Healthcare provider fraud can take many forms, from submitting multiple claims for the same service to billing for services never rendered to billing for a more expensive service than patients actually received. The list goes on.

A recently closed provider fraud case was so extensive that it nearly stretches the imagination — not just in terms of scope but also in complexity. This case dates to December 2015, when USPS OIG investigators initiated a review of an unusually high level of Postal Service-related claims for compounded medications — that is, two or more ingredients mixed to create a medication tailored to patients’ needs. The claims had been filed with the Department of Labor (DOL) Office of Workers’ Compensation Program (OWCP) and showed a pharmacy as a disproportionately high biller, having received $4.2 million for compounding drugs that year.

Our agents partnered with the Department of Labor OIG, the Department of Veterans Affairs OIG, and the Department of Defense to look into the billings’ legitimacy. A month later, they started acquiring subjects’ financial records, which involved several pharmacies and revealed money laundering, kickbacks, and multiple shells companies. How big of a case were they on to?

Over 80 grand jury subpoenas were obtained for this investigation alone. By June of 2017, over 60 interviews were conducted and by the conclusion of the case over 200 in total were conducted.

In June of 2017, search warrants were executed at six locations in Houston and Dallas. Seizure warrants were simultaneously executed at multiple banks resulting in the seizure of over $4.5 million. An additional search warrant was executed in November of 2017 in the Houston area. The ruse’s end was near.

Investigators determined the pharmacies and related entities engaged in multiple healthcare fraud schemes, including billing TRICARE, a health care program serving U.S. service members and their families. Three schemes led to a combined total of $42.3 million in fraudulent reimbursements over a four-year period. Altogether the scheme involved billing the DOL and TRICARE $126M!

Ahead of the trial, our Office of Investigations partnered with Department of Justice (DOJ) Health Care Fraud Unit attorneys. The investigation culminated in 13 indictments. All 13 defendants pleaded guilty, with a handful of those waiting until two days before trial before entering their plea.  

The case is remarkable not only because it was a highly complex investigation into a widespread healthcare fraud scheme involving compound drugs — it also illustrates the effectiveness of the Strike Force Model employed by the DOJ Health Care Fraud Unit, where experienced prosecutors and law enforcement agencies join forces to bring criminals to justice. The case also reinforced the message that providers who exploit health care programs for injured federal workers will be prosecuted to the full extent of the law.

Because of their tremendous work together, this investigation resulted in an anticipated cost avoidance of $117 million besides fines, restitution, and recoveries of $31 million. In April 2023, nine ringleaders were handed down lengthy sentences ranging from one year and six months to 20 years in prison. The remaining four defendants are scheduled to be sentenced this July.

If you know or suspect a postal contractor or employee of fraud or misconduct, be part of the change by reporting it to our Hotline.

Today’s sentencing is a testament to the dedication and determination of the investigative and legal teams. The Postal Service spends hundreds of millions of dollars annually on health care-related costs and these monies are critical to those who legitimately require medical services. As in this case, our criminal investigators will diligently pursue any individual or organization intent on defrauding the Postal Service with an eye on both federal prosecution and returning lost monies to the affected program. 

– Scott Pierce, USPS OIG
Special Agent in Charge

For further reading:

Department of Justice (via uspsoig.gov), Nine Defendants Sentenced in $126M Compounding Fraud Scheme