It appears that the Spinas abided by that law for some 25 years. So why, in 2011, did they decide to cross the line? Was it an honest desire to do more for their patients? Or the most basic of all motivations, greed? There is evidence for both, but what’s clear, according to prosecutors, is that in 2011, the Spina brothers came up with elaborate schemes to circumvent the law, setting up corporations in the names of medical doctors and other health care providers. Court documents show the Spinas ran those businesses as if they were the owners and the owners were the employees — a violation of the state law permitting only medical doctors to operate medical practices or employ physicians.
Indeed, the evidence shows Jay and Jeff retained control of everything, administering each business and doling out performance bonuses to the owners-in-name. Office manager Grossman, who declined to be interviewed, helped set up and manage bank accounts for the nominal owners of the businesses. Jay directed office staff to hide the brothers’ connections to these other businesses by using variations on the Dolson Avenue address. Money was shifted from those corporations to ones owned by Jay and Jeff, disguised as rent payments and marketing fees. Jay benefited the most; one court document shows he and his wife received $4 million in disbursements to their company, Effective Marketing.
“If there is an audit by Medicare there is no way out of this one.”
— Jay Spina email to Jeff Spina, Jan. 3, 2013
In addition to illegally operating all the businesses, the brothers engaged in other practices that are the pillars of medical fraud. They billed for services they didn’t render. They charged two different insurance providers for the same procedures. They provided treatments that weren’t necessary or effective. (The facet injections that Bagley gave to Debbie Dillinger, for example, weren’t medically justified, according to a medical expert who reviewed her records.) And they falsified medical records to back up their claims. “These are common themes in our investigations,” HHS’s Frisco told me. “Maximizing profits,” she said, was the focus of the Spinas’ practice.
In a 2013 email, Jay cautioned Jeff about exorbitant billing. “I think you had better keep a closer watch on this,” he wrote. “If there is an audit by Medicare there is no way out of this one.”
While the brothers were growing richer, court documents show that their sister, Kimberly, received an hourly wage of about $16 for her part in the scam, which involved preparing fake medical reports and doctoring workers’ compensation claims. Kimberly, who declined to speak with me, is a recovering alcoholic who flunked out of chiropractic school, according to her lawyer. She told prosecutors that she believed her job prospects outside the family business were probably nonexistent.
As the years progressed, the Spinas’ businesses grew to around 30 staff. They moved out of their original location and into a larger, newly remodeled space in a building in a strip mall just a mile away, and offered a range of services, including physical therapy, rehabilitation, acupuncture, massage and medical pain management.
“Jay was charming,” said ex-NYPD officer Padilla, “always professionally dressed — a suit guy. Even when he was on the go, he’d stop and talk and start treating somebody, rubbing their back or using one of the massage machines.” Jeff, comfortable in polo shirts and sneakers, was, according to Padilla, the quintessential hardworking middle child, “the machine” who kept the operation running.
In front of their patients, the brothers were smiling and good-natured. But behind the scenes, they often clashed. In a letter to the court, Jeff, who declined to be interviewed for this article, wrote that he knew his brother was extracting most of the medical profits through a management company: “We had many heated discussions and fights regarding his lack of transparency — in the office, in front of staff and at his house many times, when his wife had to separate us.” Chiropractor Steve Brune, a witness to their office battles, wrote in a letter to the court that Jay usually won those fights: “Jeff didn’t stand a chance when it came to disagreements with his brother.”
In interviews with investigators, staffers described how patient treatment was often based solely on how much the Spinas could extract from Medicare, no-fault insurers and workers’ compensation benefits. Patients were referred between the bogus health care companies, and insurance claims were spread out to avoid attracting attention from providers on the lookout for fraud. The brothers encouraged staff to meet certain billing targets, regardless of whether treatments were medically necessary, dangling weekly “bonus plans,” such as movie tickets, free lunches and other rewards, for hitting those profit goals. Prosecutors said the Spinas also negotiated illegal kickbacks with suppliers of goods and services, like back braces and magnetic resonance imaging scans (MRIs). They even taught employees how to lie to insurance companies to get approval for these MRIs — and get their kickbacks.
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Not everyone at Dolson went along with these activities. In an email to Jeff, one doctor complained that Jay and Kimberly were pressuring him to create exaggerated reports that would guarantee unlimited insurance company approvals for therapy. “There are lines of honesty and professionalism in producing documentation I will not cross,” he wrote, “and I want the threats of being fired unless I do so to stop immediately.”
Even a former patient told the FBI that they had realized something might be fishy when they received paperwork about claims from care providers they’d never seen, inconsistent copays and unfamiliar bills sent to collection agencies. That patient described the clinic as a “mill” that shuffled them through as many treatments as their insurance would cover.
A system vulnerable to fraud
How could such fraud go on so long without the perpetrators being caught? It’s easy, said Sparrow, the Harvard fraud expert. In the U.S. health insurance system, it’s standard for claims to be paid first and checked for validity later — if they’re checked at all. “The resources available for tracking down fraudulent and abusive providers are so tiny compared with the probable scale of these problems,” he said.
VIDEO: Avoid Medicare Card Scams
Swindlers capitalize on the fact that automated payment systems check claims for medical orthodoxy, not authenticity. As long as a claimappearsaccurate—the procedure code matches the diagnosis and the price is commensurate with the treatment — you can get paid for entirely faked medical procedures. The Spinas took that into account on several occasions when they were audited by Medicare, the New York State Comptroller’s office or private insurance companies, according to investigators: To cover their tracks, the brothers assembled a special “audit team” of their employees to manufacture medical records that files lacked.
Ironically, control systems set up to detect inappropriate billing teach criminals how to be better crooks, said Sparrow. If, for example, a provider submits a claim for a service that isn’t justified by a patient’s diagnosis, the provider will receive a computer-generated notice explaining why that claim was denied. “It’s very nice,” Sparrow said. “A reasonably clever crook watches it very carefully for these reasons and stops repeating any of those mistakes."
The ‘YouTube expert’ performs complex facet injections
When Charles Bagley joined the Dolson Avenue Medical team in the summer of 2016, he was, in many ways, a broken man, reeling from a bad divorce, a bankruptcy filing and a U.S. Drug Enforcement Administration investigation that had cost him his license to prescribe narcotics.
Not surprisingly, Bagley welcomed his new salaried job — one that would release him from the stress of running a medical practice. At Dolson Avenue, all he had to do was wait for the patients to come in. In exchange, Bagley brought a new procedure to the practice’s list of insurance-covered treatments: facet injections.
At a minimum, people who administer facet injections should have three months of daily and direct training with a physician already well versed in the procedure, according to an expert consulted by the HHS inspector general’s Office of Investigations. Bagley had no formal training, according to prosecutors, alleging that he taught himself by shadowing other doctors and watching YouTube videos. What’s more, Bagley was injecting patients with a concoction he devised himself: a combination of lidocaine, a sugar solution and ingredients the expert considered “unusual.”
The results could be horrific. In December 2016, one patient being treated for neck, back and shoulder injuries received an injection of what Bagley called his “special mixture,” she later told the FBI. She felt an “electric shock” shooting down her left arm and cried out in pain. When she left the clinic that evening, she couldn’t walk without assistance. She was dizzy, numb and in pain from the neck down, according to her account. Months after the incident, she was still experiencing pain and numbness, and was forced to quit her job as a home health aide.
In early March 2017, another patient passed out during an injection from Bagley. An employee at the clinic told the FBI that Jeff had refused to let the staff call 911 because he didn’t want the police to come. After the patient was resuscitated with CPR, Jeff emailed Jay. “Got quite bad for a bit,” he wrote. “We need to look into this.”
Seven days after that email, Debbie Dillinger walked into the clinic for her third facet injection that month. Bagley should have used an X-ray with dye to guide his needle, according to an expert report; he used ultrasound instead. He used far too much lidocaine, according to the expert who reviewed the incident. And, as Bagley acknowledged to me when we spoke on the phone about what happened, injections in the neck can be particularly risky. “I shouldn’t have been doing the injections in that area.” He wasn’t prepared for such an emergency, he said.
In California, healthcare fraud is considered a “wobbler” crime, which means it can be charged as a misdemeanor or a felony. Typically, the prosecutor decides based on the amount of money involved.What are the outcomes of healthcare fraud? ›
Unnecessary procedures and prescriptions can be dangerous — as can a lack of necessary medical care. Fraud can also result in inaccurate medical records, and medical identity theft can also lead to an early, unexpected exhaustion of a patient's medical insurance coverage.What is a characteristic of health care fraud? ›
Health care providers can commit fraudulent acts by: billing for services, procedures and/or supplies that were never rendered. charging for more expensive services than those actually provided. performing unnecessary services for the purpose of financial gain.How do you fight healthcare fraud? ›
If you find errors report them to your insurance company. If you suspect fraud and you are on Medicare or Medicaid call the Office of Inspector General at 800-447-8477.What is the definition of fraud and what are three examples of health care fraud? ›
Falsifying plans of treatment or medical records to justify payments; Misrepresenting diagnoses or procedures to maximize payments; Misrepresenting charges or entitlements to payments in cost reports; and. Soliciting “kickbacks” for the provision of various services or goods.What 3 government entities are charged with investigating healthcare fraud? ›
Government agencies, including the Department of Justice, the Department of Health & Human Services Office of Inspector General (OIG), and the Centers for Medicare & Medicaid Services (CMS), are charged with enforcing these laws.What is the biggest healthcare fraud in the US? ›
Over a period of at least six years, Fata submitted $34 million USD in fraudulent charges to private health practices and Medicare. At the time of his arrest, Fata owned Michigan Hematology-Oncology, one of Michigan's largest cancer practices.What are the consequences of frauds? ›
Fraud convictions bring with them the serious possibility of a jail or prison sentence. Though sentences differ widely, a misdemeanor conviction can lead to up to a year in a local jail, while a felony conviction can lead to multiple years in prison. Federal charges can lead to 10 years or more in federal prison.What is the difference between healthcare abuse and fraud? ›
Fraud is an intentional deception or misrepresentation of fact that can result in unauthorized benefit or payment. Abuse means actions that are improper, inappropriate, outside acceptable standards of professional conduct or medically unnecessary.What are red flags for healthcare fraud? ›
Red flags for provider fraud can include the following: Billing for unnecessary services or services not rendered, for unnecessary equipment, or for services performed by a lesser qualified person.
- Double billing: Submitting multiple claims for the same service.
- Phantom billing: Billing for a service visit or supplies the patient never received.
- Unbundling: Submitting multiple bills for the same service.
Billing for unnecessary or expensive services allows professionals or practices to inflate profits. For example, misdiagnosing a patient for the sake of being able to prescribe a more expensive drug or service is another form of fraud. Kickbacks are a form of healthcare fraud driven by physicians or facilities.Who are the victims of healthcare fraud? ›
Individual victims of health care fraud are sadly easy to find. These are people who are exploited and subjected to unnecessary or unsafe medical procedures. Or whose medical records are compromised or whose legitimate insurance information is used to submit falsified claims.Why do people commit healthcare fraud? ›
The highest reason for committing fraud is the fee-for-service payment system where providers are tempted to perform or bill for unnecessary services. The next reason is the lack of a uniform fraud prevention law. There are at least five major Federal laws designed to combat fraud.How does HIPAA prevent healthcare fraud? ›
Establishes policies and procedures for maintaining privacy and security of individually identifiable health information, outlines offenses, and creates civil and criminal penalties for violations. Creates programs to control fraud and abuse and Administrative Simplification rules.What are the three major components of fraud? ›
According to Albrecht, the fraud triangle states that “individuals are motivated to commit fraud when three elements come together: (1) some kind of perceived pressure, (2) some perceived opportunity, and (3) some way to rationalize the fraud as not being inconsistent with one's values.”Who are the 4 doctors found guilty in $150 m healthcare fraud scheme? ›
After a four-week trial, Spilios Pappas, 62, of Lucas County, Ohio, Joseph Betro, 59, of Oakland County, Michigan, Tariq Omar, 62, of Oakland County, Michigan, and Mohammed Zahoor, 53, of Oakland County, Michigan, were each found guilty of one count of conspiracy to commit health care fraud and wire fraud, and one ...Which healthcare facilities are exempt from fraud investigations? ›
|Health care facilities that are exempt from fraud investigators include||None, all facilities are subject to the law|
|Compliance in a health care organization is the responsibilitynof||All employees, volunteers, and interns|
|A formal compliance program may||Leases fines and penalties|
healthcare abuse relates to a false representation of fact. Billing for services never rendered is one of the most common types of healthcare fraud.What is the biggest medical fraud case? ›
Glaxo's $3 billion settlement included the largest civil False Claims Act settlement on record, and Pfizer's $2.3 billion ($3.5 billion in 2022) settlement including a record-breaking $1.3 billion criminal fine.
DOJ charges hundreds in connection with $6B in healthcare fraud in largest takedown ever. The Department of Justice (DOJ) charged 345 people across 51 federal districts in the largest healthcare fraud takedown in the agency's history.What state has the highest number of healthcare fraud cases? ›
- California — 123.
- Texas — 118.
- Ohio — 116.
- New York — 89.
- Florida — 85.
- Louisiana — 76.
- Arizona — 62.
- Iowa — 45.
Fraudulent intent is shown if a representation is made with reckless indifference to its truth or falsity.” Intent can be reasoned from statements, conduct, victim testimony, and complaint letters, all of which can help demonstrate that the perpetrator knew that victims were being misled.What are the 2 basic type of frauds? ›
The courts classify fraud under two major types: criminal and civil. Civil fraud is when the fraud is an intentional misrepresentation of facts. Criminal fraud is when theft is involved in the fraud.What are five situations covered by the Statute of Frauds? ›
- Promises that involve marriage as consideration.
- Contracts that can't be performed within one year.
- Contracts that involve the sale or transfer of land.
- Contracts that involve promises by executors to pay estate debts.
- Contracts that involve a promise to act as a guarantor or surety.
In the phantom billing scam, patients are billed for services never performed and sent an explanation of benefits that are usually discarded. Without notice from patients, insurers may be unaware they are being defrauded.What is one example of fraud waste and abuse committed by a healthcare provider? ›
Billing for non-covered services using an incorrect CPT, HCPCS and/or Diagnosis code in order to have services covered. Billing for services that are actually performed by another provider.What is one of the most common red flags of fraud behavior? ›
Fraudsters' common behavioral red flags
Management and co-workers may see warning signs of “fraudsters.” According to the ACFE reports, the two most common red flags continue to include living beyond one's means and financial difficulties. Other warning signs include: Getting too close to vendors or customers.
There are four elements that must be present for a person or employee to commit fraud: • Opportunity • Low chance of getting caught • Rationalization in the fraudsters mind, and • Justification that results from the rationalization.What is a red rule violation in healthcare? ›
A Red Rule is an act that has the highest level of risk or consequence to patient or Associate safety if not performed exactly, each and every time. “Red” designates the highest priority for exact compliance – STOP all action if you can't comply (except in rare or urgent situations).
The passage of HIPAA led to the development of a Health Care Fraud and Abuse Program jointly administered by the Department of Health and Human Services and the Department of Justice.What is the final omnibus rule? ›
The Omnibus Final Rule, the most recent addition to HIPAA, was passed to strengthen the protection of protected health information, especially in electronic form, as well as give patients more access to their individual health information.What are the 5 most common violations to the HIPAA privacy Rule? ›
- Losing Devices. In the last decade, over 800 device loss or theft incidents have been reported. ...
- Getting Hacked. ...
- Employees Dishonestly Accessing Files. ...
- Improper Filing and Disposing of Documents. ...
- Releasing Patient Information After the Authorization Period Expires.
Health care fraud is a type of white-collar crime that involves the filing of dishonest health care claims in order to turn a profit. Fraudulent health care schemes come in many forms.What are crimes involving healthcare? ›
These types of cases often include over-billing, billing for services which were not rendered, unreasonable billing and unreasonable rates of services, personal kickbacks, and unnecessary treatment. Further, these billing fraud cases frequently relate to fraud concerning Medicare and Medicaid programs.What is the difference between health care fraud and abuse? ›
Fraud is an intentional deception or misrepresentation of fact that can result in unauthorized benefit or payment. Abuse means actions that are improper, inappropriate, outside acceptable standards of professional conduct or medically unnecessary.What entity investigates suspected cases of fraud? ›
The FBI investigates these crimes in partnership with: Federal, state, and local agencies. Healthcare Fraud Prevention Partnership.What are three white-collar crimes examples? ›
- False accounting and/or misrepresentations of financial conditions.
- Fraudulent trades designed to inflate profits or hide losses.
- Illicit transactions designed to escape regulatory oversight.
Taking money from medical device manufacturers or pharmaceutical companies. Failing to report an impaired colleague. Working while impaired by alcohol or drugs. Becoming romantically involved with patients or family members of a patient.What is unethical but legal examples in healthcare? ›
Legal and ethical principles are closely associated, although ethical standards characteristically exceed legal obligations. For example, if a physician refuses to treat a patient because the patient cannot pay for the treatment, the physician's behavior is legal but may be deemed unethical.
If a doctor intentionally gives a patient a lethal dose of a medication and the patient dies, the doctor is liable not only for medical malpractice but can also be charged with murder. If a doctor is reckless in administering drugs to a patient and the patient dies, they can be charged with manslaughter.Why do people commit health care fraud? ›
Motivations for Committing Healthcare Fraud
When patients come in needing medical care but cannot afford the out-of-pocket costs, healthcare providers may try to lessen their financial burden by overbilling insurance companies. While this is done with good intentions, it is still a fraud crime.