October 2, 2012

Former CEO at Ortho Hospital Charged with Fraud

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A former hospital CEO allegedly extorted or solicited $1.4 million in a kickback scheme involving hospital vendors, a hospital employee and a healthcare organization in the United Kingdom.

John Reynolds also is charged with making false statements to law enforcement and was arrested Sept. 26, according to the U.S. Attorney’s Office in southern New York.

Reynolds was CEO of the Hospital for Special Surgery, the nation’s oldest orthopedic hospital, from 1997 until 2006. From 1996 to November 2002, he received about $420,000 in kickbacks from at least two hospital vendors in exchange for securing contracts for them, the U.S. Attorney’s Office states. From 2002 to 2005, he received $298,500 in kickbacks from a subordinate employee in exchange for the employee’s annual bonus. From 2005 to 2007, he received about $670,000 in kickbacks from the U.K. health care organization in exchange for facilitating a partnership with the hospital.

Reynolds allegedly withheld information from the hospital’s board of directors about the arrangements and conflicts of interest, the U.S. Attorney’s Office stated.

The racketeering charge Reynolds faces has a maximum sentences of 20 years in prison. The false statements charge has a maximum five-year prison sentence. For more on the case, visit http://www.justice.gov/usao/nys/pressreleases/September12/ReynoldsJohnArrestPR.html.

In other fraud news:

  • Nine people – including two home health agency owners and two doctors – allegedly paid and received kickbacks for Medicare home health referrals, according to the U.S. Attorney’s Office in northern Illinois. Between January 2008 and July 2012, the home health agency owners and an employee paid kickbacks generally ranging from $300 to $600 for patients who would receive at least five home health visits, which qualifies the agency for a full episode of payment. Other defendants received kickbacks that totaled as much as $24,000 just between March to July 2012. For more information on the case, visit http://www.justice.gov/usao/iln/pr/chicago/2012/pr0925_01.pdf.
  • A consultant and two directors of an ambulance company were charged in connection with a $2.5 million billing scheme that defrauded Medicare and Medicaid, according to the U.S. Attorney’s Office in western Texas. Andey Gray, owner of Crown Consulting and Billing, and Michael Farris and Sherry Trouten of Tejas Ambulance face 10 counts of healthcare fraud and two counts of theft or embezzlement in connection with health care fraud. Farris also is charged with one count of making a false statement. Tejas Ambulance was not authorized to bill Medicare or Medicaid but did so using numbers assigned to other entities. For more information on the case, visit http://www.justice.gov/usao/txw/press_releases/2012/Tejas%20Ambulance%20SA%20indictment.pdf.

RAC News

Recovery auditors (RACs) posted no new issues last week.

About the Author

Karen Long is the editor of Physician Solutions for DecisionHealth and oversees products that relate to fraud and abuse and HIPAA compliance for physician offices and home health agencies, and accreditation compliance for hospitals. In her almost four years at DecisionHealth, Karen also has been the compliance editor and a reporter for Home Health Line, nation's leading independent authority on home healthcare business, regulation and reimbursement.

Contact the Author

KLong@decisionhealth.com

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