A healthcare fraud of nearly $2 billion was traced back to one company’s leadership team

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JUNE 30, 2023

Cracking down on medical fraud.

US Attorney General Merrick Garland deemed a telemedicine fraud operated by the top brass of a software company “one of the largest healthcare fraud schemes ever prosecuted by the Justice Department.”

Executives at DMERx—an online platform that created and sold templates of doctors’ orders—were accused of using mass telemarketing operations to sell the elderly and disabled expensive and unnecessary medical equipment and prescriptions.

Former CEO Brett Blackman, CEO Gary Cox, and vice president of business development Gregory Schreck allegedly used the platform to create fraudulent orders for products like “orthotic braces, prescription skin creams, and other items that were medically unnecessary and ineligible for Medicare reimbursement,” committing fraud to the tune of more than $1.9 billion.

To highlight the impact that healthcare fraud has on taxpayer-funded programs, the DoJ yesterday (June 28) announced charges against 78 people, including the DMERx executives, accused of exploiting various care programs meant to support vulnerable groups, including the elderly people, people with disabilities, opioid addicts, and people at risk of HIV exposure.

The alleged scammers siphoned funds from American taxpayer-programs through telemedicine, pharmaceuticals, opioids, and other healthcare schemes. The stolen funds were then used, in some cases, to purchase luxury items. The federal agency seized or restrained millions of dollars in cash, automobiles, and real estate as part of the national enforcement action.

Quotable: Healthcare fraud harms real patients

“When individuals divert addictive opioid medications for personal gain, they are knowingly putting Americans at risk, all too often causing harm and even death.” —Drug Enforcement Administration (DEA) Administrator Anne Milgram, quoted in the June 28 DoJ statement

Healthcare fraud uncovered by the DoJ, by the digits

$2 billion: Fraudulent Medicare claims from telemedicine schemes, including DMERx, for which a total 11 defendants were charged

$370 million: Fraudulent claims submitted in connection with prescription drugs, which led to charges being brought against 10 defendants

$150 million: False billings involving the illegal distribution of opioids and lab testing fraud. Two dozen physicians and other licensed medical professionals “who lined their own pockets, including doctors who allegedly put their patients at risk by illegally providing them with opioids they did not need” have been charged

At least $1.1 billion: How much was actually paid out in these cases

2,800: Fraudulent orders for orthotic braces a Washington-based licensed physician signed off on, including for patients whose limbs had already been amputated. Each order was looked at and signed in under 40 seconds

$10.3 million: Value of assets seized, including bank accounts, cars, a boat and several homes

5,000: The number of defendants, who collectively have billed federal healthcare programs and private insurers more than $24 billion, charged by the Health Care Fraud Strike Force Program since March 2007

$280,000: Value of the Lamborghini found in 52-year-old Lazaro Hernandez’s possession, which the DoJ thinks was acquired, alongside a $220,000 Mercedes and three boats, from the proceeds of fraud. Hernandez was sentenced to 15 years in prison earlier this month after pleading guilty for his part in a nationwide scheme “to unlawfully distribute more than $230 million in diverted, adulterated, and misbranded medications, including HIV drugs.”


Courtesy/Source: Quartz