White Collar Criminal Defense Group

48 Arrested In Eastern Pennsylvania And New Jersey Involved In Health Care Fraud And Pill Mill Schemes

A coordinated law enforcement effort among myriad federal, state and local law enforcement agencies in Pennsylvania and New Jersey resulted in the arrests of 48 defendants. Included in those arrested were doctors and medical professionals who, allegedly, submitted over $160 million in fraudulent insurance claims, caused losses of over $800 million and distributed over 3.25 million opioid pills. This law enforcement sweep reached across seven federal districts, including the Eastern District of Pennsylvania.

In the Eastern District of Pennsylvania alone, 17 health care professionals were arrested on September 26 for allegedly submitting over $4 million in fraudulent claims and distributing over 738,000 oxycodone doses in pill mill clinics. Some doctors were charged with unlawful distribution of controlled substances for writing prescriptions that were outside the usual course of professional practice and not for legitimate medical purpose. According the Department of Justice, the FBI’s investigation revealed, that these medical doctors prescribed oxycodone to patients without examination or treatment. Defendants then knowingly submitted fraudulent claims to Medicare, health plans provided by the United States Office of Personnel Management (OPM) and Independent Blue Cross (IBC) for payment.

In Philadelphia, one medical doctor, two unlicensed foreign medical school graduates and a nurse practitioner, were indicted on one count each of health care fraud and conspiracy  to distribute controlled substances for an alleged scheme which lasted 4 years. The medical doctor, Neil Anand, owned several non-pharmacy dispensaries which dispensed medications. He owned  Anand Medical Investment, Institute of Advanced Medical Surgery and Bucks County Spine and Pain Medicine. The indictment alleged that the dispensaries provided the patients with “goody bags” containing prescription medications based on the patient’s insurance coverage, not medications that the patients needed. It also alleged that the defendants did not provide doses or instruction for usage of the medications and required the patients to accept the medically unnecessary medications before the patient received the prescription of a Schedule II controlled substance. The indictment also alleges that the defendants failed to collect co-payments but required patients to sign a false statement stating that they paid their co-pays. The nurse-practitioner is alleged to have signed blank prescriptions and given them to the unlicensed defendants to prescribe Schedule-II controlled substances.  The indictment seeks the forfeiture of the gross proceeds traceable to the alleged criminal activity.

The aggressive law enforcement actions were the result of an extensive collaborative effort of agencies with diverse expertise and focus in pursuing criminal and parallel civil actions against medical professionals and others in an effort curtail fraud and the illicit distribution of opioids. These agencies include: departments of the Health Care Fraud Unit in the Criminal Division’s Fraud Section, and the U.S. Attorney’s Offices  for the Eastern District of Pennsylvania and the District of New Jersey, known as the “Newark/Philadelphia Regional Medicare Fraud Strike Force” in addition to the FBI, Department of Health and Human Services – Office of Inspector General (HHS-OIG), United States Postal Service – Office of Inspector General (USPS-OIG), the Office of Personnel Management, the Pennsylvania Office of Attorney General, Drug Enforcement Administration, HHS-OIG, the Pennsylvania Department of State’s Bureau of Enforcement and Investigations, the Chester County District Attorney’s Office, the Eastown Township Police Department and the Philadelphia Police Department.

In addition to those arrests mentioned above, 12 defendants were also charged with possession with intent to distribute a Schedule II controlled substance and aiding and abetting others in a scheme to defraud. These 12 defendants allegedly knowingly presented false prescriptions to several pharmacies in Pennsylvania and New Jersey and purchased oxycodone from complicit pharmacists paying a premium fee. They then distributed the pills. Those pharmacists have not yet been charged.

The Department of Justice continues to aggressively prosecute those involved in the opioid crisis. Last week the Department of Justice announced charges against 58 defendants across four federal districts in Texas in a similar fraud scheme and illicit possession of controlled substance with intent to distribute. It is alleged that the Texas prosecutions resulted in a $66 million in losses and 6.2. million pills. 

Click here to view additional indictments related to this case.

Third Circuit Rejects Doctor’s Claim That Payments From Lab Were Rent, Not Bribes, In $100 Million Referral Scheme

Yesterday, the Third Circuit affirmed a doctor’s conviction for accepting bribes in exchange for referrals to New Jersey based lab Biodiagnostic Laboratory Services (BLS).  U.S. v. Thomas V. Savino, No. 18-2223 (3d Cir. 2019).  Doctor Thomas Savino allowed BLS to set up a blood drawing station in his solo medical practice in Staten Island, New York.  BLS paid Savino approximately $25,000 over the course of the arrangement, which lasted from August 2012 to April 2013.  

The government, with the assistance of a BLS recruiter-turned-cooperating witness, alleged that those payments were bribes for Savino’s referrals to BLS for testing services.  Savino argued at trial that the money was rent payment for using his space, not bribes.  The jury didn’t buy it and convicted Savino in October 2017 of 10 counts relating to the scheme, including violations of the federal Anti-Kickback Statute, Travel Act Bribery, Honest Services Fraud, and related conspiracies. 

On September 24, the Third Circuit agreed.  The Anti-Kickback Statute in 42 U.S.C. § 1320a-7b(b)(1)(A), it explained, required proof that that Savino (1) knowingly and willfully; (2) solicited or received any remuneration; (3) in return for referring any individual to a person for the furnishing of any item or service for which payment may be made in turn or in part under the Federal health care program.  The Court rejected Savino’s claim that evidence was insufficient to show that the payments were for referrals rather than rent.  It noted the “ample circumstantial evidence” the government presented at trial showing that Savino intended to accept bribes from BLS, including that:

• Savino allowed BLS to operate the lab in his office without a written agreement in return for cash payments;
• The lab had no public entrance – patients could only access the area where blood was drawn through Savino’s office;
• In recorded conversations with the BLS recruiter, Savino “haggled over the payment scheme with a new potential lab, explaining that he had ‘good volume’ and could send them certain urine testing ‘that pa[id] tremendously well;’”
• Savino accepted a $1,500 cash payment ostensibly from the new lab and offered to split monthly cash payments with the BLS recruiter if he could convince the company to do urine testing.

The Third Circuit rejected Savino’s other arguments as well, namely that as a New York doctor he shouldn’t have been convicted in connection with the New Jersey bribery statute.  The Court countered that the scheme clearly had detrimental effects in New Jersey, as BLS was based there, the blood was shipped to and tested there, and the payments Savino received came from the state. 

Dozens of other individuals have already been convicted in connection with this scheme, which led to approximately $375,000 in business for BLS and more than $10 million charged to Medicare and private insurers.  BLS pled guilty in 2016 to an information charging conspiracy to violate the Anti-Kickback Statute and the Federal Travel Act and one count of conspiracy to commit money laundering.