WASHINGTON – The owner and operator of a Florida durable medical equipment company and an assisted living facility has been convicted by a federal jury in Miami of Medicare fraud, Assistant Attorney General Alice S. Fisher of the Criminal Division and U.S. Attorney R. Alexander Acosta of the Southern District of Florida announced today.
After a seven-day trial at federal court in Miami, the jury found Marianela Smith guilty yesterday on all charged counts including conspiracy to defraud the U.S. government, to submit false claims to Medicare, and to receive kickbacks; conspiracy to commit health care fraud; and three counts of receiving kickbacks in exchange for referring patients to a co-conspirator pharmacy. Smith faces a maximum sentence of 30 years in prison. She is scheduled to be sentenced on Nov. 9, 2007, before Judge Joan A. Lenard of the Southern District of Florida.
Smith owned and operated Smith Medical Equipment, Inc. and M.P. Residence, Inc., providing her access to Medicare patients. At trial, the jury heard evidence that Smith paid kickbacks to physicians to obtain phony prescriptions for compounded aerosol medications, paid kickbacks to patients to accept unnecessary treatments, and received kickbacks from pharmacy owners to refer the false prescriptions.
Specifically, Smith conspired with the owners of Lily’s Pharmacy to refer paid patients to the pharmacy in exchange for half of what Medicare paid for “compounded” aerosols. Compounding is the process of a pharmacist making medication as opposed to a pharmaceutical manufacturer. Smith referred at least 48 patients and their Medicare billing information to the owners of Lily’s Pharmacy during the course of the conspiracy. Along with those patients, Smith provided phony prescriptions for compounded aerosol medications purchased from local physicians. One of the patients testified during trial that Smith paid him $150 per month to use his Medicare card and to obtain phony prescriptions in his name that were ultimately provided to the pharmacy. Lily’s Pharmacy fraudulently billed Medicare more than $271,000 using the phony prescriptions for compounded aerosol medications provided by Smith. In exchange, Smith received more than $81,000 in kickbacks.
In 2006, the Medicare program paid for over $155 million worth of aerosol medications in Miami-Dade County alone. These drugs amassed the single most common item billed to Medicare Part B and accounted for over 32 percent of all claims filed with the Durable Medical Equipment Regional Carrier (DMERC) in Miami-Dade County. From 2005 to 2006, claims for aerosol medications rose approximately 115 percent. According to Medicare data, Miami-Dade County alone accounted for more paid DME claims than every state in the country except California, Texas, New York, Michigan, and Ohio.
Centers for Medicare and Medicaid Services recently announced that it will no longer pay for compounded aerosol, as it has concluded that such drugs are medically unnecessary. Trial testimony established that compounding was done for the sole purpose of defrauding Medicare, and the prescriptions were predetermined before any of the over 1,000 beneficiaries at Lily’s saw a physician or received a prescription. The Medicare Fraud Strike Force led by Department of Justice prosecutors has focused on driving these compounding pharmacies out of the Medicare fraud business as the losses to Medicare are extreme and the risk to patients are enormous.
The case was prosecuted by Assistant Chief John Kelly and Trial Attorney Hank Walther of the Fraud Section of the Criminal Division, with investigative assistance of the U.S. Department of Health and Human Services, Office of the Inspector General, and the FBI. The Medicare Fraud Strike Force is led by Deputy Chief Kirk Ogrosky of the Fraud Section, and supervised by the Criminal Division in Washington, DC, and the office of U.S. Attorney R. Alexander Acosta of the Southern District of Florida. Each team has four to six agents and at least one agent from the FBI and HHS Office of Inspector General, as well as representatives of local law enforcement. The teams operate out of the federal Health Care Fraud Facility in Miramar, Fla. The strike force has brought over 70 cases involving 85 defendants since March 1, 2007.