Usa V Snap Diagnostics, Llc, Gil Raviv And Stephen Burton (1:15-cv-06204) 5e8

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UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION UNITED STATES OF AMERICA, STATE OF CALIFORNIA, STATE OF COLORADO, STATE OF CONNECTICUT, STATE OF DELAWARE, DISTRICT OF COLUMBIA, STATE OF FLORIDA, STATE OF GEORGIA, STATE OF ILLINOIS, STATE OF INDIANA, STATE OF LOUISIANA, STATE OF MARYLAND, COMMONWEALTH OF MASSACHUSETTS, STATE OF MICHIGAN, STATE OF MINNESOTA, STATE OF NEVADA, STATE OF NEW JERSEY, STATE OF NEW MEXICO, STATE OF NEW YORK, STATE OF NORTH CAROLINA, STATE OF OKLAHOMA, STATE OF RHODE ISLAND, STATE OF TENNESSEE, STATE OF TEXAS, COMMONWEALTH OF VIRGINIA, STATE OF WASHINGTON and STATE OF WISCONSIN ex rel. CHRISTOPHER PIACENTILE, Plaintiffs, v. SNAP DIAGNOSTICS LLC, GIL RAVIV, PH.D., STEPHEN BURTON, LESLIE GARDEA, APRIA HEALTHCARE GROUP, INC., LINCARE HOLDINGS, INC., DME DOES and PHYSICIAN DOES, Defendants. UNITED STATES OF AMERICA, STATE OF CALIFORNIA, STATE OF COLORADO, STATE OF CONNECTICUT, STATE OF DELAWARE, STATE OF FLORIDA, STATE OF GEORGIA, STATE OF ILLINOIS, STATE OF INDIANA, STATE OF IOWA, STATE OF LOUISIANA, STATE OF MARYLAND, COMMONWEALTH OF MASSACHUSETTS, STATE OF

) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

No. 14 C 3988 Judge Norgle

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MICHIGAN, STATE OF NEVADA, STATE OF NEW JERSEY, STATE OF NEW YORK, STATE OF NORTH CAROLINA, STATE OF OKLAHOMA, STATE OF RHODE ISLAND, STATE OF TENNESSEE, STATE OF TEXAS, COMMONWEALTH OF VIRGINIA, STATE OF WASHINGTON, STATE OF WISCONSIN, CITY OF NEW YORK, and DISTRICT OF COLUMBIA, ex rel. JOHN DOE, Plaintiffs, v. SNAP DIAGNOSTICS, LLC, SNAP LABORATORIES INTERNATIONAL, LLC, GIL RAVIV, Ph.D., AYELETTE RAVIV, S. JERRY PINTO, M.D., LISA SHIVES, M.D., THOMAS J. KEHOE M.D., PARVESH K. BANSAL M.D., and MANHATTAN CARDIOLOGY, Defendants. UNITED STATES OF AMERICA, Plaintiff-Intervenor,

v. SNAP DIAGNOSTICS, LLC, GIL RAVIV, and STEPHEN BURTON, Defendants.

) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

No. 15 C 6204 Judge Norgle

No. 14 C 3988 No. 15 C 6204 Judge Norgle JURY TRIAL DEMANDED

COMPLAINT IN INTERVENTION OF THE UNITED STATES OF AMERICA The United States of America, by John R. Lausch, Jr., United States Attorney for the Northern District of Illinois, having filed a notice of intervention against Snap Diagnostics, LLC, Gil Raviv, and Stephen Burton, pursuant to 31 U.S.C. § 3730(b)(4), alleges as follows:

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Introduction 1.

This is a civil fraud action brought by the United States against SNAP Diagnostics,

LLC, a home sleep testing company, Gil Raviv, its owner and president, and Stephen Burton, SNAP’s marketing and business development executive, seeking treble damages and civil penalties under the False Claims Act, 31 U.S.C. §§ 3729-3733, and the Anti-Kickback Statute, 42 U.S.C § 1320a-7a. 2.

SNAP Diagnostics is a nationwide provider of home sleep testing diagnostic

services. SNAP’s home sleep testing services are covered by Medicare and other federal programs where they are, among other requirements, medically necessary to diagnose obstructive sleep apnea. Over the years, Medicare has paid SNAP nearly $9 million in reimbursements for claims submitted for those services. However, instead of complying with the Medicare rules for its providers and providing honest certifications on each of its required forms, SNAP—at the direction of its president Gil Raviv, with the assistance of Stephen Burton—knowingly engaged in numerous fraudulent business practices that caused tens of thousands of false claims for medically unnecessary home sleep testing services and services occasioned by kickbacks. 3.

Despite knowing that only a few hours of home sleep testing in a single night was

needed for SNAP’s home sleep test recorders to diagnose OSA, SNAP—at the direction of Raviv—routinely double- and triple-billed federal healthcare programs, including Medicare, by submitting claims for beneficiaries’ medically unnecessary second and third nights of home sleep testing. They also unnecessarily and unlawfully multiplied the copays of seniors on Medicare. SNAP did so while regularly diagnosing OSA from a single home sleep test on patients who were not Medicare beneficiaries. This caused Medicare to pay millions of dollars in false claims. 4.

In addition, SNAP’s business model relied on several unlawful kickback schemes.

First, SNAP interpreted the results of its home sleep tests and then gave its referring physicians 3

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unsigned reports of those interpretations to “let them keep” the billing for the professional component of home sleep testing services. According to Burton, “giving” physicians this billing “drives the volume” of SNAP’s business. Second, SNAP used independent contractors to directly market SNAP’s services to referring physicians, and SNAP paid those contractors commissions per sleep test sold, claimed, and paid, including for Medicare beneficiaries. Third, as part of pitching their business, SNAP gave providers and their families, as well as key provider staff , free or no copay home sleep tests in order to induce them to refer all of their home sleep testing services to SNAP. Because SNAP’s business model was based upon offers of kickbacks, all of the nearly $9 million SNAP has received from Medicare was the result of false certifications in forms submitted to Medicare, which required the provider not to engage in unlawful kickbacks. 5.

Since Medicare began covering home sleep testing in 2009, SNAP, Raviv, and

Burton’s fraudulent practices have cost the United States millions of dollars in health care program payments for medically unnecessary services and services referred upon offers of kickbacks. Jurisdiction and Venue 6.

This court has jurisdiction over the claims pursuant to 31 U.S.C. § 3730(a) and 28

U.S.C §§ 1331, 1345. 7.

Venue lies in this district pursuant to 31 U.S.C. § 3732(a) and 28 U.S.C. § 1391(b),

because the defendants reside in this district, and the acts set out herein occurred in this district. Parties 8.

Plaintiff is the United States of America on behalf of its agencies, including the

United States Department of Health and Human Services, the United States Railroad Retirement Board, and the United States Office of Personnel Management. 9.

Defendant SNAP Diagnostics, LLC, is a provider of home sleep testing services,

enrolled with Medicare and other federal programs, and has its principal place of business in 4

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Wheeling, Illinois. 10.

Defendant Gil Raviv is the founder, owner, and president of SNAP Diagnostics, LLC

and upon information and belief resides in Northbrook, Illinois. 11.

Defendant Stephen Burton is the Vice President of Marketing & Business

Development for SNAP Diagnostics, LLC, and, according to his professional biography, is also a co-founder and investing partner. Upon information and belief, he resides in Chicago, Illinois. Facts I.

Statutory Framework A.

The False Claims Act

12.

The False Claims Act (“FCA”) provides for the award of treble damages and civil

penalties for, among other things, knowingly presenting or causing to be presented false or fraudulent claims for payment to the United States government and for knowingly making or using false records or statements material to false or fraudulent claims paid by the United States. 31 U.S.C. §§ 3729(a)(1), (2); 31 U.S.C. §§ 3729(a)(1)(A), (a)(1)(B) (as amended). 13.

The FCA provides, in pertinent part, that a person who:

(a)(1)(A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval; or (a)(1)(B) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim; . . . is liable to the United States Government for a civil penalty of not less than $5,500 and not more than $11,000, as adjusted by the Federal Civil Penalties Inflation Adjustment Act of 1990 (28 U.S.C. 2461 note; Public Law 104-410), 1 plus 3 times the amount of damages which the Government sustains . . . .

1

For violations of the FCA after November 2, 2015, the penalties range is $10,781 to

$21,563. 5

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31 U.S.C. § 3729. 2 14. For purposes of the False Claims Act, (1) the “knowing” and “knowingly”— (A) mean that a person, with respect to information— (i) has actual knowledge of the information; (ii) acts in deliberate ignorance of the truth or falsity of the information; or (iii) acts in reckless disregard of the truth or falsity of the information; and (B) require no proof of specific intent to defraud[.] 31 U.S.C. § 3729(b)(1). 15.

The standard of proof under the FCA is preponderance of the evidence. 31 U.S.C.

§ 3731(d). B.

The Anti-Kickback Statute

16.

The Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b), arose out of Congressional

concerns involving physicians’ conflicts of interest and overutilization of medical services and items. First enacted in 1972, Congress strengthened the statute in 1977 and 1987 to ensure that kickbacks masquerading as legitimate transactions did not evade its reach. See Social Security Amendments of 1972, Pub.L. No. 92-603, §§ 242(b) and (c); 42 U.S.C. § 1320a-7b, MedicareMedicaid Anti-Fraud and Abuse Amendments, Pub. L. No. 95-142; Medicare and Medicaid Patient and Program Protection Act of 1987, Pub. L. No. 100-93. 17.

The Anti-Kickback Statute prohibits any person or entity from making or accepting

payment to induce or reward any person for referring, recommending or arranging for federally

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The FCA was amended pursuant to Public Law 111-21, the Fraud Enforcement and Recovery Act of 2009 (“FERA”), enacted May 20, 2009. Given the nature of the claims at issue, Sections 3279(a)(1) and 3729(a)(2) of the prior statute and Sections 3729(a)(1)(A) and 3729(a)(1)(B) of the revised statute are all applicable here. Sections 3729(a)(1) and 3729(a)(2) apply to conduct that occurred before FERA was enacted, and Sections 3729(a)(1)(A) and 3729(a)(1)(B) apply to conduct after FERA was enacted. Section 3729(a)(1)(B) is applicable to all claims in this case pending on or after June 7, 2008, by virtue of Section 4(f) of FERA. 6

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funded medical services, including services provided under the Medicare and Medicaid programs. In relevant part, 42 U.S.C. § 1320a-7b(b) provides: (1) Whoever knowingly and willfully solicits or receives any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind — (A) in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program, or (B) in return for purchasing, leasing, ordering or arranging for or recommend purchasing, leasing or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program, shall be guilty of a felony and upon conviction thereof, shall be fined not more than $25,000 or imprisoned for not more than five years, or both. (2) Whoever knowingly and willfully offers or pays any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind to any person to induce such person— (A) to refer an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program, or (B) to purchase, lease, order, or arrange for or recommend purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program, shall be guilty of a felony and upon conviction thereof, shall be fined not more than $25,000 or imprisoned for not more than five years, or both. 18.

The statute has been interpreted to cover any arrangement where one purpose of the

remuneration was to obtain the referral of services or to induce further referrals. See, e.g., United States v. Nagelvoort, 856 F.3d 1117 (7th Cir. 2017). 19.

Compliance with the Anti-Kickback Statute is a condition of payment by the

Medicare program. In addition, violation of the statute can subject the perpetrator to exclusion from participation in federal health care programs and to civil monetary penalties of $50,000 per violation and three times the amount of remuneration paid. 42 U.S.C. § 1320a-7(b)(7) and 42 7

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U.S.C. § 1320a-7a(a)(7). 20.

A claim that includes items or services resulting from a violation of this section

constitutes a false or fraudulent claim for purposes of the FCA. 42 U.S.C. § 1320a–7b(g). II.

Diagnosis and Treatment of Obstructive Sleep Apnea 21.

Obstructive Sleep Apnea (“OSA”) is a common sleep disorder in which the

oropharyngeal walls collapse and airflow is obstructed during sleep. Individuals with OSA frequently start and stop breathing during sleep. Clinically, OSA is defined by the occurrence of daytime sleepiness, loud snoring, witnessed breathing interruptions, or awakenings due to gasping or choking in association of at least five obstructive respiratory events per hour of sleep. 22.

The diagnosis and severity of OSA must be established prior to the commencement

of treatment. Several diagnostic tests for OSA exist. Polysomnography (“PSG”), the most commonly employed comprehensive diagnostic sleep test, is furnished in a sleep laboratory facility, where the patient spends the night while a technologist supervises the recording of data and remains available to intervene if necessary. Portable monitors (used both in attended and unattended settings) also have been developed for the diagnosis of OSA. 23.

Home sleep testing (“HST”) utilizes a portable monitor, unattended and initiated

by the patient, to collect information about breathing and oxygen levels during sleep while the patient sleeps at home. Home sleep monitors are typically classified into three categories: (i) Type 2, a full unattended polysomnography device with seven or greater channels for collecting sleep data; (ii) Type 3, a limited channel device (with between four and seven channels); and (iii) Type 4, a one- or two-channel device, usually using oximetry (a measurement of oxygen in the blood) as one of the parameters. 24.

The indices commonly used to assess sleep disordered breathing are the apnea-

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hypopnea index (AHI) and the respiratory disturbance index (RDI). Either or both may be used in test results to determine whether a patient has OSA. 25.

Although other less expensive methods exist, patients diagnosed with OSA are

commonly treated with continuous positive airway pressure (AP), a non-invasive technique for providing air pressure via a nose mask, and intended to prevent the collapse of the oropharyngeal walls and the obstruction of airflow during sleep. III.

Medicare and Other Federal Benefit Coverage for Home Sleep Testing 26.

The Medicare program was enacted in 1965 under Title XVIII of the Social

Security Act to pay for certain healthcare services for older Americans. The Department of Health and Human Services (“HHS”) isters the Medicare Program through the Center for Medicare & Medicaid Services (“CMS”). 27.

Medicare is divided into four parts: Part A, Part B, Part C, and Part D. This case

concerns payments made under Medicare Part B. Medicare Part B covers, among other things, payment for physicians’ services, services and supplies incident to physicians’ services, diagnostic tests, and durable medical equipment, or DME, which includes AP machines, for use in beneficiaries’ homes. 28.

The United States reimburses Medicare providers with payments from the

Medicare Trust Fund through CMS, as ed by American taxpayers. CMS, in turn, contracts with private contractors, referred to as “fiscal intermediaries,” “carriers,” and Medicare istrative Contractors (“MACs”), to act as agents in reviewing and paying claims submitted by healthcare providers. 42 U.S.C. § 1395h; 42 C.F.R. §§ 421.3, 421.100. 29.

Physicians, clinics, and other health care providers that provide services to

Medicare beneficiaries are able to apply for and obtain a Medicare provider number. All Medicare

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providers must enroll in the program as providers and are expected to deal honestly with the government and with patients. Because it is not feasible for the Medicare program or its contractors to review the patient files for the millions of claims for payments it receives, the Medicare program relies upon the providers to comply with the Medicare requirements and trusts the providers to submit truthful and accurate claims. 30.

Medicare regulations require providers and suppliers to comply with applicable

statutes, regulations, and guidelines in order to be reimbursed by Medicare. When participating in Medicare, a provider has a duty to be knowledgeable of the statutes, regulations, and guidelines for coverage of services. 42 C.F.R. § 424.516(a)(1); 42 C.F.R. § 424.516(a)(2). 31.

Among other restrictions on coverage, Medicare covers only services that are

medically necessary. 42 U.S.C. § 1395y(a)(I)(A). According to Medicare.gov, “medically necessary” is defined as “health-care services or supplies needed to prevent, diagnose, or treat an illness, injury, condition, disease, or its symptoms and that meet accepted standards of medicine.” 32.

All Medicare providers must have, in each of their patients’ files, the medical

documentation to establish that the Medicare items or services for which they have sought Medicare reimbursement are reasonable and medically necessary. 42 U.S.C. § 1395y(a)(1)(A); 42 U.S.C. § 1395g(a). 33.

An Independent Diagnostic Testing Facility (“IDTF”) is an entity that is

independent of a physician office or hospital. Its purpose is to furnish diagnostic tests. 42 C.F.R. § 410.33. 34.

Form CMS-855B is the Medicare Enrollment Application for providers, including

IDTFs. IDTFs must enter into participation agreements with Medicare using Form CMS-855B to establish eligibility to participate in the Medicare program. IDTFs also complete CMS-855B to

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change information or to reactivate, revalidate, and/or terminate Medicare enrollment. 35.

An authorized official must sign the “Certification Section” in Section 15 of Form

CMS-855B, which, in 2008 and 2009 when submitted by SNAP, stated that it “legally and financially binds the supplier to the laws, regulation, and program instructions of the Medicare program.” The individual g the certification statement also certifies that he or she has read the information provided in the enrollment form and that the information is “true, correct, and complete” and that he or she takes on a duty to correct any information subsequently found to be not true, correct, or complete. 36.

SNAP Diagnostics enrolled with Medicare as an IDTF.

In that enrollment

document, defendant Gil Raviv designated himself an authorized official of SNAP Diagnostic, LLC, and signed the certification statement as its president in Section 15 of Form CMS-855B submitted by SNAP, indicating that he understood that SNAP was legally and financially required to comply with Medicare laws, regulations, and program instructions. 37.

Once a provider is enrolled with Medicare, the provider is assigned a National

Provider Identifier (“NPI”), a standard and unique health identifier for health care providers. A provider is required to use its NPI to identify itself on all standard transactions that it conducts where its health care provider identifier is required. 45 C.F.R. § 162.410(a). SNAP has an assigned NPI with the Medicare program. 38.

A health care provider issued an NPI can file claims with Medicare to provide

reimbursement for services provided to beneficiaries. To do so, they must submit a CMS 1500 claim form or its electronic equivalent. That form contains information required to obtain reimbursement. Among other things, this includes the NPI, the beneficiary’s name, health insurance claim number, dates of service, locations of service, type of services, number of services,

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the (HCS or T) procedure codes, diagnostic codes, charges, and the provider’s Provider Transaction Access Number.

A blank copy of a Form CMS 1500 is available at

https://www.cms.gov/Medicare/CMS-Forms/CMS-Forms/s/CMS1500.pdf. 39.

The CMS 1500 claim form contains certifications that must be signed in order for

the claim to be paid. Those certifications include, among other things, that: (1) the information provided is true, accurate, and complete; (2) the provider is familiar with, and the claim complies with, all applicable laws, regulations, and program instructions for payment, including but not limited to the Federal anti-kickback statute and the Stark Law; (3) the services were medically necessary, and (4) the services were furnished personally by the provider or an employee thereof. 40.

Form CMS-1500 also states, “No Part B Medicare benefits may be paid unless this

form is received as required by existing law and regulations (42 CFR 424.32).” 41.

As an enrolled provider, SNAP has submitted at least tens of thousands of claims

to CMS contractors for home sleep testing services using Form CMS 1500 or its electronic equivalent. A.

Medicare Coverage for Independent Diagnostic Testing Facilities’ Home Sleep Testing Services

42.

Effective March 3, 2009, CMS determined that unattended home sleep testing, with

certain types of devices, would be covered “to aid the diagnosis of OSA in beneficiaries who have clinical signs and symptoms indicative of OSA.” CMS National Coverage Determination for Sleep Testing for Obstructive Sleep Apnea, 240.4.1. 43.

Federal programs other than Medicare also cover home sleep testing services as

part of their benefits. These include the Railroad Retirement Board’s program, which provides benefits for RRB employees and retirees; the Federal Employees Health Benefit Program, which provides health care benefits for qualified federal employees and their dependents; and TRICARE, 12

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which provides benefits for healthcare services furnished by civilian providers, physicians, and suppliers to of the Uniformed Services and to spouses and children of active duty, retired, and deceased . 44.

An Independent Diagnostic Testing Facility that provides home sleep testing must

have one or more supervising physicians who are responsible for quality oversight, operation and calibration of equipment, and the qualifications of non-physician IDTF personnel who use the equipment. 45.

All procedures performed by the IDTF must be specifically ordered in writing by

the physician or practitioner who is treating the beneficiary, that is, the physician who is furnishing a consultation or treating a beneficiary for a specific medical problem and who uses the results in the management of the beneficiary’s specific medical problem. This is required for the tests to be considered reasonable and medically necessary, as well as for them to be reimbursed by Medicare. IDTFs may not add any procedures based on their own internal protocols without a written order from the treating physician. 46.

Medicare istrative contractors (“MACs”) provide further guidance regarding

what claims will be paid, and they also adjudicate payment of those claims. From time to time, MACs publish Local Coverage Determinations (“LCDs”) to provide more specific information about the coverage for certain services in its jurisdiction.

CMS, Medicare Program Integrity

Manual, Pub. No. 100-08, ch. 13, § 13.1.3.

47.

From the time that Medicare began covering home sleep testing until September 6,

2013, the Part B MAC for providers in Illinois was Wisconsin Physicians Services (“WPS”). In December 2010, WPS published its “LCD for Polysomnography and Other Sleep Studies (L31082).” That LCD provided information about what sleep testing services were covered and how they should be claimed. 13

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48.

LCD L31082 stated that unattended home sleep tests, which may be claimed under

HCS codes G0398, G0399, and G0400, are: . . . covered for the purpose of testing a patient for the diagnosis of obstructive sleep apnea if the home sleep testing is reasonable and necessary for the diagnosis of the patient’s condition, meets all other Medicare requirements, and the physician who performs the service has sufficient training and experience to reliably perform the service. A home sleep test is covered only when it is performed in conjunction with a comprehensive sleep evaluation and in patients with a high pretest probability of moderate to severe obstructive sleep apnea. Home sleep testing is not covered for persons with comorbidities (moderate to severe pulmonary disease, neuromuscular disease or congestive heart failure). Home Sleep studies are only covered for the diagnosis of Obstructive Sleep Apnea. They are not covered for any other sleep disorders (central sleep apnea, periodic limb movement disorder, insomnia, parasomnias, circadian rhythm disorders or narcolepsy) or for screening asymptomatic persons. 49.

LCD L31082 contained guidance making clear to diagnostic test providers that one

sleep testing session is typically necessary and only one claim should be submitted per session, stating: “Ordinarily, a single polysomnogram and electroencephalogram (EEG) can diagnose sleep apnea. If more than one such testing session is claimed, the carrier will require persuasive medical evidence justifying the medical necessity for the additional test (CMS Publication 100-02, Medicare Benefit Policy Manual, Chapter 15, Section 70).” 50.

The LCD’s “Utilization Guidelines” echoed that guidance and, more specifically,

stated that a home sleep test should not occur more often than once in a single year in the normal course, stating: “More than one [home sleep test] HST per year interval would not be expected. If more than one HST session is performed for suspected OSA, persuasive medical evidence justifying the medical necessity for the additional tests will be required.” 51.

LCD L31082 also had specific training and certification requirements for the

physicians and technologists performing the HST services. A physician performing the service 14

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must be have specified training in sleep medicine. 52.

As of September 7, 2013, National Government Services (NGS) became the MAC

for Medicare Part B in Illinois.

At that time, NGS had recently retired its LCD for

Polysomnography and Sleep Studies (L26428). That LCD quoted the same language as that quoted above in paragraph 50. It further stated: “If more than one testing session is performed for sleep studies for suspected sleep apnea, persuasive medical evidence justifying the medical necessity for the additional tests will be required.” 53.

Medicare has long covered AP devices in certain circumstances for those

diagnosed with OSA where the “beneficiary has a face-to-face clinical evaluation by the treating physician prior to the sleep test to assess the beneficiary for obstructive sleep apnea,” the beneficiary has taken a covered sleep test, and the findings of the test are either “1) The apneahypopnea index (AHI) or Respiratory Disturbance Index (RDI) is greater than or equal to 15 events per hour with a minimum of 30 events; or, 2) The AHI or RDI is greater than or equal to 5 and less than or equal to 14 events per hour with a minimum of 10 events and documentation of: a. Excessive daytime sleepiness, impaired cognition, mood disorders, or insomnia; or, b. Hypertension, ischemic heart disease, or history of stroke[;]” and the “beneficiary and/or their caregiver has received instruction from the supplier of the device in the proper use and care of the equipment.” NGS LCD for Positive Airway Pressure (PAP) Devices for the Treatment of Obstructive Sleep Apnea (L27230) (Retired). 54.

The notion that a single sleep test is necessary to diagnose OSA also permeates

Medicare guidance with respect to its coverage for the durable medical equipment, like AP, that is used to treat a patient who has received an OSA diagnosis. For example, while NGS’ LCD L27230, which was in effect from 1993 through September 2015, did not determine coverage for

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the HST resulting in the diagnosis, but instead the AP device used to treat the condition, the LCD provided a clear statement of the necessary diagnostic process for a valid diagnosis of OSA, in order to warrant coverage of the treatment. Because diagnosis of OSA is the only medically necessary purpose of a home sleep test under Medicare rules, what the DME MAC considered necessary for diagnosing OSA and covering treatment of the condition is important. NGS’s LCD makes clear that just a single home sleep test is the necessary basis for the diagnosis and the followon treatment. 55.

In relevant part, with emphasis added to highlight the description of the qualifying

test as a single test, it states: “Coverage of a PAP device for the treatment of OSA is limited to claims where the diagnosis of OSA is based upon a sleep test (Type I, II, III, IV, Other) that meets the Medicare coverage criteria in effect for the date of service of the claim for the PAP device. The sleep test must be either a polysomnogram performed in a facility based laboratory (Type I study) or an inpatient hospital-based or home based sleep test (HST) (Types II, III, IV, Other). The test must be ordered by the beneficiary’s treating physician and conducted by an entity that qualifies as a Medicare provider of sleep tests and is in compliance with all applicable state regulatory requirements.” (Emphasis added). 56.

Likewise, from January 2011 through September 2015, NGS had an LCD for Oral

Appliances for Obstructive Sleep Apnea (L28601), regarding another treatment avenue. This LCD had virtually identical language to LCD L27230, which again made clear that Medicare required only a single, qualifying home sleep test to diagnose OSA and have Medicare cover an oral appliance to treat the condition. 57.

Other MACs for other jurisdictions likewise have been clear that Medicare expects

only one claim for a diagnostic home sleep study in the normal course. For example, CGS

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s LCD Polysomnography and Other Sleep Studies (L36902) includes the same “Utilization Guidelines” as the WPS LCD described above, stating: “More than one [home sleep test] HST per year interval would not be expected. If more than one HST session is performed for suspected OSA, persuasive medical evidence justifying the medical necessity for the additional tests will be required.” IV.

The Health Care Fraud Scheme 58.

SNAP Diagnostics, in its present incarnation and as its predecessor entity, SNAP

Laboratories, was in the home sleep testing business for many years before Medicare began covering HST in 2009. SNAP uses its own proprietary Type III home sleep testing recorders to provide home sleep testing services to patients nationwide. 59.

Gil Raviv is SNAP’s founder and president. According to SNAP’s lab director, the

ing director, and others, Raviv is the ultimate decision maker at SNAP and makes the rules about its policies and practices, including sales and marketing, billing and reimbursement. 60.

SNAP’s marketing has relied, since at least 2009 (and likely before), on the use of

independent contractor sales representatives. SNAP called them territory managers, or TMs, because each is responsible for the referring physicians in a particular geographic area. These TMs pitched the SNAP service to physicians in their territory and otherwise maintained the s of those referring physicians, including facilitating the distribution of the recording devices to physicians’ offices and patients. 61.

In SNAP’s marketing process, the first marketing meeting a territory manager held

at a physician’s office was called a “Lunch & Learn.” That pitch meeting entailed the territory manager speaking to the physician and office staff regarding the SNAP services, as well as extolling the monetary benefits that result from referring patients to SNAP. As discussed in more

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detail below in Section IV.B.3, a key strategy for the lunch & learn pitch meeting was for the TM to get the agreement of a provider, provider’s family member, or a key staff member or that staff member’s family member, to take a first test for the practice. 62.

The logistical process for providing SNAP’s recorders to referred patients operated

as follows: physicians who referred a significant number of diagnostic services kept SNAP sleep recorders in their office, in a system they call “consignment.” Alternatively, SNAP ships the recorders directly to referred patients. TMs often trained the physicians’ staff how to use the recorders, and the staff in turn trained the referred patients. TMs also directly trained the patients themselves. 63.

After taking the test, either the patient or the physician’s office, would return the

recorder data cartridge (or later, after multi-night testing began, cartridges).

SNAP’s lab

technicians would analyze and process the results, and—for Medicare patients—SNAP’s boardcertified sleep medicine doctors, who SNAP called “reading physicians,” would interpret the test and issue a report to be provided to the referring physician. 64.

Stephen Burton oversees marketing and business development for SNAP,

particularly with respect to the referring physicians. He also directly recruited territory managers, and guided and trained them on pitching physicians to get their business. SNAP managers and top executives, including Burton, led trainings of new or potential territory managers at its Illinois headquarters. At those trainings, SNAP taught the territory managers how to carry out direct marketing strategies to sell their home sleep tests to physicians. Through those territory managers, SNAP was able to facilitate its fraudulent schemes, including medically unnecessary multiple night testing, and providing kickbacks to physicians in order to drive the volume of SNAP’s business.

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A.

Defendants’ Fraudulent Practice of Routinely Submitting Unnecessary HST Claims to Medicare Per Beneficiary 1.

65.

Multiple

SNAP’s Original Protocol of Single Night Testing

Prior to Medicare coverage of SNAP’s home sleep testing services, SNAP’s routine

practice was to have each patient record a single night of sleep in order to diagnose sleep apnea. Gil Raviv, in his role as the President of SNAP, advocated to CMS for Medicare to cover home sleep testing services. In a July 13, 2004 letter that he wrote to CMS, promoting Medicare approval of HST as an alternative to in-lab polysomnography, Raviv indicated that only one night of HST is required to diagnosis OSA. 66.

Specifically, in his letter, one of Raviv’s arguments in favor of Medicare covering

HST was the cost savings associated with HST versus PSG. He presented the below comparison charts, showing the HST cost for a beneficiary as its one-claim/one-night cost in 2004: $208 (the Medicare claim payment for a home sleep test has now increased to approximately $230, comprised of Medicare’s direct reimbursement and the beneficiary’s copay):

67.

In that 2004 communication to CMS, Raviv clearly expressed the view that the total

cost for a patient with OSA would be that of a single home sleep test claim and the resulting cost of the AP equipment to treat OSA. 68.

Medicare began covering unattended home sleep tests for the purpose of diagnosing 19

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OSA in March 2009, as discussed above in Section III. 69.

The SNAP HST recorder’s cartridge has a maximum recording capacity of 338

minutes (just under six hours). At the time that Medicare began covering HST, SNAP’s practice remained the same as it had always been: to have each patient utilize the sleep recorder for one night. SNAP’s reading physicians would provide a report with a finding of the patient’s sleep apnea (or RDI) score from that amount of data. SNAP’s Medicare claims data for the first many months of its provision of Medicare-covered home sleep tests reflect that SNAP did not submit second or third claims for a beneficiary’s second or third nights of home sleep testing during that period. 70.

SNAP, Raviv, and Burton knew that only a single home sleep test was medically

necessary to diagnose OSA. Indeed, sales training documents in use by SNAP until at least 2014 reflected this knowledge. SNAP’s training materials included “SNAP Diagnostics Sales FAQs,” which included the following question and answer:

71.

Those attending the three-day SNAP sales training were also provided with the

“SNAP Diagnostics Sales Training: Pre-Work Study Guide” as well as the “Answer Key, Comprehensive Exam,” both of which reiterated the need for only an hour or two of data to reach a diagnosis. Each included the following questions and answers: “How long does the SNAP unit record for and how does that effect the accuracy? The Snap unit will record for 6 hours. As most sleep labs now conduct a split-night study where they diagnose the patient in less than three hours,

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the total sleep time may actually be only an hour or two. With SNAP® you not only can do 6 hours but if the doctor really wants we will record a second night at no charge. Using SNAP®’s 3 hours of sleep is more than enough with a mild or moderate apneic patient. If they are severe often 1 hour is enough.” The next question and answer on each document was as follows: “How much data do you need to get an accurate study? 1-2 Hours[.]” 72.

SNAP TMs gave referring physicians (or potential referrers) a document entitled

“SNAP Report Explanation.” Regarding the recording time, it read: “Note that 200 minutes of sleep time will normally encom at least two complete sleep cycles (Stage 1 through REM sleep), which is the basis of a good data set.” However, according to SNAP’s lab director, only 120 minutes of data is necessary for a clinically significant analysis and report. 73.

SNAP had outside business investors. In November 2009, Gil Raviv wrote a letter

to SNAP’s investors, regarding the results of the third quarter and the first nine months of 2009. The letter referenced the company’s struggles with sales and test volume, stating that “sales are still not tracking where we would like them to be,” but that “[a]s we move forward, we are confident that test volume will follow.” 74.

At that time, SNAP had a home sleep testing competitor, Sleep Solutions, which

used different technology and required patients use the test for three nights. In February 2010, Gil Raviv drafted a comparison between Sleep Solutions and SNAP, and emailed it to managers at the company, for further distribution to the sales force. Therein, he identified Sleep Solutions’ three night testing requirement as a point of contrast in SNAP’s favor, because it was a “huge requirement,” “uncomfortable,” and only a few physicians had requested it:

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75.

Raviv’s comparison with Sleep Solutions makes clear that he did not consider

multiple night testing necessary. Further, he stated that, when he permitted multi-night testing upon request, SNAP did not charge extra for the additional night of testing. Soon, however, SNAP began to follow in Sleep Solutions’ footsteps. 2.

76.

SNAP Begins Multi-Night Testing and Routinely Claiming Two Tests for Medicare Beneficiaries

Later that same year, at the direction of Gil Raviv, SNAP changed its testing

protocol. It did not do so because of any new requirement to have multiple OSA diagnostic test results. Instead, SNAP sometimes received recording cartridges from patients where the data was corrupted or had not recorded, resulting in a “blank test.” Purportedly to reduce the frequency of these blank tests and avoid the need to retest, SNAP began to have its territory managers tell providers and patients that the sleep testing recorder should be worn for two nights. 77.

A letter drafted from Gil Raviv to a referring provider, dated October 13, 2010,

stated that “SNAP Diagnostics, your provider for home sleep testing, is pleased to offer the option of Multi-Night Sleep testing for your practice. We currently recommend testing your patient for a second night in the event the first night resulted in insufficient time, poor quality data or in an entirely blank test. Providing a second night recording will significantly minimize the need to call the patient and have him/her pick up the unit for a repeat test. In addition, having two night tests

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may reduce the effect of night-to-night variability. . . . You will get the patient report the same as you do today and you may receive one or two reports based on the quality of the recordings and the clinical significance of the analysis.” 78.

On October 18, 2010, SNAP’s National Sales Director emailed the territory

managers and informed them that SNAP was changing its protocol to pitch to physicians that patients should take a test for two nights. The email gave them “UPDATED Multi-Night Testing Key Points” beginning with: “This option will SUBSTANTIALLY reduce the number of BLANK tapes received because statistically one of two nights have a completed test.” The email stated that: “Multi-Night Testing will increase patient compliance & convenience when a patient is requested to be re-tested as the result of no data single night was BLANK. Save time for physicians & staff trying to get patient to return for another test. Two studies will not always equal two reports. The number of reports we send will be based on the quality of the recording or clinical significance.” 79.

In reply to that email, a territory manager stated she was “unsure about the billing

part.” The Sales Director responded “that we are not talking to [the physicians] about billing because we are not sure if they will be able to bill for more testing and there will be many times there will only be one result because 1 of the 2 nights was BLANK or incomplete and we were only able to use 1 of the 2 nights. If we do send 2 reports and a Dr. would ask about billing for 2 nights, I would ask them how do they handle other similar billing situations in their office when more than one test is done on the same pt (back to back or same date of service, i.e. lab, imaging. . .” 80.

The territory manager was not appeased and asked whether it would entail billing

two tests: “Thanks, but I meant as far as us billing the patient and their insurance twice? I’m

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getting alot [sic] of questions and the docs are not going to do it until they know.” 81.

The territory manager was correct that this protocol change meant “billing the

patient and their insurance twice.” And, notably, in response to her question, the Sales Director did not cite to any guidance or rule that SNAP was following in claiming multiple tests. 82.

While SNAP was publicly stating that its change to two nights of testing was to

resolve the problem of blank tests and to avoid retests, and telling providers that they would get one or two reports depending on clinical significance, internally SNAP began to routinely analyze and claim multiple tests per patient, particularly where the patient was a Medicare beneficiary. In October 2010, Raviv approved a protocol for both his lab director and ing director to follow, that, for Medicare patients, SNAP should automatically analyze and claim to Medicare “both nights” of testing. 83.

Gil Raviv did not issue the blanket rule to analyze and claim both nights for other

insurances, besides Medicare, or for self-pay patients. For those patients, the process described in a October 27, 2010 email from the lab director to Raviv and the ing director was that the lab director or her staff would communicate with the director of ing to determine how many nights of testing SNAP should analyze. The lab director would inform the ing director how many nights of testing SNAP had received for the patient, and the ing director would them inform the lab director how many tests she should have processed and analyzed. 84.

The determination of how many tests to analyze was based upon an assessment that

SNAP had made about how many claims each patient’s insurance was likely to pay, not based upon a clinical determination about the specific patient’s needs at that time, i.e., whether multiple tests were, for some unusual reason, medically necessary in order to diagnose a patient’s OSA. 85.

Following that procedure, sometimes the ing director’s answer was that the

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lab should analyze, or “score,” one test. In that case, the process set by Gil Raviv was as follows: if the ing director said to score one night, the lab technician was to select the night of testing with the highest preliminary RDI score, i.e. the one most likely to result in the most severe sleep apnea diagnosis. That was easily done. In SNAP’s lab, the recording cartridge for each night’s test can be inserted into SNAP’s computer. Then, raw results, including the preliminary RDI score, immediately populate in the computer. 86.

SNAP’s lab director described the process of selecting the night with the highest

preliminary RDI, in a February 21, 2011 email to a TM who had inquired about why she had not received two commissions, where a patient had tested twice, stating: “Yes, there were 2 disks. It is always a good idea to send multiple disks as it greatly reduces the chances of getting a blank one, and as a result, it decreases the need for retests. For this patient, though, we analyzed only one night (the one with more evidence of sleep apnea/higher RDI) as the insurance would not cover multiple tests.” That email was also sent to Raviv. According to the lab director, when SNAP does this, SNAP does not inform the referring provider of the raw results (i.e. the preliminary RDI) for the unprocessed nights of testing. 87.

Therefore, even as SNAP made two claims for two tests the default for each

Medicare beneficiary in October 2010, SNAP routinely analyzed—and continues to analyze—a single night’s test and produce a single report scoring the patient’s sleep apnea for many nonMedicare beneficiaries. 88.

In fact, even where one test already had been scored, when SNAP learned that a

patient was covered by Medicare, SNAP analyzed a second test unnecessarily and claimed that second unnecessary test to Medicare. For example, in June 2015, Gil Raviv was emailed by an specialist and asked how many nights to process and bill for a “self-pay” patient, i.e. a

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patient without insurance. He answered: “please put in notes and state 1 night.” A few days later the specialist emailed Raviv and the lab director and informed them that the referring provider had telephoned and informed her that the patient was not “self-pay” but instead had Medicare. The lab director then followed up, emailing one of her technicians as well as Gil Raviv, and instructed her technician to “please score night A as well (you already scored B).” The lab director’s instruction to order analysis of two reports for this patient instead of one was because the patient had Medicare and that was the rule at SNAP, as set by Gil Raviv. 89.

The fact that only one test is necessary to diagnose OSA is made further clear by

how SNAP treated Medicare beneficiaries when they were providers or providers’ staff, receiving the test as part of SNAP’s marketing pitch. When a provider’s staff member was selected for an office’s “first test” at a SNAP “lunch & learn” marketing pitch session and that individual was a Medicare beneficiary, SNAP would have only one test analyzed and one claim billed. It did so because SNAP was aware that, unlike for private pay patients, it could not waive a copay for a Medicare patient, under Medicare’s rules. Therefore, in order to keep the copay costs down for that staff member as part of its marketing strategy, it submitted only one claim to Medicare and issued one report. 90.

Burton explained the policy as follows, on October 14, 2014, in an email to a

territory manager, copying Gil Raviv, the lab director, the ing director, and others: “we will never release more than one night for the first test with a medicare patient who does not have secondary insurance and so the OOP [out of pocket] for the first test will only be $44 for the first test medicare patient who does not have secondary insurance. . . . [Y]ou are correct that the medicare typical max OOP is $87, when they are not the first test.” 91.

This practice of processing and claiming only one test when it was good marketing

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strategy for SNAP further shows that its practice of routinely analyzing and claiming two or more tests for each Medicare beneficiary was not based upon medically necessity. 3. 92.

SNAP Increases Its Requirement to Three Nights of Testing.

Only a few months after increasing its requirement to two tests from its

longstanding one test protocol, SNAP moved to a three-test requirement. 93.

On March 2, 2011, SNAP’s Director of National Sales emailed its territory

managers, with a copy to Gil Raviv as well as SNAP’s ing director, and informed them of the change. In conjunction with another “challenge,” i.e. bonus opportunity for the territory managers, he wrote:

94.

In response to that email, several TMs expressed a concern that patient copays

would increase. National Sales Manager Leslie Gardea sent an email to all of the territory managers, responding to this concern: “Apparently, the email traffic generated the question from several people as to whether the patient will pay a higher out of pocket once Gil announces 3 night testing. The answer is NO!! The doctor will still get the best report out of the 3 nights or in some cases he may receive multiple reports.” 95.

Once again, SNAP’s stated reason for increase in testing focused on eliminating

blank tests and avoiding retesting, and the message to TMs was that SNAP was looking for the “best report out of the 3 nights.” This was not true, at least for federal program beneficiaries. In reality, SNAP was not avoiding blanks but was analyzing and claiming multiple tests per

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beneficiary. 96.

The real reason for the increase in “required” nights of testing was to boost SNAP’s

profitability, as Raviv stated to his daughter just days later. SNAP’s top territory manager, Ayelette Raviv, Gil Raviv’s daughter, sent her father an email on March 4, 2011, after learning of SNAP’s changed protocol to require three nights of testing. 97.

In that email, she stated that SNAP should not require patients to test for more than

one night, and that only one night of testing is necessary, writing: I am not sure that making 3 night testing a requirement is a good idea at the moment. I think that our strength is flexibility- we encourage 3 nights, but we can do two, or even one night. This was a selling point against sleep solutions, and I think that it is still a good point and keeps us competitive with sleep labs. We are even more competitive because although we only need one night, our patients can comfortably and inexpensively test for 3 nights! With sleep labs the number of nights is limited due to cost and strategic issues. With other home tests such as sleep solutions the patient is forced to do 3 nights because their sub par analysis requires it. Some physicians and patients see the benefits of 3 nights, but for others one night is painful and disturbing enough. Right now we can provide good service for both ends of the spectrum. I think that it is a good idea to encourage 3 nights, and even start all new s with multi-night testing- but to hold off on making 3 night testing a requirement. If you implement this too quickly it could backfire. 98.

Gil Raviv responded by email later the same day: “It is very important to us to move

to 3 nights as it will improve significantly our profitability and strength, but I agree that we should do it not too aggressively. Do you think that sending the following FAX to all our customers is too harsh?” 99.

Meanwhile, at trainings for new or prospective territory managers, Gardea taught

these contractors to make sure that Medicare patients are tested for three nights because, if they did so, SNAP would submit claims for, and pay commissions to the sales representatives for, all three nights of testing in some circumstances. At the trainings, Burton likewise informed the new 28

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TMs that SNAP wanted patients to wear the sleep testing equipment for three nights and noted that insurance carriers (including Medicare) would pay for multiple nights of testing. 100.

Territory managers generally followed their training and communicated the

message to the referring physicians that patients were to take multi-night tests and wear a recorder for three nights. The referring providers generally did not have specialized training in sleep medicine and thus did not have an independent awareness of how much sleep data was necessary to diagnose OSA. 101.

Not only did territory managers instruct the physicians’ offices to have their

patients record three nights of sleep data, but in many instances SNAP representatives themselves communicated with the referred patients and gave them that instruction directly. Until recently, SNAP held “apnea clinics,” where the provider’s office would schedule patients to come in at a particular time, and the TM would train them, one by one, on how to use the device. At apnea clinics, TMs told the patients to record three nights of data. 102.

Since March 2011, SNAP has pushed three nights of testing and routinely claimed

multiple home sleep diagnostic tests per beneficiary to federal programs, despite knowing that only one test was medically necessary to diagnose OSA. For example, on March 25, 2011, an istrative staff member asked the ing director, with a copy to the lab director and Gil Raviv, to “ multi-night” on a federal employee health benefit Blue Cross/Blue Shield beneficiary who had recorded three nights of sleep. The ing director replied all and stated “[p]lease do all.” 103.

In May 2011, a SNAP lab technician emailed Gil Raviv, with copies to the lab

director and ing director, along with others, and informed him, “These are the Medicare multi nights from today. Please tell us how many of each to process[.]” The email then listed six

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patients by number and provided information on whether their Medicare was primary or secondary, but no substantive information about their clinical condition. The email identified five of the patients as having sent two nights of data and one as having sent three nights of data. Gil Raviv directed the lab technician to process all of the tests. In SNAP’s business operation, this meant that claims would be submitted for each test processed. SNAP’s lab director then responded that in “offloading data,” she found out that for the first patient, “there are actually 3 nights-still do only 2?” and Raviv responded that the first patient was “corrected to 3[,]” meaning that three tests should be processed and claimed for that patient. 104.

At the same time, SNAP was analyzing one night and producing one report where

there was no financial incentive to do more. SNAP had arrangements it called “capitated s” as well as other relationships called “flex-service agreements.” In both of those arrangements, SNAP processed only one test and provided one diagnostic report for each patient. 105.

This shift to three nights of testing for the sake of profitability appeared to work.

On April 4, 2011, Gil Raviv emailed two of the company’s investors and said, “[a]s you can see we had a sharp increase in tests during March where we increased the number of tests from 456 in March 2010 to 760 in March 2011, which is actually slightly ahead of the projections I gave you. 16% of this growth came from increasing the number of patients tested and the remaining from multi-night testing. I expect the trend to continue in April (when compared with April 2010)… Note that for breaking even on any given month we need to cross the 850 tests/month.” 106.

SNAP’s increase in profitability was based in part upon inflated and fraudulent

Medicare and other federal program payments. SNAP’s practice of unnecessarily double- or triple-testing beneficiaries in order to diagnose OSA meant that federal program payments per beneficiary to SNAP immediately skyrocketed. In 2010, Medicare paid SNAP approximately

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$7000 in total for its beneficiaries’ second-night tests and $700 in total for its beneficiaries’ third tests.

The following year, Medicare paid SNAP approximately $99,000 in total for its

beneficiaries’ second night tests and nearly $19,000 for third tests for its beneficiaries. These claims for additional tests done as a matter of course were false and fraudulent. The MACs did not have a system flag or edit in place to alert the Medicare program to this practice. 107.

At some point after changing the protocol to require three nights of testing, SNAP

created an order form that included a preprinted, preselected statement of the “Test Ordered” as “Sleep Apnea x3,” as shown below:

108.

Physicians sometimes used the above preprinted form when referring patients for a

SNAP test. In other instances, physicians sent an electronic referral that had no reference to multiple testing, even in the vague manner of the preprinted form above. In still other instances, providers used a different form, titled “SNAP Diagnostic Physician Order form,” which did not state a number of nights and instead concluded with this statement: “Given a history and physical findings suggesting a sleep disorder, I am referring this patient for evaluation using the SNAP Diagnostics System. This test and interpretation is medically necessary to obtain information which will assist in the diagnosis and treatment of this patient.” 109.

Some providers complained to SNAP about the fact that SNAP required multiple 31

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nights of testing but then provided the physician with fewer reports than tests submitted. Burton fielded some of these complaints. In response, when Burton explained SNAP’s system to those providers, he made clear that multi-night testing was not medically necessary in most cases, but he did not tell them that the nights SNAP analyzed were selected based on which had the highest preliminary RDI. 110.

For example, in response to the question from the office manager of one of SNAP’s

most prolific referring providers, asking why they regularly received one report back after a patient tests for multiple nights, Burton wrote, in relevant part, on August 7, 2014: “We can test for as many night [sic] as we wish with any insurance plan. Multi-night testing is very important, because as many as one third of patients tested can be within normal limits on night one but demonstrate mild, moderate and sometimes even severe sleep apnea on nights 2 or 3. When we release a test report, all insurance plans consider that a full service for which we must bill.” 111.

Burton then made clear why SNAP’s routine billing of two and three nights for

federal program beneficiaries is fraudulent: “For the vast majority of patients releasing all three nights would not provide any more clinical value than one night. Yet the price to the patient would be three times more (often all falling on their deductible). That is why we always evaluate each night to determine which is the most clinically relevant for that patient before making the decision on which night to release. Sometimes there are important differences that force the release of multiple reports. Yet, often there is no value to releasing multiple nights as the data are consistent. It would simply cost more.” 112.

SNAP pushed three nights of testing and routinely claimed multiple tests to federal

programs for years, despite knowing that only one test was medically necessary to diagnose OSA. On June 3, 2015, a referring provider’s office emailed Ayelette Raviv (Gil Raviv’s daughter and

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SNAP’s top sales representative) and said “we would like to discuss testing duration and whether 3 nights are needed or if we can scale back to 1-2 nights.” Ayelette Raviv replied by email the next day and stated: “In of multi-night testing, only one night is necessary. The reason to test for more is simply as no two nights of sleep are the same and to minimize the need for a retest if the patient struggled on the first night.” 113.

As a result of SNAP’s false and fraudulent claims, Medicare paid SNAP

approximately $3.7 million for medically unnecessary double and triple home sleep tests. SNAP likewise defrauded other federal health programs for medically unnecessary double and triple home sleep tests. 4. 114.

Examples of Fraudulent Claims for Unnecessary Multiple Tests

Medicare Patient A was the first patient in the email described above in paragraph

103. Medicare and Patient A were unnecessarily billed for three nights of home sleep testing, through three claims to Medicare using HCS code G0399, for service dates May 17, 18, and 19, 2011. Medicare paid SNAP approximately $173 for each of these claims, including for the medically unnecessary second and third nights of testing. 115.

Patient B was the sixth patient in the email described above in paragraph 103.

Medicare and Patient B were unnecessarily billed for three nights of home sleep testing, through three claims to Medicare using HCS code G0399, for service dates May 4, 5, and 6, 2011. Medicare paid SNAP approximately $173 for each of these claims, including for the medically unnecessary second and third nights of testing. 116.

Patient C was the Medicare patient referenced in the June 2015 email thread.

Medicare and Patient C were unnecessarily billing for two nights of testing, through four claims to Medicare using HCS code G0399, with modifiers, for service dates June 8 and 9, 2015.

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Medicare paid SNAP approximately $173 per test, including for the medically unnecessary second night of testing. 117.

Patient D was referred to SNAP by her physician with a Physician Order form that

did not reference multiple night testing. SNAP billed Medicare and Patient D unnecessarily for two nights of home sleep testing, which were claimed to Medicare using HCS code G0399, for service dates July 15 and 17, 2015. Medicare paid SNAP approximately $173 for each of these tests, including for the medically unnecessary second night of testing. 118.

Patient E was referred to SNAP by his provider through an electronic referral did

not reference multiple night testing.

Despite this, SNAP billed Medicare and Patient E

unnecessarily for two nights of testing, through four claims to Medicare using HCS code G0399, for service dates April 18 and 19, 2015. The provider’s files only contain reports from SNAP for a single test with the date of service of April 18, 2015. Medicare paid SNAP approximately $175 for each of the two testing dates submitted, including for the medically unnecessary second night of testing. 119.

Patient F was referred to SNAP by his provider through an electronic referral that

did not reference multiple night testing. Despite this, SNAP billed Medicare unnecessarily for two nights of testing, which were claimed to Medicare using HCS code G0399, with service dates September 27 and 29, 2014. Patient F’s medical records reflect that a SNAP representative communicated with the provider on September 15, 2014 and told her that SNAP “need[ed] to charge patient about 87 dollars for the testing after the Medicare coverage.” That amount is the total copay for two tests, in accordance with SNAP’s practice of routinely claiming two tests per Medicare referral, although no notes in the file indicate that SNAP informed the provider that it was charging for two tests, and the provider stated that she was not aware of this practice. The

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provider requested and received a waiver of this copay amount for Patient F due to the patient’s indigency. However, Medicare paid SNAP approximately $175 for each of these tests, including for the medically unnecessary second night of testing. B.

SNAP’S Unlawful Kickback Schemes

120.

SNAP Diagnostics engaged in multiple kickback schemes in order to increase its

referrals for home sleep testing and the resulting claims and reimbursements for those services. 1.

121.

SNAP Offered Referring Providers the Professional Component, or Interpretation, Billing as an Unlawful Inducement to Refer Patients.

SNAP’s marketing pitch to physicians focused on revenue that a physician could

earn referring patients to SNAP’s home sleep testing instead of to a polysomnography lab. An excerpt from one of SNAP’s marketing tools for showing physician revenue, called “Managing Patients with Sleep Apnea” shows SNAP’s estimate of the revenue a physician can garner for the codes that SNAP suggests billing:

122.

Some of SNAP’s revenue pitch regarded incidental and benign benefits, like billing

for an office visit for seeing the patient, but some of the pitch was an offer of kickbacks. The most

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pervasive kickback involved SNAP offering and encouraging referring physicians to bill for the professional component of the test, although SNAP physicians were performing the professional component. The referring physicians were, therefore, billing T 95806 -26 and deriving revenue for work performed by SNAP physicians. 123.

SNAP employs physicians who are board certified in sleep medicine. SNAP calls

them “reading physicians,” and they interpret the results of home sleep tests. SNAP’s reading physicians have remote access to the SNAP lab system, including the raw data and analysis for the test being interpreted by that physician. 124.

For Medicare patients, SNAP bills under the code, G0399, for its service, including

both the technical aspect and the interpretation (also known as the professional component). Private insurance and the federal employee health benefit plans use T code 95806 for the same service. Like the G0399 code, 95806 can be broken into its technical component (-TC) and professional component (-26), and billed in separate claims. 125.

In pitching physicians to refer business to SNAP, territory managers are trained to,

and do, tell physicians that they can bill private insurance for the professional component, or interpretation, of the SNAP home sleep test. This is because many private insurers, unlike Medicare, do not have the same educational or certification requirements for physician claiming home sleep testing services. 126.

TMs routinely made this proposal, despite the fact that the referring physicians

generally did not know how to interpret home sleep test data or score test results for sleep apnea. Therefore, SNAP prepared an interpretation report, including the sleep apnea RDI score, and provided the referring physician with an unsigned interpretation report. SNAP told the referring physician it would not bill for the professional component, only the technical component, and

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encouraged the referring physician to bill for the professional component, although he or she had not provided the service. 127.

Stephen Burton described this business “model” of offering physicians the ability

to bill for the “interpretation” of the sleep test in a recorded meeting in which he was attempting to solicit new independent sales representatives. Burton said, regarding the referring physicians, “they get revenue, we get revenue by the technical, and basically the fact that they can get revenue drives the volume[.]” 128.

In that conversation, Burton explained that, for private insurance patients, SNAP

has its own board-certified sleep physicians prepare a report from the test results, which includes the sleep apnea RDI score. That report by SNAP’s board-certified doctor is then given, unsigned, to the referring physician. SNAP also provides a cross-reference index that associates the numeric score of the results with the words “mild,” “moderate,” or “severe” apnea. As Burton explains, the SNAP pitch is that the referring provider writes that word at the end of the SNAP-prepared report, signs it, and then bills private insurers for the interpretation under T code 95806 -26. SNAP then bills the technical component, or T 95806 –TC, for each of those tests. 129.

With respect to Medicare patients, Burton stated in that conversation that since

Medicare requires the interpreting physician to be sleep medicine certified, most referring physicians are not able to do the interpretation for Medicare patients. Burton stated that, “the good news is that we make more money on that test.” He further stated that he never mentions in his pitch that the physician cannot bill the “professional component” for Medicare patients, though, “because then the doctor’s reaction is, oh my god, half of my patients are Medicare, I’m not going to do this.” 130.

One of the individuals to whom Burton was describing this business “model”

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expressed concern that the referring physicians would be “uncomfortable” with the idea of handling the interpretation, because they would not know how. Burton stated: “every single test is scored by our sleep guy and it’s looked at by our doctor. So all they’re doing is basically agreeing with our doctor who’s already read it . . . . So almost everybody is comfortable there.” 131.

During the meeting, Burton was asked, “[w]hat is the professional component?”

He responded, “[i]t’s interpreting the test but we never use those words . . . Because the doctor thinks oh my God.” Burton explained, that is “why we do not use the word interpret. He gets paid for doing the professional component, and that’s the way we word it.” He further stated that what the referring providers have to do takes “two seconds.” 132.

When asked during this conversation how SNAP can compete in the New York

City market, where labs often pay rental fees for space in doctor’s offices, Burton answered: “We, for us, the doctor’s making the money off the professional component . . . . So they’re—so we don’t have to pay, because we’ve given them, we’re giving them . . . a billing.” 133.

Gil Raviv described this business model similarly in a February 28, 2012 email to

the Managing Director of a venture capital fund: “In our proven business model, we consign the physicians the recorder, we provide them the kits and we analyze the data at no charge to the Dr office. We only charge the insurance company and the patient, for his portion of the technical component of the test. The Dr charges the insurance company for the professional component of the test. Therefore, the Dr makes $150/test, on average, for only a few minutes of work of his nurse and a minute or two of work for himself and retains control on his/her patient while having to invest nothing.” (emphasis added). 134.

Raviv’s email to the venture capital fund went on to extol the success of this

business model: “Consequently, it is quite easy to convince the physicians to us, and to have

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a closing rate of 80% or more. That said, as we want to weed out the offices which are not committed we ask them to setup first at least 1 patient who needs testing prior to us cong a unit to them. That happens successfully in about 50% of the Dr offices we visit. Of those about half (25%) will become long term customers with test volume greater than 2-4 tests/month while about 25% will provide less tests per month. Those that have too low of a volume we convert to a drop ship where we ship the testing unit directly to the patient's home upon referral from the office and remove the underutilize recorder from the Dr office. Therefore, the overall closing rate is about 35%.” 135.

This business model relies on the offering of kickbacks. SNAP provides a report

scored by its own sleep medicine doctor so that the referring physician can “invest nothing” but still bill for an interpretation they do not do and would not be qualified (in most cases) to do. Once the physician signs the report, he or she improperly bills for a service that was done by SNAP. SNAP allows physicians to bill in this manner instead of submitting a global claim for the service SNAP has provided because it “drives the volume” of SNAP’s business. Not only that, it increases SNAP’s Medicare test volume, i.e. the tests for which SNAP gets to bill globally and “makes more money on,” according to Burton. 136.

SNAP’s suggestion that the physician write the word “mild,” “moderate,” or

“severe” on the unsigned report is wholly frivolous. As DME coverage requirements make clear, the RDI score on the report largely determines the eligibility for treatment, and no statement that the sleep apnea is “severe” is required. SNAP presumably pitches this unnecessary step to make physicians feel as if they have done something material in order to bill for the service, when they have not. 137.

Stephen Burton not only trained territory managers in marketing this inducement,

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but he directly marketed it himself. However, in some of his own pitches, he candidly stated that the provider’s work to bill for the professional component is “report review,” i.e. reviewing the SNAP physician’s report. In an April 18, 2014 email to a cardiologist in the state of New York, Burton pitched the provider with the financial benefits of referring home sleep services to SNAP. Noting that the provider had a 50% Medicare, 25% Medicaid, and 25% commercial patient mix, Burton provided him with a “proforma” of “Projected Practice Revenue.”

This document

estimated the provider would garner revenue of $100 per patient for billing T code 95806, modifier 26, for the “Professional Component,” which the document described as “report review.” 138.

SNAP’s reading physicians on occasion have signed the interpretation reports for

private insurance patients. In one such instance, in December 2010, Ayelette Raviv emailed Gil Raviv regarding some tests that had been done for one of her territory’s practices. She asked him to “[p]lease send them another report without [Dr.] Lisa [Shives]’s signature, this is bcbs not Medicare and they can bill for it.” Shives is one of SNAP’s reading physicians. 139.

SNAP also prepares a AP initial pressure recommendation, or titration, as part

of its service. This recommendation often is provided as part of the original interpretation report, but often—when SNAP receives the neck circumference information, which is required for this recommendation, later—it is provided as an addendum.

This initial AP pressure

recommendation is required for a DME company to provide the patient’s AP. 140.

On its face, the AP pressure recommendation addendum is the work of a SNAP

reading physician, as it is signed with the typed name of the reading physician. SNAP provides this AP initiation report or addendum for all patients, regardless of whether SNAP or the referring physician billed for the professional component. 141.

This professional component incentive was, according to SNAP, financial

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compensation from SNAP. In a March 19, 2012 email exchange between SNAP’s Director of National Sales and the office manager of a physicians’ group practice that SNAP was pitching, the office manager asked, among other questions, “Is there any financial compensation from Snap Diagnostics?” SNAP answered: “A. SNAP is reimbursed by billing the patients insurance for the Technical component[.] The physician office receives reimbursement for billing the patient's insurance professional component[.]” 142.

On December 3, 2014, Stephen Burton informed Gil Raviv, with copies to SNAP’s

reading physicians, that “many providers express discomfort with the ‘interpretation’ word.” Therefore, Burton proposed changing the title of the interpretation reports that physicians were g to “Professional Findings” in order not to “scare off” those physicians from billing for the “professional component” of home sleep testing. Raviv, upon the advice of Dr. Lisa Shives, decided to keep the report an “interpretation.” 143.

On May 12, 2015, Burton emailed with a territory manager (on a communication

that included Raviv and Gardea) to advise the TM how to pitch SNAP’s business against a competitor’s business. Burton highlighted two significant differences between SNAP and the competitor. The first difference he identified was that SNAP gives the referring physician the professional component billing, stating: “we let them keep the practice revenue for the professional component when insurance allows.” This email makes it clear that, (1) SNAP offered the ability to bill for the interpretation of the test as a way to secure referrals from physicians, (2) this service was a monetary value to the physician and a perk of making referrals to SNAP, and, (3) it was something that (at least some of) SNAP’s competitors did not do. 144.

However, where the professional component billing would not be effective as an

inducement and might raise a red flag, Burton changed the pitch. On March 29, 2015, when a

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territory manager asked about how to get business from a particular new referring provider, a group practice with doctors paid by a hospital, Burton stated: “if they are a hospital-based physician practice we should make one adjustment. the docs are likely paid on salary. so ‘practice revenue’ may not be the same importance or priority that it is with independent physicians. i would suggest we DO NOT guide the providers to bill the ‘professional component’ for the sleep test (T: 95806-26). if they do not bill this code they are less likely to hit the radar of the hospital financial s. the other codes are more in line with customary and normal office activities and will not raise red flags by hospital finance team.” 145.

While this pitch was effective and many physicians became referrers to SNAP and

billed for interpretation that they did not do nor were they qualified to do, some providers questioned the legitimacy of this practice. In May 2015, Gardea emailed an istrative staff member at a cardiology practice in Texas, pitching the practice’s ability to bill the T code 95806 with modifier 26 for non-Medicare sleep tests. The istrative staff member relayed the practice manager’s question, asking how the doctor could be qualified to bill for the “sleep studies professional component.” In a follow-up email the practice’s manager wrote Gardea and asked “how can our doctor write in their interpretation if they don’t know how to interpret sleep studies?” He asked, “[d]o you have an opinion from CMS or OIG that you could share?” His email ended with the statement: “[a]t this point, it’s just not ing the smell test for us.” 146.

Gardea subsequently provided him by email SNAP’s Medicare contract and its

JHACO accreditation. The practice manager’s concerns were not allayed. He wrote: “So I see you’re accredited and have a Medicare billing number but it still does not answer our question as to how we can bill for something our physicians are not doing nor qualified to do.” Because the practice manager never received a satisfactory answer to that question, the practice never referred

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business to SNAP. 147.

Likewise, in September 2014, a physician who had received the usual SNAP pitch

from the territory manager rejected the offer by SNAP for him to bill the professional component. On September 3, 2014, Burton’s calendar reflected a call with that doctor, “who said it was unethical for us to allow the Dr. to bill the professional component. He said it was like a kickback.” Thereafter, according to the physician, he refused to bill for the professional component and subsequently began to use a competitor of SNAP, because he believed the SNAP arrangement “was not an ethical arrangement.” 148.

SNAP intended that its work, in scoring each test and providing the report to

physicians but not billing the global code and instead allowing the referring physician to bill private insurance for the professional component, would induce referrals of all the physicians’ home sleep testing services. Therefore, every single professional component billed by a referring physician, where SNAP physicians actually did the work, represents a violation of the kickback statute. As this was SNAP’s business model and general marketing strategy, every single claim by SNAP for a home sleep test for a Medicare beneficiary was a false claim, because it resulted from a violation of the Anti-Kickback Statute. 2.

149.

SNAP Provided Kickbacks to Independent Sales Representatives in the Form of Commissions and Bonuses.

SNAP provided other types of kickbacks as well. Its territory managers were, until

very recently, independent contractors who were paid a commission for each test referred, claimed, and paid for patients referred by the physicians to whom the TMs marketed. The TMs also received bonuses in certain circumstances, like meeting test sales volume targets. 150.

SNAP paid its territory managers different commission amounts based on whether

the patient referred had private insurance or Medicare. For example, the following “independent 43

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contractor agreement” between SNAP and a territory manager executed in 2014, explains the commission structure:

151.

For the “first night,” “a billable test” warrants a commission, because first nights

tests are expected to be paid. Where tests are for “night two and night three,” the agreement makes clear that the contractor is paid only “when and if Company is paid[,]” reflecting SNAP’s uncertainty in those claims being payable. As reflected in the agreement, and in other SNAP sales and marketing documents as well as internal emails, SNAP territory managers received the commission on tests only if the claims were paid. 152.

SNAP’s independent contractor agreement’s lesser valuation of the second and

third nights of testing as part of the “multi-night test commission” is not based upon any actual lesser value of additional tests provided to and claimed for Medicare beneficiaries. Medicare reimburses at the same amount for each test claimed. It does not pay for a “multi-night test,” nor is reimbursement reduced for multiple diagnostic tests, which it does not expect in the normal course. 153.

However, SNAP gave bonuses to incentivize its sales force to sell what it called

multi-night testing to providers and their patients. For example, on June 1, 2011, SNAP’s Director 44

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of National Sales emailed territory managers to tell them, “Gil has just approved our new challenge. . ..”

154.

SNAP’s arrangement with its independent contractor health care sales

representatives has many characteristics that HHS-OIG has identified as raising particular fraud and abuse concerns in HHS-OIG Adv. Op. 98-10 (Aug. 31, 1998). Specifically, HHS-OIG has identified several characteristics of arrangements among sellers, sales agents, and purchasers that appear to be associated with an increased potential for program abuse. 155.

These suspect characteristics include, but are not limited to, (1) compensation based

upon the volume or value of referrals, (2) the direct billing of a federal health care program by the seller for the item or service sold by the sales agent; (3) direct between the sales agent and physicians in a position to order items or services that are then paid for by a federal health care program; (4) direct between the sales agent and federal health care program beneficiaries; and (5) the marketing of items or services that are separately reimbursable by a federal health care program. 156.

Through SNAP’s per-test commissions, as well as bonuses for multi-night testing,

SNAP incentivized its independent contractor territory managers to push sales of medically unnecessary second and third nights of tests, which caused false claims to be submitted. The remuneration paid to the independent contractor territory managers was made to induce referrals of federal health care program beneficiaries. Because the independent contractor territory 45

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managers were paid per test, they were paid directly based on the volume or value of the sleep test referrals to SNAP from physicians to whom they marketed. No exception or safe harbor applies. This was an impermissible kickback arrangement, and because kickbacks were paid on every SNAP test sold, all of the Medicare payments to SNAP were paid as a result of false claims. 3.

157.

SNAP Gave Free or No Copay Tests to Referring Providers, Their Families, and Key Staff , to Induce the Referral of Patients.

SNAP’s business model also included kickbacks in the form of free or no copay

sleep testing services for referring physicians, their family, physician’s office staff and their family. SNAP’s marketing protocol included the requirement that territory managers, at the initial lunch & learn, “identify a staff member (family member) to do the first test so we can demonstrate the billing process. We know our device is simple to use but we want someone here to benefit from the first test so they can let you know how easy it is to use. (Its a perk that we offer at the lunch for a staff member).” 158.

As a result, SNAP provided free or no copay tests in order to acquire that provider’s

business and make sure that key office staff facilitate SNAP’s flow of business. The purpose of giving a first free test to a provider or their staff or family member was to find “a champion in the office,” according to an October 1, 2014 email exchange between Burton and Gardea, copying Raviv. 159.

In furtherance of that goal, when the no copay first test was for a referring doctor,

SNAP’s rule was to “do all bill one.” This meant SNAP would submit only one insurance claim, but would analyze three tests and give the physician all three reports. In other circumstances, SNAP would not analyze tests or provide reports where they were not submitting a claim for that service. Therefore, “do all bill one” meant SNAP was giving referring physicians’ free services— services SNAP internally valued at $1100 per test—that it did not give other patients. 46

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160.

For example, in March 2015, a SNAP referring physician ordered her own home

sleep test, such that her insurer would not cover it. As reflected in an email exchange spanning from March 26 to 31, 2015, involving Gil Raviv, the lab director, and others, SNAP determined it would give the referring physician the test for free, since the “ has good potential for us.” Because it was SNAP’s practice to “do all bill one” where the patient was a referring physician, Raviv instructed the lab director to have SNAP give the referring physician three free test analyses and reports. 161.

SNAP was careful to make sure its territory managers did not give away these

valuable services without a business benefit. As Gardea described, in an email to Raviv and Burton regarding the guidance she had given a territory manager who was struggling with closing the deal on the “first test” offer strategy. On August 12, 2015, Gardea wrote: “[s]he is like many TM's where they jump on the first person that says they need a sleep study[.] I suggested that she not offer the NOOP test to the first person that volunteers. Tell them you have something special for a staff member but then talk about symptoms to the point where everyone thinks they have sleep apnea . . . then chose the person that is most valuable to Snap (MA, OM, NP) and not necessarily the MA’s husband. We also talked about holding out for a staff member (family member) rather than defaulting to a patient.” 162.

SNAP gave entirely free tests to referring physicians and their family ,

without even submitting any claim to their insurance when that was the physician’s preference and it was necessary to get the physician’s referrals. For example, on November 25, 2014, Gardea explained in an email to an inquiring lab technician why two free tests were in the system. She said that a physician and his wife had taken tests, which SNAP had offered with no out of pocket, but then the physician demanded the tests for free, saying “that he was going to give her all his

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sleep tests so he wanted his for free.” Gardea approved processing the tests because the doctor was giving SNAP “additional patients so we decided not to make him upset[.]” 163.

Similarly, on November 13, 2014, Gardea informed Raviv and Burton by email

that, at the request of the territory manager handling a provider’s , Gardea had waived the out-of-pocket costs for home sleep testing services provided to that referring provider’s nurse’s husband “because she was a key staff member in dispensing the snap test.” 4.

164.

Examples of False Claims Resulting From Violations of Anti-Kickback Statute

Patient G is a Medicare beneficiary. SNAP submitted four claims to Medicare for

Patient G, under codes G0399, with modifiers, for home sleep testing services on April 29 and 30, 2014. SNAP claimed $230 in services per date, for a total of $460 in services. Medicare reimbursed SNAP approximately $346 dollars, or $173, for each date of service for Patient G. The referral and payment of those services to SNAP resulted in two commissions paid to the independent contractor territory manager for the sale or marketing of each of the two home sleep tests, including the medically unnecessary second test. These four claims were false claims, as they were the result of a violation of the Anti-Kickback Statute. 165.

Patient H is a Medicare beneficiary. SNAP submitted four claims to Medicare for

Patient H, under codes G0399, with modifiers, for home sleep testing services on May 23 and 24, 2014. SNAP claimed $230 in services per date, for a total of $460 in services. Medicare reimbursed SNAP approximately $346 dollars, or $173, for each date of service for Patient H. The referral and payment of those services to SNAP resulted in two commissions paid to the independent contractor territory manager for the sale or marketing of each of the two home sleep tests, including the medically unnecessary second test. These four claims were false claims as they were the result of violations of the Anti-Kickback Statute. 48

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166.

Patient I is a Medicare beneficiary. SNAP submitted four claims to Medicare for

Patient I, under codes G0399, with modifiers, for home sleep testing services on October 31, and November 1, 2015. SNAP claimed $230 in services per date, for a total of $460 in services. Medicare reimbursed SNAP approximately $346 dollars, or $173, for each date of service for Patient I. Patient I was referred to SNAP by a provider who had been marketed to by a SNAP independent contractor territory manager. The marketing included the pitch that the provider could bill for the professional component for privately insured patients, although SNAP provided the report scoring patient results, for that provider to sign. That provider regularly reviews the SNAPprovided reports, signs them, and bills for the professional component. Accordingly, the four claims submitted by SNAP for services to Patient I were false claims as they resulted from violations of the Anti-Kickback Statute. 167.

Patient J is a Medicare beneficiary. SNAP submitted four claims to Medicare for

Patient J, under codes G0399, with modifiers, for home sleep testing services on July 11 and 12, 2014. SNAP claimed $230 in services per date, for a total of $460 in services. Medicare reimbursed SNAP approximately $346 dollars, or $173 for each date of service, for Patient J. The provider who referred Patient J to SNAP had received direct marketing by Stephen Burton, by email on April 18, 2014, as described above in paragraph 137. The provider thereafter referred Patient J and others to SNAP. SNAP gave unsigned “interpretation” reports to Patient J’s provider for his other, non-Medicare referred patients. Accordingly, the four claims submitted by SNAP for services to Patient J were false claims as they resulted from violations of the Anti-Kickback Statute. 168.

Patient K is a Medicare beneficiary. SNAP submitted four claims to Medicare for

Patient J, under codes G0399, with modifiers, for home sleep testing services on March 4 and 5,

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2016. SNAP claimed $230 in services per date, for a total of $460 in services. Medicare reimbursed SNAP approximately $348 dollars, or $174 for each date of service, for Patient K. Patient K was referred to SNAP by a provider who had been marketed to by a SNAP independent contractor territory manager.

The marketing included that the provider could bill for the

professional component for privately insured patients, although SNAP provided the report scoring patient results, for that provider to sign. That provider regularly reviews the SNAP-provided reports, signs them, and bills for the professional component. Accordingly, the four claims submitted by SNAP for services to Patient K were false claims as they resulted from violations of the Anti-Kickback Statute. 169.

Patient L is a Medicare beneficiary. SNAP submitted four claims to Medicare for

Patient L, under codes G0399, with modifiers, for home sleep testing services on May 13 and 14, 2015. SNAP claimed $230 in services per date, for a total of $460 in services. Medicare reimbursed SNAP approximately $346 dollars, or $173 for each date of service, for Patient L. Patient L was referred to SNAP by a provider who had been marketed to by a SNAP independent contractor territory manager.

The marketing included that the provider could bill for the

professional component for privately insured patients, although SNAP provided the report scoring patient results, for that provider to sign. That provider regularly reviews the SNAP-provided reports, signs them, and bills for the professional component. Accordingly, the four claims submitted by SNAP for services to Patient L were false claims as they resulted from violations of the Anti-Kickback Statute.

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Count I Violations of the False Claims Act (31 U.S.C. § 3729(a)(1)(2006), and, as amended, 31 U.S.C. § 3729(a)(1)(A)) Causing False Claims to Be Presented As to All Defendants 170.

The United States incorporates by reference paragraphs 1 through 169 as if fully set

forth in this paragraph. 171.

As set forth above, defendants knowingly or with deliberate ignorance or reckless

disregard for the truth, presented, or caused to be presented, to an officer, employee, or agent of the United States, or a contractor thereof, false or fraudulent claims that were paid with federal funds. Those claims were false or fraudulent because they were for services that were not medically necessary and were, for that reason and others, in violation of applicable Medicare requirements. 172.

Defendants’ fraudulent conduct caused false claims to be presented to Medicare

contractors for payments of federal funds. 173.

The United States made payments to SNAP because of the false or fraudulent claims

caused by defendants. 174.

Pursuant to the False Claims Act, the defendants are liable to the United States under

the treble-damage and civil-penalty provisions of the False Claims Act for a civil penalty of not less than $5,500 and not more than $11,000 for each of the false or fraudulent claims herein, and for violations of the FCA after November 2, 2015, a civil penalty of not less than $10,781 and not more than $21,563, plus three times the amount of damages that the United States has sustained because of the defendants’ actions.

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Count II Violations of the False Claims Act (31 U.S.C. § 3729(a)(2)(2006), and, as amended, 31 U.S.C. § 3729(a)(1)(B)) Use of False Statements As to All Defendants 175.

The United States incorporates by reference paragraphs 1 through 174 as if fully set

forth in this paragraph. 176.

As set forth above, defendants knowingly or with deliberate ignorance or reckless

disregard of the truth, made, used, and caused to be made and used, false records and statements material to false or fraudulent claims in connection with their claims for payment of federal funds for home sleep testing services. 177.

Defendants made and/or caused to be made numerous false records and statements,

including false statements in claim forms that the claim complies with, all applicable laws, regulations, and program instructions for payment, including but not limited to the Federal antikickback statute, and that the services were medically necessary. As a result of these false records and statements, false claims for payment were submitted to Medicare contractors by SNAP Diagnostics, LLC. 178.

The United States paid such false or fraudulent claims because of the acts and conduct

of defendants. 179.

By reason of defendants’ false statements and false claims, the United States has

been damaged in a substantial amount to be determined at trial.

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Count III Violations of the False Claims Act (31 U.S.C. § 3729(a)(2)(2006), and, as amended, 31 U.S.C. § 3729(a)(1)(B)) Causing False Claims to Presented for Services Rendered as a Result of Kickbacks As to All Defendants 180.

The United States incorporates by reference paragraphs 1 through 179 as if fully set

forth in this paragraph. 181.

As set forth above, defendants knowingly or with deliberate ignorance or reckless

disregard for the truth, presented, or caused to be presented, to an officer, employee, or agent of the United States, or a contractor thereof, false or fraudulent claims that were paid with federal funds. Those claims were false or fraudulent because they were for services that were provided in violation of the Federal anti-kickback statute. 182.

Each of the defendants knowingly and willfully offered and/or paid remuneration

(including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind, to referring physicians and to independent sales representatives to induce physicians to refer patients to SNAP for home sleep testing services, for which payment was made in whole or in part by the Medicare program. 183.

Defendants knowingly caused false claims for payment or approval to be presented to

the United States, when they submitted and/or caused the submission of claims to Medicare for home sleep testing services that were impermissibly linked to an illegal offer of kickbacks violation of the Anti-Kickback Statute.

184.

Pursuant to the Anti-Kickback Statute and the False Claims Act, the defendants are

liable to the United States under the treble-damage and civil-penalty provisions of the False Claims Act for a civil penalty of not less than $5,500 and not more than $11,000 for each of the false or fraudulent claims herein, and for violations of the FCA after November 2, 2015, a civil penalty of

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not less than $10,781 and not more than $21,563, plus three times the amount of damages that the United States has sustained because of the defendants’ actions. WHEREFORE, the United States requests that judgment be entered in its favor, as follows: a.

Judgment for the United States against each of the defendants, tly and severally,

treble the government’s damages, and civil penalties for the maximum amount allowed by law; b.

For an award of costs pursuant to 31 U.S.C. § 3729(a); and

c.

For such further relief as is proper. Respectfully submitted, JOHN R. LAUSCH, Jr. United States Attorney By: s/ Sarah J. North SARAH J. NORTH Assistant United States Attorney 219 South Dearborn Street Chicago, Illinois 60604 (312) 353-1413 [email protected]

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