risk with this financial arrangement,” Pomerene Hospital CEO Jason Justus, who at the time was Pomerene’s Chief Financial Officer, told Modern Healthcare. “But it’s about saying what we’ll do and doing what we say. That builds a great deal of trust in the community.” Justus took over as CEO in July, 2019, reported The Daily Record.
Jason Justus, CEO, is shown above to the right of Tony Snyder, former CEO of Pomerene Hospital until July of 2019. Initially, Snyder was concerned that posting the hospital’s prices would discourage the Amish from seeking care at his hospital. “They are shrewd business folks, they are price sensitive, and they will shop,” he told Modern Healthcare. “They don’t expect you to lose money, but they don’t want to be paying exorbitant margins.” Fortunately, price transparency had the opposite effect. “We were holding our breath,” Justus said. “We were optimistic it would work, and we were pleasantly surprised when it did.” (Photo copyright: The Daily Record.)
In total, nearly one-quarter of the hospital’s patient revenue comes from bundled-service packages, with 3,387 packages provided last year, Modern Healthcare reported. In 2018, Pomerene brought in $36,971,931 in operating revenue, according to Modern Healthcare Metrics.
Bundled Payments Drive Innovation
Bundled payments also have forced hospital administrators and staff at Pomerene to find innovative ways to cut costs by shortening patient stays. For example, Modern Healthcare reported that the length of hospital stay for childbirth, which at the time averaged two-to-four days, dropped to 24 hours after the hospital created a 24-hour package for obstetrical deliveries. Within 18 months, 80% of childbirth cases fit the 24-hour model.
“Here is free market economics at work,” said Robert Michel,
Dark Daily’s Editor-in-Chief. “This hospital understands that it must
meet the needs of this unique group of patients with good service and quality
at a fair price. That understanding comes with an incentive for the hospital’s
staff to identify and implement innovations to cut costs while improving
quality.”
However, Pomerene Hospital’s policy of disclosing prices to patients in advance of services remains uncommon in the healthcare industry. “Outside of Medicare, bundled pricing is rare-to-nonexistent among full-service US hospitals, most of which say they don’t know their actual costs for providing care and, therefore, can’t offer such prices,” Modern Healthcare stated.
For competitive reasons, Pomerene does not publicly post its
package prices and only prospective cash-paying patients are provided the cost
breakdowns. That will most likely change following enactment of the CMS final
rule.
Other Health Systems That Bundled Prices
Though Pomerene does not shares its price-packaging methods
with other hospitals, its track record for attracting cash-paying patients made
it an example to other hospitals serving similar religious communities.
The Medical Center at Scottsville in Kentucky followed Pomerene’s lead and discounted cash prices—paid upfront or before discharge—by 25% for 300 medical services, including childbirth and common surgical procedures. This was to attract the area’s Mennonite population, noted Quartz magazine.
“I will tell you they are very conscientious about cost.
They are very business-savvy and will shop around,” Eric Hagan, Regional
Vice President of Operations at Med
Center Health and Administrator of the Medical Center at Scottsville, told Quartz.
Will Americans as a whole be just as eager to shop for
medical services? The answer to that question may determine whether increased
price transparency throughout healthcare, including clinical laboratory testing
and anatomic pathology services, results in lowering their healthcare costs.
Many other healthcare systems also are partnering with private genetic testing companies to pursue research that drive precision medicine goals
It is certainly unusual when a major health network announces that it will give away free genetic tests to 10,000 of its patients as a way to lay the foundation to expand clinical services involving precision medicine. However, pathologists and clinical laboratory managers should consider this free genetic testing program to be the latest marketplace sign that acceptance of genetic medicine continues to move ahead.
Notably, it is community hospitals that are launching this
new program linked to clinical laboratory research that uses genetic tests for
specific, treatable conditions. The purpose of such genetic research is to
identify patients who would benefit from test results that identify the best
therapies for their specific conditions, a core goal of precision medicine.
Clinical laboratory leaders will be interested in this
initiative, as well other partnerships between healthcare systems and private
genetic testing companies aimed at identifying and enrolling patients in
research studies for disease treatment protocols and therapies.
The Future of Precision Medicine
Modern Healthcare reported that data from the WholeMe DNA study, which was funded through donations to the AdventHealth Foundation, also will be used by the healthcare network for research beyond FH, as AdventHealth develops its genomics services. The project’s cost is estimated to reach $2 million.
“Genomics is the future of medicine, and the field is rapidly evolving. As we began our internal discussions about genomics and how to best incorporate it at AdventHealth, we knew research would play a strong role,” Wes Walker MD, Director, Genomics and Personalized Health, and Associate CMIO at AdventHealth, told Becker’s Hospital Review.
“We decided to focus on familial hypercholesterolemia
screening initially because it’s a condition that is associated with
life-threatening cardiovascular events,” he continued. “FH is treatable once
identified and finding those who have the condition can lead to identifying
other family members who are subsequently identified who never knew they had
the disease.”
The AdventHealth Orlando website states that participants in the WholeMe study receive information stored in a confidential data repository that meets HIPAA security standards. The data covers ancestry and 22 other genetic traits, such as:
Asparagus Odor Detection
Bitter Taste
Caffeine Metabolism
Cilantro Taste Aversion
Circadian Rhythm
Coffee Consumption
Delayed Sleep
Earwax Type
Endurance vs Power
Exercise Impact on Weight
Eye Color
Freckling
Hair Curl and Texture
Hand Grip Strength
Height
Lactose Tolerance
Sleep Duration
Sleep Movement
Sleeplessness
Sweet Tooth
Tan vs. Sunburn
Waist Size
Those who test positive for a disease-causing FH variant will be referred by AdventHealth for medical laboratory blood testing, genetic counseling, and a cardiologist visit, reported the Ormond Beach Observer.
One in 250 people have FH, and 90% of them are undiagnosed,
according to the FH Foundation,
which also noted that children have a 50% chance of inheriting FH from parents
with the condition.
AdventHealth plans to expand the free testing beyond central
Florida to its 46 other hospitals located in nine states, Modern Healthcare
noted.
Other Genetics Data Company/Healthcare Provider Partnerships
Helix (above) is one of the world’s largest CLIA-certified, CAP-accredited next-generation sequencing labs. The partnership with AdventHealth offered study participants Exome+: a panel-grade medical exome enhanced by more than 300,000 informative non-coding regions; a co-branded ancestry + traits DNA product for all participants; secure storage of genomic data for the lifetime of the participant; infrastructure and data to facilitate research; and in-house clinical and scientific expertise, according to Helix’s website. (Photo copyright: Orlando Sentinel.)
Business Insider noted that Helix has focused on clinical partnerships for about a year and seems to be filling a niche in the genetic testing market.
“Helix is able to sidestep the costs of direct-to-consumer
marketing and clinical test development, while still expanding its customer
base through predefined hospital networks. And the company is in a prime
position to capitalize on providers’ interest in population health management,”
Business Insider reported.
Ochsner’s program is the first “fully digital population
health program” aimed at including clinical genomics data in primary care in an
effort to affect patients’ health, FierceHealthcare
reported.
Hereditary breast and ovarian cancer due to
mutations in BRCA1 and BRCA2 genes;
Lynch
syndrome, associated with colorectal and other cancers; and
FH.
Color also offers genetic testing and whole genome sequencing services to NorthShore’s DNA10K program, which plans to test 10,000 patients for risk for hereditary cancers and heart diseases, according to news release.
And, Jefferson Health offered Color’s genetic testing to the healthcare system’s 33,000 employees, 10,000 of which signed up to learn their health risks as well as ancestry, a Color blog post states.
“Understanding the genome warning signals of every patient will be an essential part of wellness planning and health management,” said Geisinger Chief Executive Officer David Feinberg, MD, when he announced the new initiative at the HLTH (Health) Conference in Las Vegas. “Geisinger patients will be able to work with their family physician to modify their lifestyle and minimize risks that may be revealed,” he explained. “This forecasting will allow us to provide truly anticipatory healthcare instead of the responsive sick care that has long been the industry default across the nation.”
It will be interesting to see how and if genetic tests—free
or otherwise—will advance precision medicine goals and population health
treatments. It’s important for medical laboratory leaders to be involved in health
network agreements with genetic testing companies. And clinical laboratories should
be informed whenever private companies share their test results data with
patients and primary care providers.
