Case 1:14-cr-00023-JPJ-PMS Document 4 Filed 09/23/14 Page 1 of 22 Pageid#: 4 CLERK' S OFFICE U. S.DIST. COURT ATM INGDO N,VA FILED SEF 23 221j IN TH E U N ITE D STAT ES D ISTR ICT C O U R T FO R TH E W E STER N D ISTR ICT O F VIR G IN IA A BIN G D O N D IV ISIO N UNITED STATES OF AM ERICA ) ) v. ) ) BETH PA LIN JO SEPH D .W EBB and M A R Y E LIZA BETH CU RTISS JULI A C, UD 6Y: D U : LERK , K caseNo. l. 'IM violations: 18U.S.C.lj2,1347,1349 42 U.S.C.% 1320a-7b(b)(2)(A),and 1320a-7b(b)(1)(A) IN D IC TM EN T INTRODUCTION THE GR AN D JU RY CH A RG ES THA T: Atalltim esrelevantto thisindictm ent,M edicare,Virginia M edicaid,and Termcarewere health care benefitprogram s funded and adm inistered by the United States Governm ent. health care benefitprogrnm is defined in Title 18,United States Code,Section 24(b)asany publicorprivateplan orcontract,affecting comm erce,underwhich any m edicalbenefit,item,or service is provided to any individual,and includes any individualor entity who is providing a m edicalbenefit,item or service for which payment may be m ade under the plan or contract. M edicare,Virginia M edicaid,and Telmcare provided health care benefitsto eligible recipients, includingpaym entforlaboratory services,such astlrine drug screens,and forprescription drugs. The M edicare program w asestablished to provide m edicalservices to elderly,blind,and disabled beneticiariesptlrsuantto the provisionsofthe SocialSecurity Act(Title 42,United USAO No. .2010R00160 Page 1 Case 1:14-cr-00023-JPJ-PMS Document 4 Filed 09/23/14 Page 2 of 22 Pageid#: 5 StatesCode,Section 301etseq.). M edicareisadministered bytheFederalgovernmentthrough theCentersforM edicareand M edicaid Services(CM S)and isfunded through aportion ofthe payrolltaxes paid by workersand employers;and,by premiums deducted from monthly social security checks. M edicare will only pay for treatm ents and services, such as laboratory tests and prescription drugs, which are considered medically necessary, performed within accepted m edicalstandards,and arerendered foralegitimatemedicalpurpose. 4. M edicareservicesaredividedinto distinctparts. M edicarePartB (outpatientinsurance) includes benefits for doctor and other non-hospital health care provider services, such as laboratory services and urine drug screens. M edicare PM D is a prescription drug benetit. M edicare will only pay for treatments and services which are considered reasonable and m edically necessary,performed within accepted m edical standards, and are rendered for a legitimatem edicalpum ose. 5. A11providers enter into a M edicare provider enrollm entagreement,which outlines the nllesand regulationsthatareto be followed to ensure thatlim ited M edicare ftmds areexpended appropriately. Upon CM S certification oftheproviderenrollmentagreem ent,a providernum ber isissued. BristolLaboratoriesbecam e a M edicare provideron or aboutJanuary 1,2009 and w as assignedtheNationalProviderIndex @ PI)ntlmber#1447410642. M edicare providers electronically subm it billings for medicaltreatments and services rendered to recipients via a health insurance claim form (ç1CM S-1500'') to the M edicare Administrative Contractoror ICM AC''. The M AC isa regionalprivate company thatcontracts w ith CM S to adm inisterM edicare benefits. The M A C review sand processes the claim ,and then USAO No. .2010R00160 Page 2 Case 1:14-cr-00023-JPJ-PMS Document 4 Filed 09/23/14 Page 3 of 22 Pageid#: 6 generatesan electronicfundstrmzsferto theprovider'sdesignated bank account. TheM AC that serviced Virginia from M ay 2009 through M arch 18,2011 wasTrailblazerHea1th Entem rises, LLC,headquartered in Dallas,Texas. The M AC thatreplaced Trailblazer in M arch 19,2011 through A pril30,2012 isPalm etto GBA ,headquartered in Colum bia,South Carolina. 42 Code of Federal Regulations Section 410.32 states that alldiagnostic x-ray and laboratory tests,and otherdiagnostic testsbilled to M edicare m ustbe ordered by the physician who istreating the beneficiary. Thatis,the physician who furnishesa consultation ortreats a beneficiary for a specific m edical problem and who uses the results in the m anagem eét of the benetk iary's specific medicalproblem . Tests notordered by the physician who istreating the beneficiaryarenotreasonableand necessary. 8. Chapter 1,Section 30.1.3 ofthe M edicare Claim sProcessing M anual-GeneralBilling Requirem ents states that a provider cnnnot impose any limitations with respect to care and treatm ent of M edicare beneficiaries that it does not im pose on all other persons seeking treatment. A providermay notrefuseto furnish atreatm entforcertain illnessesorconditionsto M edicare beneficimies,ifitfurnishessuch treatm entto others.Failure to abide by thisrule isa causefortermination oftheprovider'sagreem entto participate in the M edicareprogram . 9. Virginia M edicaid isahealth carebenefitprogram thatwasestablished by Title 19 ofthe SocialSecurity Actof 1965 designed to providem edicalassistance servicesto indigentpersons. The U.S.Departmentof Health and Human Services (1çHHS'') and the Commonwea1th of Virginia,DepartmentofM edicalAssistance Services(ItDM AS'')administerand supervise the M edicaid program in Virginia, which is called the Virginia M edical Assistance Progrnm USAO No. .2010R00160 Page 3 Case 1:14-cr-00023-JPJ-PMS Document 4 Filed 09/23/14 Page 4 of 22 Pageid#: 7 (1ûVMAP'').lnVirginia,Medicaid isfundedbybothfederaland statedollarsatapproximately a 50% -50% ratio dtlring the years2009-2011. 10. DM AS has established procedures in accordance with the regulations of HHS to com pensate doctors, laboratories and other health care providers for services provided to M edicaid recipients. A participating provider is a person,organization,or institution with a valid participation agreementwho orwhich will(1)provide the service,(2)submitthe claim, and,(3)acceptas paymentin fullthe amountpaid by VM AP. One ofthe yvays aprovider receivesreimbursem entforM edicaid services is to submit,by m ailorwire,a Health lnsurance Claim Form CICM S 150053totheM edicaidfiscalintermediary. Thefiscalintennediary,under contractwith DM AS,receives,processes,and authorizespaymentto providersofservicesunder the M edicaid program First Hea1th Services Corporation,of Richm ond,Virginia,w as the fiscal intennediarytmtilJuly2010. Xerox(originallyACS StateHealth,whichwasboughtbyXerox) wasthe fiscalintermediary afterJuly 2010. Providers sign M edicaid participation agreem ents thatrequire them to keep such records asare necessm'y to fully disclosethe selwicesprovided to M edicaid patients,and to fum ish such inform ation,upon request,to the M edicaid progrnm. Providers agree to render and perfonn services thatare in accordance with federaland state law,aswellas allVM AP adm inistrative policiesand procedures. M edicaidwillonlypay forservicesanditems(such aslaboratory testsandprescription medications) which are considered medically necessary,performed within accepted medical standards,and arerendered foralegitim atemedicalpurpose. USAO No. .2010R00160 Page4 Case 1:14-cr-00023-JPJ-PMS Document 4 Filed 09/23/14 Page 5 of 22 Pageid#: 8 Virginia Administrative Code j12 VAC 30-80-30 covers M edicaid fee-for-senice paym ents and states that providers are prohibited from chargipg M edicaid-insured patients a higherfee-for-service than they would charge a non-M edicaid,tminsured patient. Section A states:I'Paymentforthefollowing services,exceptforphysician services,shallbe thelowerof thestateagencyfeeSchedule oractualcharge (chargeto thegeneralpublic).'' Section A (8) specificallyaddresseslaboratory services(otherthaninpatienthospitals). 14. The Termcareprogrnm wasimplemented asafive-yeardemonstration progrnm approved by the federalHea1th Care Financing Administration (11HCFA''),which isnow known asthe CentersforMedicareand MedicaidServices(ûtCM S'').Theprogram received severalextensions after the originalexpiration date of December 30, 1999 and is in place today. Tenncare is considered a health carebenefitprogram asestablished by Title 19 ofthe SocialSecurity Actof 1965. Tenncare isftmded by both federaland statedollars. The Federalportion ofTermcare's costswas64.3% in 2009;65.57% in 2010;and,65.8% in 2011. Tenncare essentially replaced and enhanced the M edicaid program in Termessee by offering coverage to som e tm insured and tm insurable persons w ho w ere not eligible for traditional M edicaid. Tenncare services are offered through several m anaged care entities. Each enrollee has a M anaged Care Organization CçM CO'') for his primary care and medical/surgicalservices. 16. Healthcare providers subm ita tCCM S 150055form to the proper Term care M anaged Care Contractor (ççM CC'') forpayment of services perfonned by the provider. Providerbilling subm issions and subsequent Term care paym ents to the providers can either be in paper or electronic fonnat. USAO No:2010R00160 Page 5 Case 1:14-cr-00023-JPJ-PMS Document 4 Filed 09/23/14 Page 6 of 22 Pageid#: 9 Providerscompleteabinding providerenrollm entagreem ent,which statesthey willabide by Tenncare standards, rules,and regulations. Tenncare w illonly pay for services and item s (such as laboratory tests and prescri ption medications) which are considered medically necessary, perfonned within accepted m edical standards, and are rendered for a legitimate m edicalpurpose. ln Section F ofthe Tenncare providerenrollm entagreement,providersagree Goto make Covered Services available to (Termcare)M embers in the same manner thatsuch servicesareprovided ormade to a11otherpatients of Supplier;''and (énotto dterentiate or discriminatein thetreatmentof TenncareMemberson thebasisofrace,color,veteran status, sex,age,religion,nationalorigin,handicap,disability,stateofhealth,orsourceofpayment.'' 18. Ata11tim esrelevantto thisindictment,Anthem BlueCrossBlue Shield ofVirginiabased in Richm ond,Virginia;Blue CrossBlue Shield ofTermessee based in Chattanooga,Tennessee; C IG NA Insurance based in H artford,Connecticut;and,A ETNA insurance based in H artford, Connecticut(collectivelytheççprivateinsurancecompanies''),werehealthcarebenefitprogrnms. A health carebenefitprogram isdefined in Title 18,United StatesCode,Section 24(b)asany publicorprivateplan orcontract,affecting comm erce,underwhich any m edicalbenefit,item ,or service isprovided to any individual,and includes any individualor entity who isproviding a m edicalbeneft,item or service for which paym ent may be m ade under the plan or contract. Anthem Blue CrossBlue Shield (ofVirginia),Blue CrossBlue Shield ofTennessee,CIGNA lnsurance,and AETNA insurance (çlthe private insurance companies'') provided health care benefits to eligible recipients, including paym ent for laboratory services, such as urine drug screens,and forprescription drugs. USAO No. .2010R00160 Page 6 Case 1:14-cr-00023-JPJ-PMS Document 4 Filed 09/23/14 Page 7 of 22 Pageid#: 10 Each ofthe private insurance companies,aswith M edicare and M edicaid,have provider agreements in which they only will pay for treatments and services which are considered reasonable and m edically necessary, perfonned within accepted medical standards, and are rendered fora legitim ate medicalpurpose. 20. A t a11 tim es relevant to this indictm ent,BristolLaboratories, LLC ,w as a participating provider for M edicare,Virginia M edicaid,and Tenncare, as well as for each of the private insurance companies. Provider participation in a11 of these health care benefit programs is voluntary. Subutex (buprenorphinehydrochloride)andSuboxone(buprenomhinehydrochlorideand naloxonehydrochloride)wereapproved by theU.S.Food and DrugAdministration (:TDA'')in 2002 for the treatm ent of opiate/opioid dependence. Subutex and Suboxone treat opiate addiction in patients by preventing the sym ptom s of w ithdraw al from heroin,oxycodone,and otheropiates/opioids. Subutex contains only buprenop hine hydrochloride and is intended for use at the beginning oftreatmentfordrug abuse(also called çfinduction''). Suboxoneisacombination of two proven medications,buprenop hine and naloxone. Naloxone is added to buprenorphine to decrease the likelihood of diversion and abuse of the combination product. Both drugs are supplied in 2 m g and 8 mg tablets,aswellas sublingualfilm sheets. Subutex isalso indicated when apatientcannottake Suboxone dueto pregnancy ordocum ented allergy tonaloxone. 23. Due to itsopioid agonisteffects,buprenorphine can be abused,particularly by those not physically dependenton opioids. Based on the potentialforabuse ofSubutex and Suboxone,the USAO No: 2010R00160 Page 7 Case 1:14-cr-00023-JPJ-PMS Document 4 Filed 09/23/14 Page 8 of 22 Pageid#: 11 FDA and itsparentDepartmentofHealth andHuman Services(1çHHS'')recommendedthatthe Dnzg Enforcement Administration (ûçDEA'') place the active ingredient, buprenomhine, in Schedule IlIunderthe Controlled SubstancesAct(ççCSA''). The DEA has,in fact,classifed buprenorphineasa Schedule l11controlled substance. 24. Suboxone, Subutex and buprenop hine diversion and abuse have becom e com m on in Southwest Virginia and N ortheast Tennessee. W arrants and indictm ents for their diversion and/or illegaldistribution are frequent in many jurisdictions,including W ashington County, Virginia' ,Bristol,Virginia;Scot'tCounty,Virginia;and,Sullivan County,Telm essee. 25. ln orderto prescribe Suboxone,Subutex,and buprenorphine in an office based setting for treatment of dl' ug addiction, a physician must com plete additional training and apply for a separate DEA number called an 1ûX ntlm ber.'' The X num ber is the snm e as the physician's regularDEA numberwith an X in frontofit. Thistraining iseighthoursand can be completed on-line. 26. An X num ber allows a physician to treat 30 patients with Suboxone, Subutex and buprenom hine forthe firstyear. The physician can apply to the DEA to treatup to 100 patients afterthe firstyear. 27. Dr.CKW ,M D (tICKW '')wasan anesthesiologistwhoobtainedhisX numberand began prescribing Suboxone,Subutex and buprenorphine in iO09,and initially worked ata Jolmson City,Termessee facility. ln approxim ately July or August of 2009,he leftthat facility and opened his own practice in Bristol,Virginia,where he continued to prescribe Suboxone and Subutex and buprenom hine. That practice,CK W ,M .D .,PLLC ,w as originally located at 1009 W est State Street, Suite 2-C,Bristol,V irginia. From January 2011 until its closure in A pril USAO No. .2010R00160 Page 8 Case 1:14-cr-00023-JPJ-PMS Document 4 Filed 09/23/14 Page 9 of 22 Pageid#: 12 2012,the practice waslocated at337 BluffCity Highway,Unit101,Bristol,Tennessee. CKW died on M arch 14,2013,a little lessthan oneyearafterheclosed thisoftice. 28. BristolLaboratories,LLC,CiBristolLabs'')located at1009 W estStateStreet,Suite2B, Bristol,Virginia,isa medicallaboratory owned by BETH PALIN (tTALlN''),who isa non- practicingattorneylicensedinSouthCarolina.Palin'shusband,JOSEPH D.W EBB (%çW EBB''), although notan owneraccordingto corporate filings,isheavily involved in running thebusiness. W EBB handles the marketing partofthe business and is also involved with hiring and firing em ployees. M tn.Empire Medical Care, lnc., LLC (CIM EM C'')#was a business incorporated in Virginia and in Telm essee and owned by PALIN . M EM C was located at 138 Antique Street, Gate City,Virginia.Dr.MARY ELIZABETH CURTISS CûCURTISS''),an otolaryngologist tear,nose and throatdoctor) who has a practice in M arion,Virginia,was an employee of M EM C. CURTISS,like CKW ,hasan X ntlmberthatallowsherto prescribe Suboxone,Subutex and buprenom hine. In fact,CURTISS wasem ployed by CKW fora shorttim e in 2010 before shebecam eemployed by M EM C. 30. Both CKW and CURTISS purportedto be operating substanceabusetreatm entprogrmns, prescribing Suboxone, Subutex and buprenomhine for the treatment of opiate addiction. CU RTISS ultim ately had an X num ber allow ing her to treat up to 100 patients. CK W 'S X num beronly perm itted him to see up to 30 patients. 31. Both CKW and CURTISS operated on a cash only basis and did notacceptM edicare, M edicaid orinsurance ofany kind foroffice visits. Patientspaid asm uch as $250 foran initial visitand up to $110 foreach subsequentweeklyvisit. USAO No. .2010R00160 Page9 Case 1:14-cr-00023-JPJ-PMS Document 4 Filed 09/23/14 Page 10 of 22 Pageid#: 13 CKW and CURTISS both filled outand sentin pre-authorization form s so thatinsured patientscould have their prescriptions covered by theirplans. 33. Both CKW and CURTISS required every patientto undergo a urine drug screen atevery weekly appointm ent. Both doctorsreferred alloftheirurinedrug screensto BristolLabs. Unlike M EM C and CKW 'S oftk e, Bristol Labs did accept insurance, M edicare and M edicaid. Both M EM C and CKW would collectpatients'inslzranceinformation so BristolLabs could billinsurance forany testing done. BristolLabs,CKW ,and M EM C treated insured patients with two different expensive automated drug screens:a qualitativetestthatmeastlresthe presence orabsence ofa drug orits m etabolites,followedby aquantitativetestthatmeasureshow much ofadrugoritsmetabolite is present in the urine. Uninsured patients were treated using one much cheaper,dip-stick type drug screen called a çlquick cup.'' W hen apatientwasinsured,BristolLabswould do qualitative testing in-house,and then send the specim en outto anotherlab,CtFL'' in D enver,Colorado,forquantitative testing. 37. M edicare,M edicaid and the insurance companies would be billed up to $2,000.00 per urine drug screen for the in-house qualitative testing. M edicare would pay up to $321.76; Virginia M edicaid would pay up tci$118.53;Tenncarewould pay up to $256.72;and,insurance companiespaidup to $1218.75 forthe in-housequalitative testing by BristolLabs. 38. M edicare,M edicaid and the private instlrance companieswould be billed an average of $1,125.00 perurine drug screen forthe additionalquantitative testing by FL. M edicare would pay up to $321.76;Virginia M edicaid would pay up to $112.59;Tenncare would pay up to $209.74;and,insurancecom paniespaid up to $582.35 forthequantitativetesting. USAO No: 2010R00160 - Page 10 Case 1:14-cr-00023-JPJ-PMS Document 4 Filed 09/23/14 Page 11 of 22 Pageid#: 14 39. Patients withoutinsurmwe,M edicare or M edicaid would not getany automated lzrine drug screen testing. Uninsured patients would have a ltpointof care''orûtquick cup''test,for which they were charged between $10 and $25. 40. lnsured patients were not given the option of taking the cheaper quick cup test,and uninsured patientsw ere notgiven the option oftaking the m ore expensive autom ated tests. 41. The type ofurine drug screen ordered depended only on method ofpaym ent and had nothing to do with the particularsofeach patient'sindividualtreatm ent. 42. A t M EM C, CUR TISS insisted that every patient have an instant,point of care t%quick cup''urine drug screen. Patientswith M edicare,M edicaid or insurmwe would have additional autom ated qualitative testing and autom ated quantitative testing,w hile uninsured patientshad no furthertesting.Uninsured patientspaid an extra $25' cash forthe quick cup test. lnsuredpatients paid nothing extra,and theirinstlrancewasbilled forthetwo autom ated tests- they paid nothing outofpocketforthe 1ab testing. 43. For an insured patient,the govenzm entorprivate insurance com panies were billed 125 tim esas m uch as the cash patient,and they paid 25 tim es as m uch as a cash patient,for w eekly drug screening. D R .CK W .M D 44. From approxim ately August2009 tllrough D ecem ber 2010,CK W 'S office was located in the snm ebuildingasBristolLabs. Patientscould easily registerwith thedoctor,go to thelab for amine drug screen,and return to the doctor'softsce. Stafffrom both businesseswentback and forth freely between CKW 'Softice and the lab. USAO No. .2010R00160 Page 11 Case 1:14-cr-00023-JPJ-PMS Document 4 Filed 09/23/14 Page 12 of 22 Pageid#: 15 45. CKW m oved hispractice to Bristol,Tennessee in Januazy 2011,and rem ained there until its closure in April2012. Since the lab was no longerphysically close by,BristolLabs placed a çûcollector''at CKW 'S office every day it was open. The collector would collect instlrance information orcash foruninsured patients,and the urine specimen from each CKW patient,and bring them back to the 1ab for processing and analysis. The collector w as an em ployee of,and w aspaid by,BristolLabs. 46. W hen apatienttested positive forsom ething they should nothave been taking,ortested negative forSuboxone oranotherdrug thatthey should be taking,CKW seldom took action or inaposed consequences. Occasionally,treatm entnotes stated thata patientwas ççcounseled''or the testwould be noted in the file. Rarely was apatientdism issed,even forrepeated bad drug screens. Patients were neverrequired to attend counseling orN arcotics Anonymousm eetings when they had bad drug screens. ln fact,no patientswere everrequired to go to counseling or m eetings ofany kind for any reason. A patient's initialvisitconsisted ofa cursory interview and no physicalexam ortesting otherthan the urine drug screen,and the patientpaid $250 cash forthatvisit. Patientsdid see CKW during an initialvisit. 48. CKW did not getrecords from patients'other medicalproviders and relied sim ply on whatpatientstold him in termsofmedicalhistory andphysicalcondition. 49. Subsequentvisits were required weekly,and patients had to have a urine drug screen each time. The patientdid notalwayssee CKW during the subsequentvisits,which cost$110, often having theirdrug screen and getting a prescription from the office staff. (U USAO No. .2010R00160 - Page 12 Case 1:14-cr-00023-JPJ-PMS Document 4 Filed 09/23/14 Page 13 of 22 Pageid#: 16 Subutex,should only beused forpatientswho have a documented allergy to naloxone,or forpatientswho arepregnant,orduring induction. Subutex hasahigherstreetvalueand ism ore proneto abuseand diversion than Suboxone. CKW prescribed Subutex orgeneric buprenorphine to many patientswho did nothavea docum ented allergy to naloxone and w ho were notpregnant. 52. Suboxone,Subutex and buprenorphineare centralnervoussystem (tçCNS'')depressants, and com bining those dnlgs with otherCN S depressants,such asalcoholorbenzodiazepinescan be very dangerousand cause respiratory failure. CKW often prescribed benzodiazepines along w ith Suboxone,Subutex orbuprenorphine. 53. lnduction is the process a patient should go through on his orherfirstvisitto a Suboxone clinic. Induction occurs w hen the patient presents for the first treatm ent appointm ent in moderatewithdrawal. Thedoctoradministersadose,monitorsthepatient,andadjuststhe dose asneeded. 54. CKW did notperform any inductions athispractice. Aftera cursory firstappointm ent, typically lasting less than fifteen minutes, a patient was given a prescription to fill at the pharm acy. Otherthan the urine drug screen,no otherm edicaltests orexam s occurred. M CRW was hired by CKW to be his office manager. She was employed by another office-based addiction treatm ent physician in Kingsport, Tennessee,prior to being hired by CK W . 56. O nce hired, M CRW took a very active role in determ ining how the practice w ould operate. M CRW w as involved w ith nearly every significant decision concerning CK W 'S practice. USAO No. .2010R00160 Page 13 Case 1:14-cr-00023-JPJ-PMS Document 4 Filed 09/23/14 Page 14 of 22 Pageid#: 17 Although no counseling ormeetingsoccurred,M CRW held herselfoutto bea counselor and group leader/facilitatorforNarcoticsAnonymous-type m eetings,thereby giving the illusion that legitim ate counseling and m eetings w ere being offered atCK W 'S practice. Thispartofthe practice wascalledççBristolRecovery.''Counseling and/orm eetingswerenotrequired to rem ain a patientofCK W 's. 58. CKW and M CRW began to have a rom antic relationship,and M CRW becam e pregnant w ith CK W 'Schild,born in approxim ately Decem ber2010. 59. Dtlring thesumm erof2010,CKW and M CRW m oved to Louisiana,butkepthispractice open in Bristol,Tennessee,despite living a driving distance of over tw elve hours and 800 m iles aW ay. 60. W hen he moved to Louisiana,CKW would come up to his office in Bristol,Tennessee, once ortwice a month,yethisoffice wasopen two daysa week,every week. Thereweretimes thatfive weeks went by without CKW appearing at his practice or seeing his patients. His patients,however,continued topay forappointments,have drug screens,and receive pre-written prescriptionsinhisabsence from CKW 'Snon-medically trained staff. 61. During December 2010, CKW 'S oftice was closed for one week over the holidays. Patientswererequired to pay double ($220)attheirappointmentpriorto the holiday week in orderto receive an extra week'sprescription. Patients weretold ifthey only broughtthe usual officevisitfee($110),theywouldoplyreceiveoneweek'sprescriptionandtheywouldçlfeellike crap''overthe holidays. 62. CK W lefthisnew office m anager,JP,in charge ofhispractice w hen he w as notthere. JP had no m edicaltraining. JP w as hired initially to be a housekeeper for CK W and M CRW . JP USAO No. .2010R00160 Page 14 Case 1:14-cr-00023-JPJ-PMS Document 4 Filed 09/23/14 Page 15 of 22 Pageid#: 18 wasassibted by hersister,HB,who had a high schooldiplom a and had taken some clmssesata comm unity collegebutwho hadno medicaltraining either. The atm osphere at CKW 'S office was unlike m ost doctors'offices: sm oking in the waiting room was som etim espermitted;CKW broughthisdog with him to the office attim es; therewereno stethoscopes,thermometersorotherkindsofmedicalequipment(otherthanurine screen cups); and, some patients seemed impaired by alcohol and drugs while there for appointm ents. CKW wrote prescriptions for Suboxone,Subutex,buprenom hine,and berlzodiazepines, not for legitim ate medicalpum oses and outside the usual cotlrse of a professional m edical practice. 65. CK W ordered excessive,m edically unnecessary quantitative and qualitative urine dnzg screens from BristolLabs,and failed to use the results ofthese tests to guide treatmentofhis patients. 66. CK W treated cash patients differently than insured patients by giving them different laboratory testsbased only on theirm ethod ofpayment,and forreasonsthathad nothing to do with theirtreatm ent.lnsurancepatientswere notgiven the choiceofhaving aquick cup test,and cash patientsw ere notgiven the choice ofautom ated testing. M TN .EM PIR E M ED IC AL C AR E.LLC - DR .M AR Y ELIZA BETH CU RTISS In October 2010, PALIN and W EBB attempted to open an oftke-based addiction treatm entclinic in Bristol,Virginia,which they called ççM edpath.'' This business was closed shortly afteritopened due to their failure to getan appropriate business license. ' '.(( ( USAO No:2010R00160 .((). ( Page 15 Case 1:14-cr-00023-JPJ-PMS Document 4 Filed 09/23/14 Page 16 of 22 Pageid#: 19 68. Theclinicre-opened asMtn.EmpireMedicalCare,LLC CIM EM C'')in December2010, atanew location in GateCity,V irginia. 69. M EM C'Sprimary physician wasCURTISS,whom PALIN and W EBB had metwhile she workedwithCKW forabout3monthsduringthesummerof2010 UustbeforeCKW movedto Louisiana). CURTISS wasan independentcontractorand waspaid $1400 perday to work at M EM C,regardlessofthenumberofpatientsshesaw ortheam otmtofwork shedid. 70. CURTISS'salary exceeded fair marketvalue for the work she pedbrmed. Her salary was excessive for the time she spentand the work she did,and was notviable comm ercially. The only reason M EM C could afford to pay herthatjalary wasthe large income generated by 1ab testing sheordered thatwascompleted and billedby BristolLabs. 71. CU RTISS referred every patient she saw at M EM C to Bristol Labs for urine drug screening. 72. For mostofthe tim e thatM EM C wasopen,there wasno counselorworking there. ln approxim ately Jtm e 2011,M L w as hired to be a counselor there. C OO SCling or ççgroup''w as nevera requirem entto rem ain a patientatM EM C . 73. Although CURTISS did spend m ore tim e with herpatients than CKW ,she did notdo inductionsofnew patientseither. Shejustgavethem aprescription to fillatthepharmacy at theirtirstappointm ent. 74. CURTISS waspaid by M EM C,however,sheorherhusband wouldpick up herpaycheck atBristolLabs. 75. There w asalways a BristolLabs em ployee working atM EM C. Thisperson w ould actas receptionist, office m anager, and urine drug screen snm ple collector at M EM C. That person USAO No:2010R00160 Page 16 Case 1:14-cr-00023-JPJ-PMS Document 4 Filed 09/23/14 Page 17 of 22 Pageid#: 20 would also be involved with marketing M EM C by putting up yard signsin SouthwestVirginia and NortheastTennessee. 76. PALIN and W EBB decided that they wanted to hire additionalphysicians to work at M EM C,asCU RTISS w asonly w orking one ortw o days perw eek. 77. A m anagem ent consulting firm introduced them to another physician who had his X num berfrom DEA and wasable to prescribe Suboxone,Subutex and buprenorphine. He began w orking there during the sum m erof2011 and only saw fourpatients. The same management consulting firm introduced W EBB and PALIN to two other physicianswho were interested in obtaining theirX numbersand working forM EM C. Both of those doctorstook an on-line course atBristolLabsto gettheirX num ber,and the course was paid forby BiistolLabs. M EM C closedbeforethesedoctorsofficially began employm ent. Although they signed the ordersauthorizing the screenings,the physiciansatM EM C did not choose the type of urine drug screens thatwould be done. BristolLabs created the drug screen order forms which the doctors pre-signed. The M EM C oftice m anager,also a Bristol Labsem ployee,would check offthe teststo be perform ed depending on whetherthepatienthad insurance or not: autom ated qualitative and quantitative testing forinsured patients,orquick cup fornon-insured patients. 80. PALIN and W EBB required the physiciansthey em ployed atM EM C,and in particular CU RTISS, to order excessive, m edically unnecessaty quantitative and qualitative urine drug screens from BristolLabs,and the physicians did not use the results ofthose tests to guide treatm entofM EM C 'Spatients. USAO No:2010R00160 Page 17 Case 1:14-cr-00023-JPJ-PMS Document 4 Filed 09/23/14 Page 18 of 22 Pageid#: 21 AtPALIN and W EBB'Sinstruction,M EM C treated cash patientsdifferently than insured patientsby giving them differentlaboratory testsbased only on theirm ethod ofpayment,and for reasonshaving nothing to do with theirtreatm ent.lnsurance patientswere notgiven the choice ofhaving a quick cup test,and cash patients were notgiven the choice ofautomated testing. CO UN T O N E The Grand Jury chargesthat: 1. The lntroduction is re-alleged and incorporated by reference into this count ofthe indictm ent. O n or aboutand betw een M ay 1,2009 and April30,2012,in the W estern Districtof V irginia and elsew here, CK W , M CRW , BETH PA LIN , JO SEPH D . W EBB, and M A R Y ELIZABETH CURTISS,asprincipalsand aidersand abettors,knowingly and willfully executed and attempted to execute a scheme and artifice to (a)defraud any health care benefitprogram and (b)obtain bymeansoffalseand fraudulentpretenses,representations,and promises,money under the custody or control of Virginia M edicaid, Tenncare, M edicare, and the private insurance com panies,which are health care benefitprogrnms as defined by Title 18,United States Code 124(b),in connection with the delivery ofand paymentforhealth care benefits, item sand services. 3. ltwasthe objectofthe schemeand artifice to defraud thatCKW ,MCRW ,BETH PA LIN, JO SEPH D . W EBB, and M A RY ELIZA BETH CU RTISS w ould gain com pensation from Virginia M edicaid,Tenncare,M edicare,and the private insurance companies,to which they were notentitled,by fraudulently ordering,completing,and billing forurine drug screens that were m edically unnecessary,and the results of which w ere notused in directing the care of . USAO No:2010R00160 r7 ( Page 18 Case 1:14-cr-00023-JPJ-PMS Document 4 Filed 09/23/14 Page 19 of 22 Pageid#: 22 thepatient. 4.ln furtherance ofthe scheme and artitice to defraud,CKW ,M CRW ,BETH PALm , JOSEPH D. W EBB, and M ARY ELIZABETH CURTISS knowingly subm itted and caused billing in the amountof$12,459,211to be subm itted to VirginiaM edicaid,Tenncare,M edicare, and the private insurance companies, and received over $1,203,000 to whieh they were not entitled. In fulherance of the schenae and artifice to defraud,both CKW and M ARY ELIZABETH CURTISS m ade a urine dnzg screen by BristolLaboratories,LLC,aprecondition for obtaining a weekly Suboxone, Subutex or generic buprenorphine prescription for opiate addicted patients. 6. A11in violation ofTitle 18,United StatesCode,Sections2 and 1347. C O U NT TW O TheGrand Jury chargesthat: The lntroduction is re-alleged and incorporated by reference into this count of the indictment. 2. On oraboutand between M ay 1,2009 and April30,2012,in the W estern Districtof Virginia and elsewhere, CKW , M CRW , BETH PALIN, JOSEPH D. W EBB, and M ARY ELIZABETH CURTISS conspired to knowingly and willfully execute and attemptto execute a schemeandartiticeto (a)defraudahealth carebenetk program and(b)obtain bymeansoffalse and fraudulentpretenses,representations,and prom ises,money underthe custody and controlof V irginia M edicaid,Tenncare,M edicare,and the private insurance com panies,which are health USAO No: 2010R00160 Page 19 Case 1:14-cr-00023-JPJ-PMS Document 4 Filed 09/23/14 Page 20 of 22 Pageid#: 23 carebenefitprogrmnsasdefned by Title 18,United StatesCode Section 24(b),in connection with thedelivery ofand paymentforhealth care benefits,itemsand services,in violation ofTitle 18,UnitedStatesCode,5 1347. 3. ltwastheobjectofthe conspiracy thatCKW ,M CRW ,BETH PALW ,JOSEPH D. W EBB,and M ARY ELIZABETH CURTISS would gain compensation from Virginia M edicaid, Tenncare, M edicare, and the private insurance com panies,to w hich they w ere not entitled by fraudulently ordering, com pleting, and billing for lzrine drug screens that w ere m edically unnecessary,andtheresultsofwhich werenotused in directing the care ofthepatient. 4. In furtherance ofthe conspiracy,and to effect its object,CKW ,M CRW ,BETH PALm ,JOSEPH D. W EBB, and M ARY ELIZABETH CURTISS knowingly subm itted and caused billing in the am otmtof $12,459,211 to be subm itted to Virginia M edicaid,Tenncare, M edicare,and theprivate insurance companiesand received over$1,203,000 to which they were notentitled. 5. ln furtherance ofthe conspiracy,and to effectits object,both CKW and M ARY ELIZABETH CURTISS m ade a urine drug screen by BristolLaboratories,LLC,a precondition for obtaining a weekly Suboxone, Subutex or generic buprenorphine prescription for opiate addicted patients. 6. A1lin violation ofTitle 18,United StatesCode,Section 1349. USAO No. .2010R00160 Page 20 Case 1:14-cr-00023-JPJ-PMS Document 4 Filed 09/23/14 Page 21 of 22 Pageid#: 24 C O U NT TH R EE The Grand Jury chargesthat: 1. The lntroduction is re-alleged and incop orated by reference into this count of the indictm ent. 2. On oraboutand between Decem ber 1,2010 and N ovember 16,2011,in the W estern DistrictofVirginia and elsewhere,M ARY ELIZABETH CURTISS,as principaland aiderand abettor, knowingly and willfully received rem uneration, specifically, directly and indirectly, overtly and covertly,in retum forrefening individualsfor the furnishing and arranging for the furnishing of any item and service for which paym ent may be made in whole or in partby M edicaid orM edicare,both ofwhich areFederalhealth careprogrnms. 3.A11inviolationofTitle42,UnitedStatesCodeSection 1320a-7b(b)(1)(A). C O U N T FO U R The GrandJury chaxgesthat: The lntroduction is re-alleged and incorporated by reference into this count of the indictm ent. 2. On oraboutand between December1,2010 and Novem ber 16,2011,in the W estern District of Virginia and elsewhere,BETH PALIN and JOSEPH D.W EBB,as principals and aiders and abettors,knowingly and willfully paid rem uneration,directly and indirectly,overtly and covertly,in retum forrefening individualsforthefum ishing and arranging forthefurnishing ofany item and service forwhich paymentm ay be m ade in whole orin partby M edicaid orby M edicare,both ofwhich areFederalhealth care progrnm s. 3.A11inviolationofTitle42,United StatesCodeSection 1320a-7b(b)(2)(A). USAO No:2010R00160 Page 21 Case 1:14-cr-00023-JPJ-PMS Document 4 Filed 09/23/14 Page 22 of 22 Pageid#: 25 eFFfemv tA TRUE BILL,thisTJC: dayof J- , 20 /C . /), Gr d Jtlzy Foreperson .,-r?'''..'..-...-,,,,'--' u . e' , .. . ) ;. ' .y7 TIM OTHZ J ' EAPHY , ' z. zyc United StatesAttorney USAO No:2010R00160 Page 22
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