Expansion of Existing Health Care Fraud Schemes in the Time of COVID-19

Since 1863, the False Claims Act (FCA) has encouraged private citizens to alert the government to fraudulent behavior and to bring suits on its behalf. The FCA has been the government’s primary tool to combat fraud, returning over $3 billion to the government in 2019, $2.6 billion of which involved the healthcare industry.[1] It was the tenth consecutive year that the Department of Justice (DOJ) reported civil health care fraud recoveries exceeding $2 billion.[2]

Amid the current public health crisis, healthcare fraud directed at the torrent of government funds being disbursed in response to COVID-19 is sure to increase. While new schemes will emerge, existing fraud schemes are being adapted and expanded to target funds related to the COVID-19 response.

Two recent cases demonstrate this in practice. In March of 2020, Erik Santos, who ran a marketing company that generated leads for testing companies, was charged with allegedly conspiring to defraud federally funded and private healthcare benefit programs by submitting fraudulent claims for genetic cancer screenings and COVID-19 testing.[3] The government alleged that Santos has engaged in a scheme in which he solicited and received kickbacks from companies involved in clinical and diagnostic testing in exchange for directing individuals eligible to those companies for testing that were reimbursed by Medicare. Santos used the pandemic as an opportunity to expand his existing kickback scheme to include COVID-19 tests, which were packaged with much pricier respiratory pathogen panel (RPP) tests that do not identify or treat the virus. Santos noted, “everybody has been chasing the COVID dollar bird.”[4]

What begins as a healthcare fraud scheme can also morph into something bigger. In early June of 2020, Mark Schena, the president of a medical technology company, was charged with allegedly participating in schemes to defraud investors and health care benefit programs by submitting over $69 million in false and fraudulent claims for allergy and COVID-19 testing.[5] Since 2018, Schena and others paid kickbacks to recruiters and doctors to run allergy screening tests on patients regardless of medical necessity.

In March of 2020, as the COVID-19 crisis escalated, Schena and others allegedly made false claims about the company’s ability to provide fast, reliable, and affordable COVID-19 tests that complied with state and federal regulations and misrepresented the company’s prospects for testing to potential investors. Schena stated that it was simple to develop a COVID-19 test, because making the switch from testing for allergies to testing for COVID-19 akin to a pastry chef switching from selling strawberry pies to selling rhubarb and strawberry pies.[6] His company’s stock price doubled in mid-March, but Schena never disclosed that the validity of the data and the accuracy of the company’s COVID-19 tests were questionable.

The False Claims Act and whistleblowers have historically proven effective at combatting fraud against the government, especially in the healthcare industry. As existing fraud schemes expand and new schemes develop, DOJ has affirmed its commitment to pursue FCA violations during the pandemic and to prioritize the investigation and prosecution of COVID-19 related fraud schemes.[7] Some members of Congress have also shown their support for utilizing the FCA in combatting COVID-19 scams.[8] With the government’s already scare resources being strained further, the role of whistleblowers with inside knowledge of these schemes will be vital to assisting the government protect patients and taxpayers during this time of crisis.

Yoo Jung Hah is a former staffer of Taxpayers Against Fraud Education Fund. She served as the Public Interest Advocacy Fellow and is currently pursuing a Juris Doctorate at Duke University.

[1] Press Release, U.S. Dep’t of Justice, “Justice Department Recovers over $3 billion from False Claims Act Cases in Fiscal Year 2019” (Jan. 9, 2020), https://www.justice.gov/opa/pr/justice-department-recovers-over-3-billion-false-claims-act-cases-fiscal-year-2019.

[2] Id.

[3] Press Release, U.S. Dep’t of Justice, “Georgia Man Arrested for Orchestrating Scheme to Defraud Health Care Benefit Programs Related to COVID-19 and Genetic Cancer Testing” (Mar. 30, 2020), https://www.justice.gov/usao-nj/pr/georgia-man-arrested-orchestrating-scheme-defraud-health-care-benefit-programs-related.

[4] Id.

[5] Press Release, U.S. Dep’t of Justice, “Medical Technology Company President Charged in Scheme to Defraud Investors and Health Care Benefit Programs in Connection with COVID-19 Testing (June 9, 2020), https://www.justice.gov/opa/pr/medical-technology-company-president-charged-scheme-defraud-investors-and-health-care-benefit.

[6] Id.

[7] U.S. Dep’t of Justice, Memorandum from Attorney General William P. Bar, “COVID-19 Department of Justice Priorities” (Mar. 16, 2020), https://www.justice.gov/ag/page/file/1258676/download.

[8] Letter from Whistleblower Protection Caucus to Attorney General William Barr, (Mar. 24, 2020), https://raskin.house.gov/sites/raskin.house.gov/files/DOJ%20coronavirus%20task%20force%20to%20combat%20fraud.pdf