Telehealth: Thoughts on DOJ’s Release

On September 30th, the Department of Justice (DOJ) charged 345 defendants including 100+ medical professionals with submitting more than $6 billion in false and fraudulent claims to federal healthcare programs and private insurers.

This includes more than $4.5 billion connected to telemedicine, more than $845 million connected to substance abuse treatment facilities or “sober homes”, and more than $806 million connected to other healthcare fraud and illegal opioid distribution schemes.

Credit Suisse details their quick thoughts and key takeaways from their conversations with industry stakeholders and participants on the DOJ release. As reported, part of the $4.5 billion telehealth fraud involved having a marketing network lure in hundreds of thousands of unsuspecting individuals via telemarketing calls, direct mail, and internet/TV ads.

Telemedicine executives allegedly paid healthcare providers to order unnecessary Durable Medical Equipment (DME), genetic and other diagnostic testing, and medications, either without any patient interaction or with only a brief phone call. The scheme involved kickbacks to telemedicine executives after the pharmacy, lab, or DME company billed Medicare/Medicaid.

Although charges were formally announced on September 30, Credit Suisse’s view based on industry conversations is that a number of these schemes could have already been underway prior to the COVID-19 pandemic and associated relaxation of telehealth regulations.

However, the relaxation of HIPAA regulations in addition to DEA allowing controlled substances to be prescribed using telemedicine may have allowed the fraud to accelerate. In fact, there have been several cases in the past where providers have orchestrated schemes to receive kickbacks and bribes in exchange for the ordering of medically unnecessary medical devices/equipment for insured beneficiaries.

For example, in February 2020, the owners of two telemedicine companies were charged in a similar scheme that went on between March 2017 and April 2019. In February of 2019, DOJ charged a network of telehealth companies, physicians, and patient recruiters in a $1.2 billion Medicare fraud scheme.

According to Credit Suisse, the industry is still evolving and learning. Telemedicine is not necessarily new and given the significant volume of virtual visits during COVID-19, it is not surprising that there are “bad actors” in a rapidly-evolving industry looking to abuse the system.

Given that telehealth is a new “broadly accepted” medium for delivering care, the areas more susceptible to fraud may be unique and unknown to the federal agencies, making it more difficult to detect and stop.

However, the extent of the fraud, whether or not exacerbated by regulation waivers during COVID-19 is likely to drive payers including CMS, and telehealth vendors to enhance monitoring programs to ensure quality and the integrity of telehealth as a modality is maintained.

According to industry experts, cases like these and there may be more during and post the pandemic, are unlikely to slow down telehealth adoption or change CMS’s perspective on it. CMS has always been concerned about the potential of fraud, and as a result, this underscores the importance for having fraud detection models and systems in place.

For more information and to provide feedback, email Jailendra Singh at or call 212-325-8121.

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