Houston-Area Patient Recruiter Convicted of Health Care Fraud

January 28, 2010 - Sylvia Smith, 64, a retired nurse, was convicted today of conspiracy to commit health care fraud and health care fraud, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney Tim Johnson of the Southern District of Texas; and Special Agent-in-Charge Mike Fields of the Dallas Regional Office of the Department of Health and Human Services, Office of the Inspector General (HHS-OIG).

At trial, Noel Jhagroo, owner of Trucare Medical Equipment Services (Trucare), a Houston-area durable medical equipment company, testified that he entered into a kickback arrangement with Smith, whereby he agreed to pay her 10 percent of what Medicare paid Trucare for each patient Smith referred. Jhagroo and Smith submitted claims to Medicare for enteral nutrition supplies and for bundles of orthotics, referred to as “artho kits.” Jhagroo also testified that he paid Smith a kickback of $300 per patient in this scheme. In total, Jhagroo and Smith submitted $747,258 in phony claims to Medicare.

In order to bill Medicare for enteral nutrition supplies, Medicare regulations require that a beneficiary have a feeding tube. The forms supplied by Smith indicated that the beneficiaries she referred had such a feeding tube. The evidence at trial, however, showed that none of the patients referred by Smith had a feeding tube. The evidence also showed that Smith provided Jhagroo with high-dollar Medicare codes for specialized enteral food supplements. In fact, Smith and Jhagroo supplied patients with over-the-counter supplements, one of which stated on the bottle that it was “not for tube feeding.”

The evidence at trial showed that Smith also provided Jhagroo with a product list of inexpensive, soft, over-the-counter supplements to be included in the artho kit. The evidence showed that Smith provided Jhagroo with Medicare codes to be used for billing purposes that were actually for expensive, rigid, high-end orthotics, in contrast to the inexpensive products that were actually delivered. After refusing the inexpensive artho kits initially, two Medicare beneficiaries testified that Smith offered them $100 if they would agree to accept the kits.

In addition to referring patients, the evidence at trial showed that Smith supplied Jhagroo with phony certificates of medical necessity signed by a Houston-area physician, so that Trucare could submit claims to Medicare. A Medicare beneficiary testified at trial that she had never heard of the physician who signed the form supplied by Smith to Trucare.

Smith’s sentencing is scheduled for May 12, 1010. Smith faces a maximum prison sentence of 10 years for the conspiracy count, as well as 10 years in prison for each of the six counts of health care fraud for which she was convicted. Smith also faces a maximum fine of $250,000 per count. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime. Jhagroo pleaded guilty on Nov. 2, 2009, to conspiracy to commit health care fraud for his role in the scheme.

The case was prosecuted by Assistant Chief John S. (Jay) Darden and Trial Attorneys Katherine Houston and Jennifer L. Saulino of the Criminal Division’s Fraud Section, and was investigated by the FBI, HHS-OIG and the Railroad Retirement Board.

The case was brought as part of the Medicare Fraud Strike Force, supervised by the U.S. Attorney’s Office for the Southern District of Texas and the Criminal Division’s Fraud Section. Since their inception in March 2007, Strike Force operations in seven districts have obtained indictments of more than 500 individuals who collectively have falsely billed the Medicare program for more than $1 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.