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Why a PA Getting Hit with 240 Years in Jail is Just the Beginning

Published on Jan 30, 2024

If you read this blog, you know that I have previously covered the ongoing ridiculous saga of fake birth tissue stem cells and the billing of these products to Medicare. This past week, the first shoe to drop in the ongoing criminal investigation into that activity happened, with a Physician’s Assistant getting tagged with a judgment that carries up to a 240-year prison sentence. Here’s why we are likely to see more prison time awarded for the birth tissue scammers. Let’s dig in.

Birth Tissue Scams

I have covered the birth tissue scammers many times. The first part of the scam was claiming that these products contained millions of live and functional stem cells. This was fiction as they contained dead and dying stem cells. The second part of this insanity was these companies asking Medicare to issue Q-codes. These codes were the easy part of a two-step process whereby Medicare decides to pay for a product. However, getting the code is meaningless if the Medicare guidelines don’t also cover the service. In the case of birth tissues when used to treat pain or arthritis, the Medicare guidelines explicitly did not cover these products. Hence, having step 1 completed without step 2 means that while Medicare might pay these claims in error, any monies that Medicare paid were always coming back to the feds.

Sophisticated physicians, sales reps, and other companies looked at the half-completed coverage process for birth tissues used to treat pain or arthritis and stayed away. Why? Because if you knowingly submit a false claim to Medicare for payment that’s 20 years in federal prison per occurrence.

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20 Years x 12 = 240 Years

In this case, a physician’s assistant injected amniotic fluid to treat pain and arthritis. He then used a Q-code meant for product X (which also wasn’t covered to treat pain and arthritis) instead of the actual product he used in the patient (also not covered). The reimbursement for product X was more than for product Y. So Medicare had him on two fronts. The first was using an amniotic product to treat pain and arthritis and getting reimbursed in error. The second was using the wrong Q-code.

Since Medicare will often pay for things that don’t make sense, the honus is placed on the submitter of the claim to do it right. If Medicare detects that you got paid in error, it will claw back its money. If Medicare thinks that you knowingly submitted a false claim, that’s 20 years in prison per claim. In this case, because this guy knowingly submitted the wrong code to amp up reimbursement, this was low-hanging fruit for the DOJ to prosecute. They had 12 occurances, so that’s 20 years times 12 for 240 years of possible jail time.

Isn’t This Just About the Wrong Q-Code?

Several sales reps who sold this Q-code song and dance to gullible providers have claimed that this DOJ action is just about using the wrong Q-code and not about Medicare not covering birth tissues for pain and arthritis. That position doesn’t hold water if you read the DOJ press release:

“Not only did this defendant attempt to scam Medicare out of hundreds of thousands of dollars, he did something far worse by potentially endangering his patients’ health in recommending that they be injected with a drug that had not been approved for that purpose,” said U.S. Attorney Simonton.

“Certain amniotic products have been approved by the U.S. Food and Drug Administration for wound care, but not for pain management. (In fact, the FDA has issued repeated consumer alerts warning that biologics like amniotic fluid “have not been approved for the treatment of any orthopedic condition, such as osteoarthritis, tendonitis, disc disease, tennis elbow, back pain, hip pain, knee pain, neck pain, or shoulder pain,” nor for “chronic pain or fatigue.”) Because amniotic products have not been approved to treat pain, Medicare considers amniotic injections administered to treat pain medically unnecessary and does not reimburse for them.”

So clearly the DOJ knows all about the Q-code scam I have described. They know that these products were never approved to treat pain and arthritis, but that many providers billed and were paid in error for these services.

Who’s Next?

Since criminal prosecution in this space is dependent on knowingly submitting a false claim, which of the players in these scams will be prosecuted? Well, we know that multiple credible actors in this arena have reported for the past 12-24 months that DOJ attorneys have taken depositions from many doctors and birth tissue employees. The doctors have had attorneys at their side presumably trying to keep their clients from incriminating themselves and to cut deals if any can be had. You can assume the employees and principles for the birth tissue companies have had the same type of legal counsel. Let’s look at both of these players.

On the physician side, doctors are expected to know what Medicare does and doesn’t cover. “I didn’t get the memo” is never an acceptable excuse to the feds. The way this usually works is that the feds send a letter to the doctor after an audit by a Recovery Audit Contractor. That letter provides a dollar amount to be paid back and then states that the other option is to take the government to court to dispute the payment. Physicians rarely choose option B because the feds have a habit of going for criminal charges if they end up in court. Hence, almost always there is an out-of-court settlement for a payback to Medicare that costs the doctor that money plus interest plus legal fees.

On the birth tissue company side of this equation, it’s probably easier to prove that these companies knew that they were submitting false claims, but not a cakewalk. For example, I knew of at least one billing company engaged by a birth tissue vendor that I interviewed personally. They clearly knew that they were playing with the Medicare system because they had documentation of an entire lexicon of claims language for the providers to use to be more likely to get paid. I also have covered at least one contractor for a birth tissue company who was lecturing doctors how to use specific language that IMHO didn’t fit with an injection, but again, was more likely to cause Medicare to pay the claim. Hence, if I was easily able to find two instances where the birth tissue companies were playing fast and loose, my guess is that the DOJ with subpoena power and the ability to take a deposition under oath should be able to unearth much more.

Based on this analysis, I suspect that doctors who were gullible enough to bill Medicare for these injections will continue to have to pay back big money, likely on the order of almost a billion dollars back to Medicare. A few physicians will be dumb enough to challenge the DOJ in court and will probably lose, causing some jail time. However, the vast majority of physicians will just write big checks back to CMS. On the birth tissue vendor side, I suspect that we will see some DOJ prosecutions, especially now that the feds have prevailed easily in this case. This will probably be executives in these companies.

The upshot? I think we’ll see criminal prosecutions this year as the DOJ begins to take down the big birth tissue vendor C-suite. The lesson here for doctors is mostly financial with huge checks being written back to Medicare. We should know more in the next few months.