Sting Nets Felony Charges Against 5 Michigan Physicians

Kate Johnson

February 29, 2012

February 29, 2012 — Five Michigan physicians are facing felony charges after a joint investigation by federal and state authorities uncovered an alleged kickback scheme in which the physicians received illegal payments for referring their Medicare and Medicaid patients to a specific network of healthcare facilities.

Three nonphysicians (the owner, manager, and administrator of the healthcare network) have also been charged.

US Attorney Donald A. Davis and Michigan Attorney General Bill Schuette announced the charges as part of a joint investigation by the Health Care Fraud Division of the Michigan Attorney General, the Federal Bureau of Investigation, and the Office of Inspector General.

Four of the accused physicians, Lino S. Dial Jr, DO; Niti Thakur, MD; Andre Blair Smith, MD; and Muhammad Salman Rais, MD, face felony charges under the federal Anti-Kickback Statute, with a penalty of up to 5 years' imprisonment, a $250,000 fine, 3 years of supervised release, and restitution. A physician's assistant, Natalie Schutte, also faces the same charges.

A fifth physician, Kevin S. Witt, DO, was charged in state court with 2 felony violations under the Medicaid False Claim Act. Each charge carries a penalty of up to a 4-year prison term and/or a $30,000 fine.

Payments Ranged From $100 to $600

According to the federal indictment, the first 4 physicians accepted either 1 or, sometimes, 2 illegal kickback payments, ranging from $100 to $600 each, in return for referring patients to facilities that were owned, managed, and administrated by Babubhai Rathod, Raju Nakum, and Rajesh Makwana. These payments "were falsely disguised as reimbursement for other purported expenses, including mileage, medical director fees, continuing medical education, and contractual labor," says the indictment.

The state charges against Dr. Witt allege that in May and June 2011, he accepted kickbacks of an unspecified amount in exchange for referrals of his patients.

Rathod, also known as "Dr. Bob," the owner of the healthcare facilities in question, is a former physical therapist whose license was suspended in 2004 and who pled guilty in 2003 to state charges of falsifying medical records, resulting in a fine and restitution of $17,500.

According to the indictment, Rathod is accused of paying and offering illegal "kickbacks and bribes" to employees of his companies and to independent healthcare providers in exchange for the referral of patients for electrodiagnostic testing, physical therapy, and home healthcare services that were billed to Medicare and Medicaid.

In addition, his manager, Nakum, and administrator, Makwana, are accused of recruiting healthcare professionals and others to refer patients, of paying and directing the payment of kickbacks "at agreed rates to co-conspirators," and of falsely recording these payments.

All of the accused have been arraigned and are awaiting trial.

"In passing the anti-kickback legislation, Congress intended that medical decisions be made with the patient's best interest in mind and not because the referral of a patient will result in a financial benefit to the referring physician," noted US Attorney Davis in a press release.

"Taxpayers Ultimately Pay the Price"

Attorney General Schuette added, "Patients deserve to know that when a doctor refers them for additional treatment, the decision to do so is based upon quality health advice — not what is best for the doctor's bank account.... Kickbacks with the Medicaid program don't just hurt patients, they affect the taxpayers who support the bottom line. Medically unnecessary treatments drive up the costs of Medicaid, and taxpayers ultimately pay the price."

State Assistant Attorney General Dennis Pheney Jr, who is responsible for the state case, declined requests for comment from Medscape Medical News, and in the federal case, Raymond E. Beckering III, assistant US attorney and criminal health care fraud coordinator, explained, "we are limited in making comments outside the court in pending criminal matters.... If the case results in convictions by plea or at trial, we typically take that opportunity to make more detailed statements, and even interviews. Until that time, we cannot comment."

Lawyers for the accused also declined to comment or did not return messages from Medscape Medical News, with the exception of James W. Burdick, who is representing "Dr. Bob," the owner of the healthcare network.

"This case is nothing like the many healthcare fraud cases I have defended — and seen — over many years in this field," he told Medscape Medical News in an email. "I've heard no allegation of overbilling; no allegation of overutilization; no allegation of drug diversion; no allegation of phony charts, phony charting, cut-and-pasted, or presigned, physician signatures or patient signatures, or billed services which were not performed by competent, licensed, and certified healthcare providers.

"Similarly, there has been no claim I've heard of paying patients money or drugs for their 'red-white-and-blue' (Medicare) cards to be abused, or of unnecessary 'testing' or worthless (if not harmful) so-called 'infusion therapy' and other types of 'services' so commonplace in 99% of the cases I see and defend. As I understand it, the allegation is that some clinic managers allegedly paid physicians to steer their (always needy) patients to these clinics, rather than other clinics, and [there is] no claim that they did not receive appropriate and necessary, and helpful, treatment. That is a far cry from the kinds of things we normally see in this specialty type of practice, nor is it the sort of thing I typically include in my cautionary lectures to physicians, residents, pharmacists, and hospitals."

Kickbacks End Up Hurting Patients

However, in an earlier interview with Medscape Medical News about an unrelated case, Assistant US Attorney Joan Hartman explained that under the False Claims Act, "claims infected by a kickback arrangement are 'false' within the meaning of the act."

Hartman added that kickbacks always end up hurting patients. "While physicians may think that their medical judgment isn't being tainted by these incentives, in fact it is, and physicians have to resist," she noted. "If you look at the medical literature, studies show that if you give physicians a financial interest in a test or procedure, the physicians' orders for that test or procedure are going to go up on average by close to 50% from what the baseline would have been without the incentive."

According to Michelle D. Bayer Esq, an attorney with Frank Haron Weiner, a law firm in Troy, Michigan, if any of the physicians' charges result in criminal convictions, the physicians could face serious professional consequences.

"Under state law, such criminal convictions would be reportable to the State Licensing Board; in the case of physicians, the Board of Medicine," she told Medscape Medical News. Bayer is not connected to this case.

"The State Licensing Board can take disciplinary action, which can include suspension or permanent revocation of the healthcare professional's license. These situations can also become reportable to the National Practitioner Data Bank [NPDB]. Federal law requires State Licensing Boards to report to the NPDB any licensure disciplinary action which is based on reasons related to professional competence or conduct," she said.

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