Guilty Plea in Case Involving $70 Million Medical Diagnostics Fraud

Estimates say that approximately $5 trillion is spent annually on healthcare in the United States. These payments go to a variety of providers, most of which are acting above-board. Unfortunately, there are numerous instances where an individual or business in the medical industry breaks the rules to increase their bottom line. 

One of most competitive healthcare segments involves diagnostic services. In some cases, companies offer very similar products and a doctor’s personal preference determines who gets the sale. There are also instances where illegal kickbacks are used to close the deal. 

James Rausch, a director of operations and sales for a mobile medical diagnostics company, pled guilty to conspiring to violate the anti-kickback statute. The case centers around allegations that, from March 2015 through September 2020, Rausch conspired with two managers of a mobile medical diagnostics company to offer illegal kickbacks to doctors. In return, the physicians ordered medically unnecessary transcranial doppler (TCD) scans, which are ultrasounds that evaluate blood flow in parts of the brain.

Prosecutors say that Rausch and his co-conspirators went to great lengths in order to conceal their scheme. They reportedly established bogus rental and administrative service agreements with doctors, making it appear as if the payments were legitimate compensation for the company’s use of space and administrative services, rather than money for the fraudulent TCD scan referrals.  

The anti-kickback statute aims to prevent healthcare fraud and abuse, ensuring that medical decisions are based solely on patient needs rather than financial incentives. Misconduct of this type does not only represent the misappropriation of funds from government programs such as Medicare and Medicaid, but also could compromise standards of care. 

As in the Rausch case, parties engaged in medical insurance fraud frequently devise ways to hide what they are doing. Transparency and accountability often depend on honest employees who learn that something illegitimate is going on. 

Under the False Claims Act, someone who blows the whistle on wrongdoing could obtain a share of what the government recovers in a legal proceeding. Generally these payments amount to between 15 and 30 percent of what the government receives. While not every case involves a $70 million fraud like this one, Kardell Law Group has extensive experience advocating for whistleblowers who wind up with six- and seven-figure awards.