Feds Step-up Crackdown on Fraudulent Billing for Compounded Meds

The recent indictment of a St. Petersburg physician who was charged with receiving illegal kickbacks for writing prescriptions for compounded medications serves to further highlight the federal government’s increased level of scrutiny over the industry.

The facts of the latest case are as follows: Dr. Anthony Baldizzi was charged on June 23 with one count of conspiracy to defraud the United States, 21 counts of healthcare fraud, one count of money laundering, one count of making a false statement, and one count of receiving illegal kickbacks.

According to the indictment, Baldizzi, who practiced at an urgent care clinic in Pinellas County, entered into an agreement with the owners and operators of Lifecare Compounding Pharmacy to receive kickbacks for each prescription he wrote and directed to Lifecare to be filled.

Lifecare’s principals later introduced Baldizzi to the principals of Centurion Compounding, a marketing firm. It is alleged that Baldizzi then entered into another kickback relationship whereby he agreed to become a Centurion in-network doctor and write prescriptions for compounded creams (pain creams, scar creams, migraine creams and anti-aging creams) marketed by Centurion and filled at Lifecare. The creams ranged in price from $900 to $21,000 per month.

In exchange, Baldizzi allegedly was paid a kickback for each paid claim, equal to approximately 10 percent of the after-cost amount of the payment. Many of the prescriptions were written for beneficiaries of Tricare, a federal healthcare benefit program. Lifecare submitted claims to Tricare totaling approximately $5.3 million and submitted to Medicare claims for prescriptions written by Baldizzi totaling approximately $71,312.41.

Baldizzi is just the latest in a long string of cases that the federal government has been investigating pertaining to the payment of illegal kickbacks to healthcare practitioners in exchange for writing prescriptions for compounded medications.

Tricare’s high rates of reimbursement for compound medications appears to be why the area is ripe for fraud. According to an article in Military Times, Tricare beneficiaries have been the target of “extreme sales tactics,†including cold calls, Craigslist searches for sales reps and customers, solicitations inside military hospital pharmacies, and even food trucks set up outside of military bases that promise free lunch to Tricare beneficiaries who sign up to receive compounded medications.

Tricare’s spending on compounded pain medicines began to skyrocket around 2012 as pharmacies, often working with independent marketing companies, aggressively marketed the drugs to doctors and patients, according to an article published last November in the Wall Street Journal.

As we wrote about in February, at the end of fiscal year 2015, Tricare had paid approximately $1.7 billion for compounded drugs; up from $23 million in 2010. And recently, the Tricare program has become the target of fraud relating to genetic testing, as we wrote about last month.

The Anti-Kickback Statute makes it a felony for anyone to offer, pay, solicit, or receive any form of remuneration in exchange for the referral of federal healthcare program business. While there are safe harbors – or instances in which physicians may receive remuneration – it’s always best that physicians who prescribe compounded drugs, compounding pharmacies and marketing companies carefully assess their relationships to ensure compliance with the law.

Even if a physician does not receive payment for writing prescriptions, he or she should be wary of the fact that federal healthcare programs (i.e. Medicare, Medicaid and Tricare) only reimburse for medically necessary products and services. Billing for medically unnecessary services results in a false certification and therefore is a violation of the False Claims Act. So, in addition to facing charges of accepting illegal kickbacks, providers also could face charges relating to the FCA.

Penalties under the False Claims Act range from $5,500 to $11,000 per claim. However, that range could nearly double in coming months. On May 2, the Railroad Retirement Board published an interim final rule, raising the penalties authorized by the False Claims Act to a range of $10,781 to $21,563. The increased penalties would apply to claims made on or after Aug. 1, 2016, and before Jan. 1, 2017.

The Baldizzi case is just the tip of the iceberg and the federal government has made it clear that it will not tolerate these contractual arrangements. Physicians would be well-advised to contact their healthcare law attorney before signing any agreements or allowing the use of their provider numbers to bill any healthcare insurance company. Ignorance is not a defense.

If you have any questions or concerns, feel free to contact The Health Law Offices of Anthony C. Vitale at 305-358-4500 or email us at info@vitalehealthlaw.com.

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The Health Law Offices of Anthony C. Vitale