Rural hospitals allegedly exploited as billing shells in ‘elaborate’ $1.4B pass-through scheme

A group of health professionals has been charged with attempting to cheat the health care system out of massive amounts of money in a multistate scheme, according to documents unsealed Monday.

Ten individuals – including hospital managers, lab owners and billers – were charged for their participation in a scheme to bill private insurance companies $1.4 billion for lab tests, for which they were paid $400 million.

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The individuals allegedly used their own management companies to take over small, rural hospitals – which were often financially struggling – as “shells” to fraudulently bill private insurers for expensive urinalysis drug tests and blood tests.

While outside laboratories allegedly conducted most of the tests, the conspirators billed insurers as though they were conducted at the rural hospitals because they received higher contractual reimbursement rates that way.

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Samples for testing were said to be obtained from sober houses and substance abuse treatment centers via kickbacks paid to recruiters.

Many times the lab tests were not medically necessary, prosecutors said.

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“This was allegedly a massive, multi-state scheme to use small, rural hospitals as a hub for millions of dollars in fraudulent billings of private insurers,” Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division said in a statement.

Prosecutors say the scheme was carried out from November 2015 to February 2018. It involved hospitals in Florida, Missouri and Georgia.

All 10 individuals were charged with conspiracy to commit health care fraud and wire fraud.

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