In 2019, the U.S. Department of Justice (“DOJ”) announced “Operation Brace Yourself,” which resulted in charges against 24 criminal defendants and adverse administrative actions against 130 DME companies.  Operation Brace Yourself was a nationwide scheme related to the dispensing of orthotic braces using telehealth companies and providers that resulted in an estimated $1.5 billion in cost avoidance, according to the DOJ.  

Following Operation Brace Yourself, the DOJ continued enforcement efforts against fraudulent schemes related to telehealth, orthotic devices, and lab testing, which CG attorneys have discussed in client alerts and presentations.  As the government has explained, these fraudulent schemes often involve medical providers, DME suppliers, labs, pharmacies, telemarketing companies, and telehealth companies.  Hallmarks of government enforcement actions related to these types of schemes include cross-agency collaborations, nationwide enforcement, and pursuing all actors, companies, and individuals involved in the schemes (i.e., the entire “supply chain”).  These hallmarks were evident in a recent enforcement action.

On April 22, 2021, the DOJ announced charging Christopher Cirri, Thomas Farese, Domenic Gatto, Nicholas DeFonte, and Pat Truglia for their roles in a $65 million nationwide scheme to defraud federal healthcare programs.  The individuals were owners of orthotic brace supply companies and marketing companies.  All individuals were charged with conspiracy to commit health care fraud and three counts of health care fraud in connection with paying and receiving health care kickbacks and bribes.  

According to the press release, between October 2017 and April 2019, Truglia, Cirri, and DeFonte allegedly operated or controlled telemarketing call centers that solicited and enticed beneficiaries to accept orthotic braces regardless of need.  Truglia, Cirri, and DeFonte also contracted with telemedicine companies and invoiced the companies for “marketing” and “business process outsourcing.” The government alleges that the contracts were a sham used to conceal kickbacks and bribes paid to the telemedicine companies in exchange for orders for braces.  The government also outlined how some individuals allegedly conspired to purchase brace orders through other suppliers, while other individuals conspired to sell brace orders to orthotic brace suppliers.  Despite how the schemes were executed, they involved kickbacks, bribes, sham invoicing, submission of false information to the government, and using shell companies, according to the government. 

The charges (health care fraud and conspiracy to commit health care fraud) imposed on the individuals are punishable by up to 10 years in prison.  Financially, the charges may include the greater of a $250,000 fine or twice the gross profit or loss caused by the offense, according to the press release.   

The DOJ’s announcement is another example of the government’s use of cross-agency collaborations, as the case was investigated by HHS-OIG, FBI, VA-OIG, and the Defense Criminal Investigative Service (DCIS).  The press release also demonstrates the government’s pursuit of individuals as part of the healthcare supply chain who may not be physicians.  Healthcare industry participants (licensed medical providers, DME suppliers, marketing and business support, and other non-medical providers) must remain vigilant and consistent in compliance efforts.

The attorneys at Chilivis Grubman represent clients of all types and sizes in connection with government investigations, both criminal and civil, and False Claims Act litigation.  If you need assistance with such a matter, please contact us today.