On April 13, 2021, a New York-based chiropractor, was sentenced to nine years in prison, and ordered to pay close to $20 million, for running what the federal government alleged was a large scale scheme to defraud Medicare and other third party insurers.[1]   The sentencing stems from a case originally filed under seal on August 29, 2018, in which the U.S. Attorney’s Office for the Southern District of New York alleged that two New York chiropractors – James and Jeffery Spina – improperly owned and controlled multiple medical practices and engaged in submission of fraudulent health care claims from 2011 until September 2017.

The court documents indicate that the Spinas had relationships with at least 6 New York professional service corporations that, on paper, were owned by licensed medical doctors.  However, the government alleged that in practice, the Spinas illegally owned, controlled and were the financial beneficiaries of all of the medical practices.  New York, like a number of other states, has laws governing the “corporate practice of medicine” that prohibit anyone who is not a licensed medical doctor from owning or controlling an entity through which professional medical services are provided. As part of the alleged scheme, the Spinas used false or non-existent addresses on paperwork for the various entities, while all claims for medical services were billed out of the same Middletown, NY location. In addition, the Spinas also allegedly forged physician signatures and backdated corporate documents.  The entities all shared the same bookkeeper, who, when secretly recorded discussing operations, stated “You’ve got to be able to think like a [expletive] crook.”

The litany of illegal behavior alleged by the government also included:

  • Submission of claims for medically unnecessary items services and items;
  • Submission of claims for services which were never rendered;
  • Double billing the same service to 2 different insurers (e.g., billing Medicare and No-Fault Insurance for the entire cost of the same service);
  • Altering and fabricating medical records (often to establish medical necessity);
  • Oversight and direction of professional medical services by non-physicians, including determinations of which medical procedures patients should receive;
  • Obstruction of medical audits by Medicare and other insurers; and
  • Creation of real estate and marketing companies to disguise kickbacks received from third parties in return for patient referrals.

As part of the scheme, it was alleged that employees were directed to lie about patient diagnoses, pain levels and prior treatments.  An “audit team” was allegedly established to go through medical records to look for missing items and fabricate the missing info in the event of payor audits.  The government presented email evidence showing that falsifying records was a regular practice.  Additionally, records were alleged to have been hidden at other locations, such as Jeffery Spina’s house and an offsite storage facility.  Scripts were allegedly prepared for purported physician owners of the entities so that if or when they were questioned about the corporations, they would know certain basic info about the entities.  As part of an undercover operation, various law enforcement officers visited the practices for “treatment”.  In multiple instances, this resulted in claims being submitted to insurers when no services were ever provided, or for services that were unrelated to the undercover officers’ alleged physical conditions.

The government claimed that from 2011 until Sept 2017, the majority of claims submitted by the Spina-controlled entities were fraudulent.  During that time period, those entities submitted over $80 million in claims. James Spina pled guilty to one count of conspiracy to commit healthcare fraud on May 9, 2019. In addition to a 9 year prison term, he was sentenced to 3 years of supervised release, and ordered to pay $9.76 million in restitution, and further required to forfeit another $9.1 million.

The details of the Spinas alleged unlawful activity as described in the indictment and sentencing document paint a picture of egregious fraudulent behavior, particularly with respect to the billing practices.  However, the government focused not only on the alleged submission of false and fraudulent claims for medical services, but also on the fact that the medical practices appeared to be run by unlicensed individuals. As a result, the sentencing may also serve as a warning to medical practices that have relationships with unlicensed individuals and entities that provide management and other administrative services to the practice to carefully review the level of operational control exerted by any such third party.

[1] See US DOJ Press Release, Tuesday April 13, 2021 at https://www.justice.gov/usao-sdny/pr/doctor-sentenced-9-years-prison-widespread-scheme-defraud-medicare-and-other-health.