Four Doctors Convicted of Medicare Fraud Must Pay $56,686,731.53 in Restitution

Four doctors convicted of health insurance fraud – with details in Zalma’s Insurance Fraud Letter of February 15, 2020, argued with the court about the extent of restitution required to be paid. The amount, and extent of opioid fraud, was difficult for the court to quantify to the four crooked doctors.

In United States Of America v. Michael L. Babich, Alec Burlakoff, Michael J. Gurry, Richard M. Simon, Sunrise Lee, Joseph A. Rowan, and John Kapoor, Criminal Action No. 16-cr-10343-ADB, United States District Court District Of Massachusetts (February 14, 2020) on May 2, 2019, a jury convicted Defendants Michael Gurry, Richard Simon, Sunrise Lee, Joseph Rowan, and John Kapoor of conspiring to violate the Racketeer Influenced and Corrupt Organizations (“RICO”) statute, 18 U.S.C. § 1962(d). Separately, Defendants Michael Babich and Alec Burlakoff both pled guilty.

DISCUSSION

The parties agree that there are individual victims as well as institutional victims, but disagree as to who should be compensated, for how much, and based on what conduct. The convictions were based on the predicate acts of mail and wire fraud in connection with the Insys reimbursement center (“the IRC”) and the prior authorization requests that went through the IRC. According to the indictment had the insurers known that the defendants gave bribes and kickbacks to the targeted practitioners, the insurers would not have authorized payment for Subsys.

This language clearly links the insurance fraud to the bribes and the bribed practitioners.

The Government, also with support from the language of the indictment, argued that the offense of conviction is broad enough to encompass all prior authorization requests that went through the IRC, even from doctors that were not identified in the indictment as having been bribed.

Insurance Providers

Defendants must pay each insurer an amount equal to the loss incurred by the insurer due to the RICO conspiracy. The Defendants argue that the Government is impermissibly asking the Court to consider all paid Subsys claims nationwide, as opposed to the claims related to prescriptions from the thirteen bribed practitioners. The Government agrees that it cannot prove that every call that went through the IRC was fraudulent.

Given the challenges in resolving the legal and factual issues raised by the parties, the Court finds that trying to quantify restitution beyond the thirteen identified medical professionals bribed would, as foreseen by the Guidelines, be too complicated and unduly prolong and burden the sentencing process. The Court further finds that any restitution number arrived at without reviewing individual files would be too speculative. Therefore, the Court will limit restitution to those losses for which there is either no dispute regarding restitution or for which the payments can be traced to the bribed co-conspirator doctors.

The Court, therefore, found restitution to be owed to the insurers, including Medicare. The information included as to each insurer comes from materials provided by that insurer.

Medicare

Medicare paid approximately $169,058,169.00 for Subsys prescriptions for patients who had no principal diagnosis of cancer within a year before the prescription. The Government is seeking $136,768,059.00, which represents payments for claims that originated in the IRC, arguing that Medicare would not have knowingly authorized payment for any Subsys prescription if the prescription was off-label (i.e., not for breakthrough cancer pain) or if it knew that the prior authorization request originated at the IRC rather than from a physician’s office. The Court notes that despite this representation, there is evidence that Medicare covered off-label use of fentanyl products that were similar to Subsys.

Given the complex issues of fact related to the cause or amount of Medicare’s losses, the Court limits the restitution award to $30,232,895.00, which represents the prescriptions attributable to the thirteen co-conspirator prescribers.

Aetna

Aetna seeks $15,769,912.00 in restitution. It reviewed all reimbursements from 2012 until October 2018 and found that it had covered Subsys for 3,690 Aetna members. Of those members, 1,894 received Subsys prescriptions despite not having a cancer diagnosis. Those prescriptions cost Aetna $15,772,637.00. Applying the 80.9% threshold to represent claims that were processed through the IRC, all of which Aetna argues were fraudulent, Aetna estimates that it paid $12,760,063.00 in fraudulent claims. Given the complex issues of fact related to the cause or amount of Aetna’s losses, the Court limits the restitution award to $1,193,479.00, which represents the prescriptions attributable to the thirteen co-conspirator prescribers.

Anthem Blue Cross Blue Shield

Anthem has not provided sufficient evidence for the Court to find their calculations accurate by a preponderance of the evidence. Again, given the complex issues of fact related to the cause or amount of Anthem’s losses, the Court would limit the restitution award to the prescriptions attributable to the thirteen co-conspirator prescribers. Because Anthem does not provide any quantification of its payments for prescriptions written by the thirteen bribed doctors identified by the Government, no restitution is awarded on this record.

Cigna

Given the complex issues of fact related to the cause or amount of Cigna’s losses, the Court limits the restitution award to $1,838,768.07, which represents the prescriptions attributable to the thirteen co-conspirator prescribers.

Caremark

Given the complex issues of fact related to the cause or amount of Caremark’s losses, the Court limits the restitution award to $15,072,543.35, which represents the prescriptions attributable to the thirteen co-conspirator prescribers.

CONCLUSION

The Government has demonstrated by a preponderance of the evidence that the victims are entitled to at least $56,686,731.53.

ZALMA OPINION

The four doctors were very successful thieves. The restitution order does not cover everything they stole, only those amounts the court felt confident was proved as a result of the prescriptions issued by the four doctors. They will be spending time in jail and will not be able to earn, or steal, money to pay the more than $56 million. Hopefully the government will take possession of, and sell, all of the property obtained by the four from their criminal activity and any cash, bonds or marketable stock purchased with the ill gotten funds. I won’t hold my breath before they collect but if collected it will support a team of investigators and prosecutors for the next few years.


© 2020 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here.