Ill. AG Files Fraud Suit Against Health Care ‘Providers’

Illinois Attorney General Lisa Madigan has intervened in a sealed lawsuit and filed an insurance fraud complaint against a health care company and its owners who allegedly devised a scheme to conduct worthless and unnecessary electrodiagnostic testing while billing private insurers to the tune of more than $234 million for the services.

The complaint, filed Monday in Cook County Circuit Court, names as defendants Veridian Health, LLC (f/k/a ZT Technical Services Inc.), Veridian’s CEO and founder Mitchell Rubin, Veridian’s Chief Compliance Officer Lawrence Rubin and neurologist Edward J. Herba, as well as a complex web of affiliated and related companies.

According to Madigan’s complaint, Veridian Health bills insurers for poorly performed tests that allegedly are medically unnecessary and systematically bills for tests they do not even perform. Since 2002, the largest percentage of Veridian’s billings has been for a test that Veridian now reportedly admits it has never performed. This “phantom test” has generated more revenue for defendants than the tests they actually have performed.

Electrodiagnostic testing, when performed by trained technicians under the supervision of qualified physicians, can have diagnostic value. Electrodiagnostic testing involves the stimulation of nerves with electrical current and is used primarily to detect pinched nerves, carpal tunnel syndrome and other nerve-related conditions.

According to Madigan’s lawsuit, Veridian Health employs mobile technicians who travel to the offices of chiropractors and other doctors to perform electrodiagnostic tests. The referring physicians are not trained or qualified to administer or supervise electrodiagnostic testing. Unlicensed technicians administer an extensive pre-determined battery of tests on each and every patient. Instead of providing patients with narrowly tailored sets of tests, Veridian Health gives the referring physicians only three choices for testing, regardless of the patient’s condition and medical history: an “upper profile,” a “lower profile” or both.

Each testing profile involves repeated shocks or stimulations of multiple nerves in each arm and/or leg. Because no qualified physician is reportedly present and Veridian Health does not tailor the testing to the patient’s medical condition, the technicians routinely perform unnecessary tests. In addition, Veridian’s technicians, reportedly poorly trained and unsupervised by a qualified physician, rarely produce readable and useful test results.

Madigan alleges that as part of the scheme, off-site neurologists on Veridian Health’s payroll purport to read and interpret the tests. While a neurologist is required to be on hand to conduct a crucial portion of the electrodiagnostic test – the needle EMG – Madigan’s lawsuit alleges Veridian Health’s neurologists never see the patients and usually spend less than five minutes reviewing the test results.

Yet, Veridian Health reportedly bills insurers more than $10,000 for an upper and lower profile, which is three to 10 times what a qualified provider, who actually meets with the patient, would charge for properly administered and readable tests. According to Madigan, not surprisingly, the Veridan Health neurologists’ reports are generally vague and of little use to the referring physician.

Also according to the complaint, Mitchell Rubin and others masterminded a scheme to “fly under the radar” and to “not raise red flags” with insurance companies. Veridian Health utilized dozens of companies to bill insurance companies and kept additional companies “in the drawer” in case insurers caught on to the scheme and stopped paying.

Veridian Health also reportedly coached its neurologists to avoid using “problematic” terms, including complaints that the tests were unreadable and recommendations for the needle EMG test that Veridian Health did not conduct. If a neurologist persisted in using the “problematic” terms, Veridian Health reportedly solved the problem by altering the neurologist’s findings before forwarding the findings on to the referring physicians and the insurers. Eventually, neurologists who did not “get with the program” allegedly were fired.

Veridian Health markets itself – primarily to chiropractors – by emphasizing that the doctors, instead of referring patients to neurologists and losing business, can keep the patients in-office and have the tests done on-site by Veridian Health. In fact, promotional literature for Veridan Health’s predecessor company ZT Technical Services includes a brochure that asks, “Why is this Doctor Smiling?” The answer provided is that the doctor can reportedly increase his or her income by $5,000 to $10,000 a month by using the Veridian Health testing scheme.

Madigan’s six-count complaint charges the defendants with violations of the Insurance Claims Fraud Prevention Act, violations of the Consumer Fraud and Deceptive Business Practices Act and violations of the Medical Practices Act.

The first count in Madigan’s complaint alleges the defendants committed insurance fraud by submitting bills for tests that were never performed, were performed poorly or were medically unnecessary. Madigan also alleges that the defendants violated the Insurance Claims Fraud Prevention Act by paying kickbacks for testing referrals in the form of waived lease agreements and fee splitting.

The second count alleges the defendants defrauded patients and physicians by falsely advertising their testing as having diagnostic value, being “hospital quality” and conducted by “board certified technicians.”

The third count alleges the defendants violated the Medical Practices Act by controlling various medical corporations that actually send bills to the insurers. Although the medical corporations are nominally in control of neurologists, Veridian Health, through one of its subsidiary companies, actually controls the corporations and receives all of the payments from insurance companies to the medical corporations.

The state seeks a court order preventing the defendants from continuing testing and continuing to dissipate the proceeds of their fraudulent scheme through alleged lavish spending.

The complaint also asks the court to order monetary damages of $50,000 per violation, penalties for violations of the Insurance Claims Fraud Prevention Act, including disgorgement of the monies received, triple damages for the amounts billed and penalties of up to $10,000 per false claim.