New Jersey Says No to Patient Recruiter Schemes (Medicare Fraud Whistleblower Post)
[Ed. Note: This post discusses New Jersey’s new legislation which criminalizes most patient recruiter schemes. For other states, visit our main patient recruiter Medicare fraud page.]
The federal laws only apply when federal health dollars are on the line. That means Medicare and Medicaid. New Jersey has gone one step farther and criminalized patient recruiter schemes. It doesn’t matter whether or not state Medicaid monies are involved.
Lest you think that offenders simply get a slap on the wrist, the New Jersey law carries a presumption of prison. The only way an offender gets probation is if the court makes a specific finding that a prison sentence would create a “serious injustice.” The court also has to find that the injustice “overrides” the need to deter others.
The full statute reads as follows:
2C:21-22.1 Definitions relative to use of runners; crime; sentencing.
1. a. As used in this section:“Provider” means an attorney, a health care professional, an owner or operator of a healthcare practice or facility, any person who creates the impression that he or his practice or facility can provide legal or health care services, or any person employed or acting on behalf of any of the aforementioned persons.
“Public media” means telephone directories, professional directories, newspapers and other periodicals, radio and television, billboards and mailed or electronically transmitted written communications that do not involve in-person contact with a specific prospective client, patient or customer.
“Runner” means a person who, for a pecuniary benefit, procures or attempts to procure a client, patient or customer at the direction of, request of or in cooperation with a provider whose purpose is to seek to obtain benefits under a contract of insurance or assert a claim against an insured or an insurance carrier for providing services to the client, patient or customer, or to obtain benefits under or assert a claim against a State or federal health care benefits program or prescription drug assistance program. “Runner” shall not include a person who procures or attempts to procure clients, patients or customers for a provider through public media or a person who refers clients, patients or customers to a provider as otherwise authorized by law.
b. A person is guilty of a crime of the third degree if that person knowingly acts as a runner or uses, solicits, directs, hires or employs another to act as a runner.
c. Notwithstanding the provisions of subsection e. of N.J.S.2C:44-1, the court shall deal with a person who has been convicted of a violation of this section by imposing a sentence of imprisonment unless, having regard to the character and condition of the person, the court is of the opinion that imprisonment would be a serious injustice which overrides the need to deter such conduct by others. If the court imposes a noncustodial or probationary sentence, such sentence shall not become final for 10 days in order to permit the appeal of such sentence by the prosecution. Nothing in this section shall preclude an indictment and conviction for any other offense defined by the laws of this State.”
This may sound like a great deal of legalese so we will break it down into explainable terms.
New Jersey says that both lawyers and healthcare providers can’t pay anyone to recruit patients or clients. The term “runner” or “recruiter” is frequently used when referring to healthcare pay-for-patient” schemes.
How Typical Medicare Fraud Patient Recruiter Schemes Work
In the most patient recruiting schemes, healthcare providers pay cash to the recruiter. Cash is hard to trace and avoids all records and bookkeeping. In a typical cash scheme, the recruiter is paid $100 per patient. Depending on the service offered by the provider, the recruiter may target potential patients among the homeless, on the street and outside blood banks. The recruiter will often use a portion of $100 to buy the target cigarettes or alcohol. Sometimes the recruiter will pay the target a small amount of cash.
The cash or bribe is paid after the medical service is rendered. Often the patient recruiter (runner) drives the target to the appointment. Once the service is complete, the recruiter earns his or her pay.
The runner gets paid. The patient gets paid and the healthcare provider bills Medicare for a needless service. Who loses? Taxpayers! Our taxes pay for Medicare and premiums pay for health insurance.
In one popular variation, the provider doesn’t even provide the service. The patient shows up simply so the provider can obtain his or her insurance information.
We are aware of recent patient recruiter schemes where the patient is given booze or cigarettes simply to show up for an appointment. One recent case in New York City revealed patient recruiters that were operating their own shoe store! After the appointment was complete, the patient would be driven to the store and allowed to pick out free sneakers or shoes.
In more sophisticated schemes, patient recruiters pay bribes or give gifts to residents of nursing homes and sometimes the staff of these facilities. The residents are urged to seek treatment for a condition or malady that they may not even have. Instead of seeing his or her regular physician, who best knows the patient’s medical history, the patient is driven to the clinic that hired the patient recruiter.
New Jersey’s statute outlaws not only the runners but those that hire or direct them. That means the state can prosecute the runners, clinics and any intermediaries.
Traditional advertising is exempt from the law. So are other traditional marketing efforts such as marketing directors found in many hospitals and nursing homes. These aren’t the people paying cash or buying booze in the hopes of enticing a person to seek services. It is only the one-on-one recruiting and use of bribes or payments that triggers the law.
The use of patient recruiters and runners has always been a red flag for Medicare and Medicaid fraud. To date we have not seen a legitimate patient recruiter yet.
Recent New Jersey Patient Recruiter Schemes
The Garden State has seen plenty of patient recruiter prosecutions even before the new law was passed. The new law simply adds another tool for prosecutors seeking stop corruption and Medicare fraud.
In August of 2017, Robert Bessey of Philadelphia pleaded guilty in a New Jersey federal court to conspiracy yo commit healthcare fraud. Prosecutors say Bessey and a pharmaceutical sales rep, Matthew Tedesco, were kingpins in a $25 million Medicare fraud. In announcing the convictions, a Justice Department official said, “Using a network of recruiters, doctors, and state and local government employees, the defendants defrauded the state of New Jersey and other health insurers out of millions of dollars by getting reimbursed for phony prescriptions on expensive and medically unnecessary compounded medications. This conduct, which fraudulently exploited state health benefits programs and left New Jersey taxpayers on the hook for millions in losses, is especially brazen in an era when health insurance is a constant concern for many Americans.”
As of May 2020, Bessey still has not been sentenced. Usually that is an indication that he is cooperating with the Justice Department and is likely to testify in other trials.
More recently (May 2020), another Garden State patient broker pled guilty to bribing patients in order to get them to attend substance abuse programs. He was paid “referral fees” by the programs. 26-year-old Peter Costas pled guilty to one count of conspiracy to commit healthcare fraud.
According to court records, Costas worked for a marketing company that found addicts for rehab facilities. Of course, Costas would only get paid if the addict had good health insurance. To convince addicts to attend the program, Costas often bribed the patients thousands of dollars. For his services, Costas would receive an average of $2,500 to $5,000 from the facility.
Prosecutors say that it didn’t matter if the patients sent to the facilities even needed treatment. In fact, “some facilities provided ineffective drug treatment or, in some cases, actually fostered drug use instead of drug treatment.
If the patient was discharged and still had insurance, Costas would the patient enroll in a different program.
Lest you think Costas was trying to help drug addicts, one text message thread intercepted by the FBI suggests otherwise,
March 25, 2018, Co conspirator-1 reported via text message to Co-conspirator-3 and COSTAS that Patient-2 was “smoking meth” at Facility-2, referring to methamphetamine. COSTAS replied, “Yes. [Patient-2]’s freaking out at me. [Patient-2] said out of the 10 [people] in [Facility-2] only 4 are sober. The rest are smoking meth and dope …. [Patient-2] said everyone’s high and it’s a complete flop and [Patient-2] tried to stay sober around it without ‘ratting’ as long as he could.”
COSTAS’s text message reflects that Patient-2 was trying to remain at Facility- 2 long enough to trigger Referral Payments to Marketing Company-1, which would increase the likelihood that Patient-2 would receive the Patient Bribe that COSTAS had promised.
As is typical in patient recruiter schemes, everyone made money. The so-called rehab facilities got their money from insurance companies. The marketing company, Costas (the “patient broker”) and even the addict got their cut too. And we wonder why health insurance rates keep going up!
Costas faces 10 years in prison when sentenced later this year.
Patient Recruiter Schemes Qualify for Whistleblower Awards
Medicaid and Medicare fraud is a violation of the federal False Claims Act. Thirty states have their own state Medicaid False Claims Act program. Under these laws, whistleblowers with inside information about illegal patient recruitment schemes can earn huge awards.
To be eligible for an award, the information must be original and must relate to federal or state funded healthcare programs. There is also a “first to file” requirement meaning if you have information, don’t wait.
Awards average between 15% and 30% percent of whatever is collected from the wrongdoer.
To earn the award, you must hire a lawyer and file a complaint under seal in federal court. Most states have similar requirements. We accept these cases on a contingent fee basis meaning you do not pay for our services unless we recover money on your behalf.
Medicare fraud has reached epidemic levels. The government is only able to audit one-half of one percent of providers. The FBI says that Medicare fraud cost taxpayers tens of billions per year.
Who can stop Medicare fraud? You. Doing so often saves lives too.
For more information, contact attorney Brian Mahany at or by telephone at (202) 800-9791. You can also download our 11 step guide for whistleblowers – we don’t ask for your name, email or telephone and it is free. All inquiries are protected by the attorney – client privilege and kept confidential. Cases accepted anywhere in the United States.
MahanyLaw – America’s Whistleblower Lawyers
Update: Have information about a patient recruiter scheme outside the Garden State? Visit our patient recruiter whistleblower page