Graft in the Skin Graft Business Among Cases Charged in Nationwide Healthcare Fraud Bust

Recently, the U.S. Department of Justice (DOJ) issued a press release announcing a massive nationwide healthcare fraud bust, creating the types of headlines designed to strike fear in the hearts of everyone in the healthcare industry who provides services, devices, pharmaceuticals, and insurance paid for by governmental health insurance programs such as Medicare, Medicaid, Tricare, and Champva. 

“National Healthcare Fraud Enforcement Action Results in 193 Defendants Charged and over $2.75 Billion in False Claims,” the top headline boasts. Among the defendants were 76 doctors, nurse practitioners, and other licensed medical professionals, and the fraud charges read like a top 10 list of healthcare fraud trends, including everything from telemedicine and laboratory fraud to fraudulent addiction treatment schemes, distribution of adulterated HIV medication, and, ironically, “graft” uncovered in connection with the application of amniotic wound grafts.

Before diving into some of the specific charges, let’s first see who is behind this impressive roundup of suspected healthcare rogues. Led by the Healthcare Fraud Unit of the DOJ Criminal Division’s Fraud Section, this wide-ranging national takedown was the handiwork of the Health Care Fraud Strike Force, a special unit founded in 2007 that operates in 27 districts, and whose core mission is to identify newly emerging healthcare fraud schemes and target the most egregious fraudsters. Since its founding in March 2007, the Strike Force has charged more than 5,400 defendants who collectively billed Medicare, Medicaid, and private health insurers more than $27 billion, and has utilized advanced data analytics and algorithmic methods in its work.   

However, the Strike Force did not achieve the stellar results announced last month on its own. Instead, as evidenced by the people quoted in the press release – a veritable “Who’s Who” of top federal agency brass, from Attorney General Merrick Garland to Homeland Security Chief Alejandro Mayorkas to FBI Chief Christopher Wray – the bust is a textbook model of cross-agency coordination and collaboration. The Strike Force marshalled the resources of such core partners as 32 U.S. Attorneys’ Offices and 11 State Attorneys General Offices nationwide, the U.S. Department of Health and Human Services Office of Inspector General (HHS OIG), the FBI, Drug Enforcement Administration (DEA), and Homeland Security.     

Reporting on the charges the Strike Force has brought in its roughly 133 individual cases filed across 31 federal district courts and 10 state courts in this latest bust would fill up all of the remaining Monitor Mondays podcasts this year, and then some. Therefore, I’ve chosen to focus on one of the six cases that DOJ spotlighted in last week’s press release: amniotic skin grafts. While I’d like to say that I chose this case solely because it features allegations of the types of odious behavior and elder abuse befitting the Strike Force’s mission of targeting the most egregious fraudsters, I confess that the idea of keeping up with our Monitor Mondays punster-in-chief David Glaser proved too enticing, and I had to report on “graft” in the amniotic tissue graft industry.

In this case, prosecutors in the District of Arizona charged Alexandra Gehrke and Jeffrey King, the two owners of Arizona wound care companies Apex Mobile Medical LLC, Apex Medical LLC, Viking Medical Consultants LLC, and APX Mobile Medical LLC, and Bethany Jameson and Carlos Ching, two nurse practitioner working with them, with making $900 million in false claims to Medicare for highly expensive amniotic wound grafts used on Medicare patients. According to the allegations, Gehrke and King targeted elderly Medicare patients, including many who were terminally ill and in hospice care, and caused unnecessary amniotic tissue grafts to be applied to wounds that did not need this treatment – and they allegedly did so without proper treatment for infection or coordination with the patients’ treating physicians. 

Gehrke and King are also accused of causing nurse practitioners to apply the expensive grafts in sizes that were excessively larger than the wounds, thereby improperly increasing their Medicare reimbursement, and receiving more than $330 million in illegal kickbacks in exchange for purchasing the grafts that were then billed to Medicare. Through the alleged fraud scheme, Gehrke and King were paid more than a million dollars per patient for the unnecessary grafts, and received $600 million from Medicare in 16 months alone. Upon the arrest of Gehrke and King, the government seized over $70 million in gold, jewelry, cash, and luxury vehicles. Jameson and Ching were also charged as part of the scheme for their role in allegedly applying the amniotic skin grafts to Medicare beneficiaries without medical necessity.    

This case is part of an increasing number of healthcare fraud cases involving the use of skin grafts. Last week, DOJ reached a $1.63 million settlement with Tareen Dermatology, P.A., its CEO, and Dr. Mohiba Tareen in a qui tam case initiated by two whistleblowers that included allegations of the use of certain skin grafts in circumstances where their usage was not justified as billed (United States of America, et al., ex rel. Carrie Cremin and Susanne Polzin v. Tareen Dermatology P.A., Dr. Mohiba Tareen, and Dr. Basir Tareen, Case No. 19-cv-2457). Similarly, in April 2023, DOJ settled for $24 million a False Claims Act case launched by two whistleblowers against a Beverly Hills plastic surgeon, his sons, medical practices, and billing companies that had allegedly double-billed for single-use skin graft materials by failing to properly dispose of the unused portions and using and billing for them in later procedures involving other Medicare and Medicaid beneficiaries (and had falsified the place of service for skin grafts to fraudulently maximize reimbursements). 

As these cases demonstrate, whistleblowers will continue to play a critical role in exposing fraud in wound care treatment involving second or substitute skin.