After a whistleblower reached out to authorities, the Department of Justice (DOJ) announced that numerous Southern Californian medical clinics must pay $10 million for alleged false claims, kickbacks, and false referrals.

California-based defendants Mohammad Rasekhi M.D., with his wife Sheila Busheri of Southern California Medical Center (SCMC) and R & B Medical Group Inc., doing business as Universal Diagnostic Laboratories (UDL) (aka collectively the defendants), have all agreed to pay $10 million as per an agreement with the DOJ.

Whistleblowers at the time of the investigation and subsequent complaint claimed that Mr. Rasekhi and Ms. Busheri used about a dozen different tactics to defraud Medicare, Medi-Cal (Medicaid) and TRICARE. Some of the alleged fraud violations violate the Anti-Kickback Statute, such as allegedly paying per-patient kickbacks to the marketers who referred those patients to SCMC and allegedly paying kickbacks to doctors when they referred patients to have lab tests at UDL. Court documents show that the United States claims Dr.Rasekhi, by referring SCMC’s patients for lab tests in the very lab he owned, also violated the Stark Law, aka the Physician Self-Referral Law.

The $10 million payment will, as the DOJ official statement says, “resolve allegations that they submitted false claims to Medicare and California’s Medicaid program, known as Medi-Cal, arising from allegations of paying kickbacks and making self-referrals.”

Each of the defendants works in the medical centers, including Dr. Rasekhi, the founder and chief medical officer of SCMC and the co-owner of UDL, and Ms. Busheri, the chief executive officer of SCMC and the co-owner and chief executive officer of UDL.

Court documents state that SCMC is an “approved federally qualified health center that operates six clinics in southern California,” and UDL is a laboratory located in the same region.

SCMC is a federally qualified health center that operates six clinics in southern California. UDL is a reference and esoteric laboratory in Southern California.

The United States claims the defendants purposefully “submitted or caused” numerous false claims both to Medicare and Med-Cal, via an alleged kickback scheme. The supposed scheme involved was well thought out and organized, as per the DOJ statement.

In the public release upon the announced settlement against the alleged fraud actions by the defendants, the United States said in a statement that the defendants employed numerous alleged illegal methods “by (a) paying kickbacks to marketers to refer Medicare and Medi-Cal beneficiaries to SCMC clinics in violation of the Anti-Kickback Statute (AKS), (b) paying kickbacks to third-party clinics in the form of above-market rent payments, complimentary and discounted services to clinic staff and write-offs of balances owed by patients and clinic staff in exchange for referring Medicare and Medi-Cal beneficiaries to UDL for laboratory tests in violation of the AKS and (c) referring Medicare and Medi-Cal beneficiaries from SCMC clinics to UDL for laboratory tests in violation of the Stark Act prohibition against self-referrals.”

Other accusations in the complaint included claims that the defendants, between January 2014 and December 31, 2019, “violated the AKS by providing remuneration to the third-party providers and marketers named in the Civil Action to refer Medicare and Medicaid beneficiaries to UDL for laboratory testing.”

The DOJ statement alleges that after the remuneration was given to a third party by said defendants, including rent payments “without conducting any market valuation and at above fair market value; providing discounts on laboratory services to referring providers and their staff; and writing off balances owed to UDL by referring providers,” they also “submitted claims or caused claims to be submitted to and received payments from Medicare and Medicaid for beneficiaries referred for laboratory services as described in this subparagraph.”

Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division, said that their department is focused on any and all schemes regarding healthcare providers.

“Kickback and self-referral schemes risk impairing the judgment of healthcare providers and diminish the reliability of the care that they render,” said Mr. Boynton. “This resolution upholds the department’s commitment to ensuring that Medicare and Medicaid beneficiaries receive care that is untainted by the providers’ financial interest.”

U.S. Attorney Martin Estrada for the Central District of California agreed.

“Providers who exploit the Medicare, Medicaid and TRICARE programs for their personal financial gain will be held accountable under the False Claims Act,” said Mr. Estrada. He added, “This significant resolution evidences our steadfast commitment to ensuring the integrity of federally funded health care programs.”

In the U.S., Medicaid is funded jointly by all states plus the federal government. Since the state of California already paid a portion of the Medicaid claims in this case, they will now receive about $4 million from the $10 million settlement.

Since the case was settled, the claims made in the complaint are considered allegations only, and there has been no determination of liability on the defendant’s side.