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 In truth, U.S. federal investigators say, some of the sales
representatives are part of a burgeoning industry that threatens to
become what multiple government investigators call the next big
frontier in healthcare fraud: genetic testing, which is reaping
millions of dollars from unnecessary tests that target senior
citizens.
Shimon Richmond, assistant inspector general for investigations with
the Office of Inspector General for the Department of Health and
Human Services, said his office has seen a steady stream of
complaints into genetic testing. In 2018, the inspector general’s
office received about one or two complaints per week. Now, he said,
the fraud hotline burns with as many as 50 calls weekly.
"We have investigations going on in this space across the country.
It is not limited to one geographic region,” Richmond said in an
interview. “This is touching every corner.”
In all, more than 300 federal investigations, conducted by multiple
law enforcement agencies, are examining genetic testing fraud
schemes, said a law enforcement official who spoke on condition of
anonymity because the inquiries are not yet public. The
investigative crush was sparked in part by unusual Medicare billing
data patterns that started to emerge in 2015.
In the United States, genetic testing has skyrocketed. For Medicare,
the public insurance program for elderly and disabled Americans,
payouts for genetic tests jumped from $480 million in 2015 to $1.1
billion in 2018, a Reuters analysis found. Those figures do not
include invoices for spending by state Medicaid programs, which
serve the poor, or supplemental Medicare insurance programs offered
by private insurers.
The investigations are examining billings submitted to federal
health insurance programs. By law, all diagnostic lab tests must be
ordered by a doctor treating a patient for a specific condition.
In the cases under review, investigators and patients told Reuters,
marketers get elderly residents to turn over their Medicare or
Medicaid information, along with their driver’s license and other
identifying information, and tell them they will take a free cheek
swab that can help them understand their risks of developing cancer
or whether their genetics could unlock clues about how they will
respond to drug treatments. They then get a doctor to sign off and
approve the test and ship the swab off to a lab, which seeks
Medicare payouts.
But many of the lab tests are not relevant to the patient’s history,
and some of the doctors sign off on the results without conferring
with the patient, said investigators familiar with the operations
and patients interviewed by Reuters. Suspect companies pocket
thousands, with a cut going to doctors, but the seniors get little,
if any, benefit, investigators say.
Brian Benczkowski, the assistant attorney general for the U.S.
Department of Justice’s Criminal Division, estimated that fraudulent
billings submitted over the last few years are expected to total
“north of $1 billion.” He called genetic testing of the elderly "the
next big frontier in federal healthcare fraud enforcement."
"There is a huge pot of money that entrepreneurial criminals are
trying to figure out how to access,” Benczkowsi told Reuters.
Investigators say genetic testing became a ready target thanks to
advances in medical technology and a rise in the technique’s
popularity. Companies such as 23&Me, which offers
health-and-ancestry genetic tests directly to consumers for $199,
have entered the mainstream. Their success, federal investigators
say, has drawn the attention of scamsters looking to capitalize on
the trend.
Rebecca Kinney, the acting director for the Office of Healthcare
Information and Counseling, part of HHS, said seniors should be on
the lookout for red flags and any genetic tests should be ordered by
their own doctors. “The thing that we really try to tell people to
pay attention to in any kind of marketing scheme or fraud scheme are
the phrases ‘Free to you’ or ‘Free if you have Medicare,’ ” she
said.
TARGETING SENIOR CITIZENS
In Delray Beach, Florida, Janet Putrah participated in a cheek
swabbing event hosted by her condo building's social committee in
February 2018.
She said none of the tests, which were sent to a lab called Clio
Laboratories, made any sense to her. She was stunned to learn the
lab billed her Medicare Part B insurance plan more than $30,000 and
was paid more than $12,000.
The test results “were useless," she wrote in a complaint to the
condo board. "There were pages and pages with information about
drugs. It listed 12 drugs that I may have an 'unfavorable' response
to. I don't take any of the drugs listed."
Putrah said she only participated because her grandmother had died
of colon cancer and she was told the test would be paid for by
Medicare. In July 2018, she contacted Medicare to raise concerns
about her billing statement, and then in December 2018 she called
the inspector general’s fraud hotline and forwarded supporting
documents.
“It’s my money you’re taking from me in taxes,” she said. “This is
just insane.”
Jean Stone, a Medicare fraud specialist who worked for the federal
Centers for Medicare & Medicaid Services and now often testifies as
an expert witness, said the test results Putrah received appear
“useless.”
"They paid $12,000 they shouldn't have paid," Stone said of
Medicare, calling the test “wasted taxpayer dollars.”
"Who gets the test results?” she asked. “They don't even know who
the woman's doctor is."
Another condo resident, Arlene Pallack, said her Humana Medicare
Advantage plan in 2018 paid for $2,225.17 of the $4,625.42 Clio
charged for her cheek swab. Humana is concerned about the “growing
health care issue” of testing fraud, a spokeswoman said, and targets
misuse.
Until she was interviewed by Reuters this August, Pallack had never
received the results. She only got them after calling the lab to
inquire.
A spokesperson for the Centers for Medicare and Medicaid Services
said it uses an “aggressive” approach to address fraud prevention.
Janet Shaver, the current treasurer of the condo board where Putrah
and Pallack participated in the cheek swabbing event, said the
board’s leadership has since changed, but that she intends to follow
up “to make as many people as possible aware of this.”
Victoria Nemerson, Clio’s general counsel, said in a statement that
the company’s testing is proper and that it has “extensive
experience providing important testing and laboratory services for
physicians and patients.” She added: “We commit substantial time and
resources to meeting our legal duties.”
Other companies are also riding the genetic testing wave.
In California, Jean Reeves, Lura Tamm and Patti Falkenberg said they
had their cheeks swabbed at a free event in February 2019 by a
pleasant woman named Ronda Butman, a sales representative who later
told Reuters she worked on contract with two different marketing
companies. One of those businesses was called MyDNACancerTesting;
the other marketing company went by MedMolecular.
The women said Butman told them the genetic test could help predict
if they were at risk of developing cancer and tell them how their
genetics could impact the way their bodies metabolize their
medications – a scientific field known as "pharmacogenetics."
All three recall being told the cancer and pharmacogenetic
screenings would only cost Medicare a few thousand dollars. All they
needed to provide, they said they were told, was a swab of their
DNA, their Medicare card number, and other sensitive information,
which they shared.
But Medicare explanation-of-benefits statements, reviewed by
Reuters, revealed that a lab in Arlington, Texas, called Spectrum
Diagnostic Labs LLC had in two cases tried to charge Medicare more
than $15,000 per patient, and received around $5,000.
"I'm worried about my Medicare information and my Social Security
out there. I thought ‘My gosh, they’ve got all of this information,’
" Falkenberg said.
The tests were approved, records show, by a physician the women say
they never met: Dr. Cornelius J. O'Leary. Before taking part in
genetic testing, public records show, he had filed for bankruptcy in
2012, had been convicted of misdemeanor battery in 2015, and in two
lawsuits in 2012 and 2014 had alleged law enforcement officials were
harassing him and using counter-terrorism units to sleep-deprive
him.
O’Leary could not be reached for comment. He did not respond to
emails or calls seeking an interview at multiple numbers listed for
him. A relative declined to help Reuters get in touch with him.
Butman, the sales rep, said she later quit her job at
MyDNACancerTesting. MedMolecular, the other company, later shut down
its genetic testing business.
Butman has since gone back to those from whom she collected cheek
swabs to warn them the billings for the tests might be improper. She
said she has filed complaints with several state attorneys general
against MyDNACancerTesting and some of the labs she fears were
overbilling.
“I feel like a victim,” said Butman, who said she got involved to
help those at risk of cancer.
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Jerry Pfeister, the founder of MyDNACancerTesting, told Reuters he
contracted with a different company which dealt with the labs, but
his company did not interact with labs or doctors. He said
MyDNACancerTesting severed ties and stopped collecting cheek swabs
for the company that dealt with the labs in April. “We never had any
interactions with any doctors or labs,” Pfeister said.
Monique Deckter, formerly vice president of operations at the other
company, MedMolecular, said her small marketing firm contracted with
a larger distributor that helped facilitate the tests, which were
later shipped to Spectrum Diagnostic. She said she closed
MedMolecular in April 2019 amid concerns the telemedicine company
she was told to use was not strictly following Medicare rules.
Justo Méndez, an attorney for Spectrum Diagnostic Labs, said every
sample it receives comes with a medical order signed by a doctor and
a patient consent form. “Spectrum has processes in place to ensure
compliance with the required documentation needed from the referring
physician,” he said.
The amounts billed are handled by a third party, he said, and the
company has no financial relationships with doctors.
Perry Holloway, a company principal, said he was unaware of any
problems. His attorney Samy Khalil said his client “did not know of
or intentionally participate in any fraud.”
In a common trend nationwide, sales reps were enticed by some
marketing firms through ads on recruitment websites, with the
promise they could earn from anywhere from $200 to more than $1,000
for every swab collected and sent to the lab, said investigators and
several sales reps interviewed by Reuters.
In some cases, investigators warn, such payments could be construed
as a kickback. Anti-kickback laws prohibit medical referrals in
exchange for a reward or anything of value in connection with
federal healthcare programs. In 2018, Congress doubled the maximum
prison term in such cases to 10 years per offense.
TANGLED TESTING WEB
A little-explored world surrounds the marketing companies,
laboratories and telemedicine companies involved in elder genetic
testing. Among them is Spectrum. Another is Clio Laboratories, the
Georgia-based lab that is part of an interconnected network of labs,
medical billing operations, a telemedicine firm and other
healthcare-related limited liability companies, company records
show.
Several patients said they filed complaints with state or federal
agencies against Clio and Spectrum, either by phone or through
written complaints seen by Reuters.
In a handful of cases, the patients who had DNA samples sent to Clio
or Spectrum said they never spoke with a doctor about why the cancer
or pharmacogenetic tests were medically necessary. Moreover, when
test results were completed, they were mailed directly to patients'
homes. That is not the norm, say doctors and medical experts.
Usually, the ordering physician receives results first, then reviews
them with the patient.
Nemerson, the Clio lawyer, declined to comment on these specifics,
citing her statement to Reuters that the company diligently follows
testing rules.
Spectrum’s lawyer said the company has not been contacted by the
government concerning any patient complaints.
In 2017, the most recent data available, Clio billed Medicare $8.6
million for genetic testing and was paid about $4.6 million.
Clio Laboratories and a cluster of companies – including Elite
Medical Laboratories, 360 Laboratories and billing company
Laboratory Experts – are connected to Jordan Satary, an entrepreneur
in his mid-twenties whose father once ran a lab that went bust,
records show.
His father, Khalid Ahmed Satary, had earlier founded and led
Confirmatrix, a Georgia toxicology lab. Satary started that company
after his April 2008 release from federal prison; he had pleaded
guilty to charges filed in 2003 involving fraud, trafficking in
counterfeit products and copyright infringement related to a compact
disc company he operated.
Confirmatrix was raided by federal investigators in 2016, media
reports say, as part of a probe into a kickback scheme involving
opioid pain clinic owners who were routing urine drug tests to
toxicology labs. The lab was accused, but not charged, with being
part of the scheme in a 2017 indictment filed in Tennessee. The
investigation is ongoing.
Confirmatrix filed for bankruptcy November 4, 2016. Some of the
former employees of the defunct company now work for multiple other
labs with ties to the Satary family.
Elite Medical Laboratories, for instance, lists its lab director as
Stanley Wu, the former Confirmatrix lab director. Wu hung up on
Reuters when it sought his comment and did not respond to an email
seeking comment.
Reuters journalists stopped by Elite’s office last month. From
outside the offices through large front windows, they saw UPS and
FedEx boxes stacked inside, with cheek swabs and other DNA samples
spilling out. Two men stood at a table sorting them.
Elite has “a long history of providing valuable services” and is
“committed to upholding” its legal obligations, Nemerson said in a
statement.
Khalid Satary did not respond to text messages or emails seeking
comment. An attorney who previously represented Satary told Reuters
he could not comment.
Son Jordan is listed in an April 2019 document as the CEO and CFO of
a medical billing operation, GNOS Medical, which is located in the
same business plaza with Elite and Clio. It has since changed its
name to Laboratory Experts, public records show.
Jordan Satary lists Laboratory Experts as belonging to him on his
own corporate website. He was separately listed in 2018 as a
registered agent for Clio’s Florida-based location, which later
merged with the Georgia office. The contact information on the
website for Elite Medical Labs contained an email address as
recently as August for his media company, Shufe Media. The reference
was later removed, after Reuters inquiries.
Jordan Satary could not be reached for comment. When a reporter
stopped by Clio Laboratories in August, the office said he was out
of town and referred Reuters to Nemerson, the company’s general
counsel. He did not respond to subsequent emails listed for his
various companies, or to a text message.
DISCIPLINED DOCTORS
Some of the doctors involved in the genetic testing wave also have
checkered pasts.
One California doctor was signing off on genetic tests for patients
even as two states had disciplined him or were preparing to do so
after he was criminally convicted in Los Angeles.
Orthopedic surgeon Dr. Mitchell G. Cohen pleaded guilty in November
2015 to filing a false tax return in connection with an illegal
kickback scheme, cooperated with the government’s investigation, and
later served more than eight months in a halfway house in central
California through March 2019, court records show. Cohen was not
charged with making an illegal kickback, but pleaded guilty to
making a false tax return in a case federal authorities said
involved kickbacks.
New York and California each took disciplinary action based on the
conviction, with both placing him on probation in June 2018 and June
2019, respectively.
Cohen was approving genetic tests for Medicare patients during his
stint in the halfway house and after his probation period ended. He
approved the medical necessity of genetic tests handled by labs
including BioConfirm in Georgia and Elite Medical Laboratories, lab
records show.
He signed off on the genetic test for Elite in September 2018, as he
was serving his sentence in the halfway house, records show. He
approved the medical necessity of tests sent to Bioconfirm on May
10, 2019.
Scott Grubman, an attorney for BioConfirm, said his client “relies
in good faith on the information submitted to it by the ordering
provider,” complies with its legal obligations and is not aware of
any issues related to Dr. Cohen.
Contacted by Reuters, Cohen said he was in surgery and hung up. Mark
Werksman, his attorney, said Cohen stopped working for several
telemedicine companies authorizing genetic tests for Medicare
patients on May 20, 2019, after the government suspended his
Medicare billing privileges, an action that typically occurs after a
doctor is convicted.
Under the probation terms, he said Cohen was allowed to work during
the day while spending nights in the halfway house. He said Cohen
consulted with patients before the tests and followed up to discuss
the results.
“He believes he was providing a medically necessary and important
service to his patients,” Werksman said.
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