Last Friday seven companies and four men were charged with involvement in a $1 billion telemedicine fraud scheme, where they allegedly filed false claims for payment and mislead doctors and patients in order to defraud private health benefit programs, according to the Department of Justice.

The indictment claims that the telemedicine company HealthRight conducted a fraudulent scheme where it asked patients for insurance and health information, specifically prescription pain creams and other products. The company would then go to physicians and have them to sign off on the drugs before marking the medications up significantly and billing the private insurance companies, the indictment alleges. 

The indictment, filed at the District Court of Eastern District Tennessee, alleged that over the course of approximately three years the parties charged were involved in submitting “not less than $931,000,000 in fraudulent claims for payment.” The indictment also claims the companies and men were also involved in filing fraudulent claims worth $174,000,000 to private health insurance programs, including Blue Cross Blue Shield of Tennessee. 

Prior to the indictment, telemedicine company HealthRight and its CEO Scott Roix have pleaded guilty to felony conspiracy for their roles in the scheme. Additionally HealthRight along with Roix plead guilty to conspiring to commit wire fraud in a separate scheme for fraudulently telemarketing dietary supplements, skin creams and testosterone. 

Additionally, Andrew Assad, Peter Bolos, Michael Palso, Larry Everett Smith and the pharmacies Synergy Pharmacy Services, Precision Pharmacy management, Tanith Enterprises, ULD Wholesale Group and Alpha-Omega Pharmacy were charged with conspiracy to commit health care fraud, mail fraud and introducing misbranded drugs to interstate commerce.  

Assad, Bolos and Palso could face up to 20 years in prison and/or fines of up to $250,000 if convicted.

Why it matters 

Telemedicine has been working for over a decade to gain legitimacy in the field of healthcare.This case touches on one area that has left the industry with a lot of questions: reimbursement. 

The main model in telemedicine used by companies like Teladoc or Doctor on Demand is one where insurers or self-insured employers broker deals with telehealth vendors, giving their members access to 24-7 virtual care. But over the past few years hospitals and health systems have started to get into the game, on the theory that consumers would rather get virtual care from the same doctor they see for in-person care. 

The trend

For the most part when telemedicine companies have been involved with lawsuits it’s a question over using the practice in certain states. For example, Teladoc was in a lawsuit with the state of Texas, which came to a close in May when the state passed its telemedicine law. 

MDLive was also briefly the defendant of a class action lawsuit. The suit led by the law firm Edelson PC sued the telemedicine company for privacy violations. However, this suit was quickly dropped without any monetary settlements by the company. 

But fraud has been a concern in the space. Last year the FBI was looking into fraud allegations of Portland, Oregon-based Zoom+ may have committed in effort to avoid losing money from required risk adjustment payments. 

Of course, the biggest fraud in the healthcare world this year has to be Theranos. In March the SEC charged Theranos CEO Elizabeth Holmes with “massive fraud.” Holmes and former Theranos President Ramesh Balwani were charged with raising over $700 million from investors through fraud and false statements.