Two operators of a New Jersey marketing company were sentenced to prison for their roles in conspiracies to commit healthcare fraud and to pay and receive illegal kickbacks, United States Attorney Alina Habba announced on April 21, 2025.
Defendant 1, of Rockland County, New York, and Defendant 2, of Roswell, Georgia, were sentenced in Newark federal court after pleading guilty to informations charging them with conspiracy to violate the Federal Anti-Kickback Statute and conspiracy to commit healthcare fraud. Defendant 1 was sentenced to 51 months in prison, and Defendant 2 was sentenced to 80 months.
According to court documents and statements made in court, from approximately June 2017 through May 2019, the defendants participated in a scheme involving durable medical equipment (DME) companies, telemedicine providers, and doctors to submit false claims to healthcare benefit programs, including Medicare and TRICARE. The defendants operated a New Jersey-based marketing company through which they and their co-conspirators identified beneficiaries to target. Employees of the company contacted the beneficiaries and pressured them to agree to receive DME, often including back, shoulder, and knee braces. Employees were paid commissions and bonuses to encourage high volumes of patient participation, regardless of medical necessity.
The defendants, through the marketing company, paid kickbacks to telemedicine companies, which in turn paid doctors for DME prescriptions. The doctors signed orders without regard to medical necessity and often without speaking to the beneficiaries. The prescriptions were then distributed to DME suppliers across the country, with whom the marketing company had additional kickback arrangements. These suppliers submitted claims to Medicare, TRICARE, and other healthcare benefit programs and sent portions of the reimbursements back to the marketing company as payment. The marketing company received over $63 million in these payments.
In total, the defendants caused the submission of over $127 million in false and fraudulent claims. Using proceeds from the scheme, the defendants purchased luxury vehicles, including a Ferrari, a Lamborghini, a Bentley, and a BMW.
In addition to their prison terms, both defendants were sentenced to three years of supervised release and ordered to pay $127,600,000 in restitution. Defendant 1 was ordered to forfeit over $63 million, and Defendant 2 was ordered to forfeit over $5.5 million.
United States Attorney Habba also announced that Defendant 1 and the marketing company entered into a civil settlement agreement. As part of the settlement, they admitted to violating the False Claims Act and consented to the entry of a $63.8 million judgment.
Compliance Perspective
Issue
All healthcare services and items billed to Medicare, Medicaid, or private insurers must be medically necessary. Medical necessity is defined as services or items required to diagnose or treat an illness, injury, condition, or its symptoms. Unnecessary claims may violate the False Claims Act, leading to fines, criminal charges, and other sanctions. Additionally, under federal and state Anti-Kickback Statutes, it is illegal to offer, pay, solicit, or receive anything of value to induce or reward referrals for items or services reimbursable by a federal healthcare program. This prohibition applies to both direct and indirect arrangements, including relationships with marketing companies, telemedicine providers, or equipment suppliers. Kickbacks may be monetary or non-monetary and must be reported immediately to avoid legal consequences.
Discussion Points
- Review and update your policies and procedures related to ordering and billing for services and items such as DME, ensuring that all practices comply with medical necessity requirements and applicable fraud and abuse laws. Confirm that all third-party relationships, including those with marketing companies, telemedicine providers, and suppliers, meet legal standards and do not involve payment structures based on referrals or reimbursement.
- Train staff to confirm that all ordered services and items are medically necessary before proceeding. If necessity is unclear, clarify the order and consult with the medical director as needed. Provide education on the Anti-Kickback Statute, including what constitutes a kickback or false claim, and ensure staff understand internal reporting procedures. Emphasize the importance of timely reporting and protections against retaliation.
- Audit regularly to ensure that ordered items and services meet medical necessity requirements and that billing is accurate. Review relationships with vendors and referral sources to identify potential compliance risks. Survey staff to assess their understanding of medical necessity and their ability to recognize and report concerns related to false claims or improper referrals.
*This news alert has been prepared by Med-Net Concepts, Inc. for informational purposes only and is not intended to provide legal advice.*