Keokuk chiropractor accused of Medicare fraud exceeding $1 million

A Keokuk chiropractor is being sued by the federal government, which alleges he defrauded Medicare of more than $1 million.

The U.S. Department of Health and Human Services alleges that Jason James of the James Healthcare & Associates clinic — along with his wife, Deanna James, the clinic’s co-owner and office manager — filed dozens of claims with Medicare for a disposable acupuncture device, which is not covered by Medicare, as if it were a surgically implanted device for which Medicare can be billed.

According to the lawsuit filed this week in U.S. District Court for the Southern District of Iowa, more than 180 such claims were filed by the clinic between July 2016 and September 2018.

Beginning in 2016, the lawsuit alleges, the clinic began offering an electro-acupuncture device referred to as a “P-Stim.” When used as designed, the P-Stim device is affixed behind a patient’s ear using an adhesive. The device delivers intermittent electrical pulses though a single-use, battery-powered attachment for several days until the battery runs out and the device is thrown away.

Because Medicare does not reimburse medical providers for the use of a such a device, DHHS alleges that some doctors and clinics have billed Medicare for the P-Stim device using a code number that only applies to a surgically implanted neurostimulator.

The use of an actual neurostimulator is reimbursed by Medicare at approximately $6,000 per claim, while P-Stim devices were purchased by the Keokuk clinic for just $667, DHHS alleges. The clinic was “being paid thousands of dollars for just a few minutes, at most, of work,” the department claims.

The department alleges James knew his billings were fraudulent as the P-Stim device is “nowhere close to even resembling genuine implantable neurostimulators” and do not require surgery.

The lawsuit alleges that on June 15, 2016, when Jason James was contemplating the use of P-Stim devices at the Keokuk clinic, he sent a text message to P-Stim sales representative Mark Kaiser, asking, “Is there a limit on how many Neurostims can be done on one day? Don’t wanna do so many that gives Medicare a red flag on first day. Thanks.”

After realizing the “large profit windfall” that could result from the billing practice, DHHS’s lawsuit alleges, James “told Mark Kaiser not to mention the Medicare reimbursement rate to his nurse practitioner or staff – only his office manager and biller needed that information.”

James then pressured clinic employees to heavily market the P-Stim devices to patients, even if those patients were not agreeable or, after trying it, were reluctant to continue the treatment, the lawsuit claims.

In October 2016, the clinic’s supplier of P-Stim devices sent the clinic an email stating the company had “no position on what the proper coding might be for this device if billed to a third-party payer” such as an insurer or Medicare, according to the lawsuit. The company advised the clinic to “consult a certified biller/coder and/or attorney to ensure compliance.”

According to the lawsuit, James then sent Kaiser a text message asking, “Should we be concerned?”

DHHS alleges the clinic’s initial reimbursement claims were submitted to Medicare through a nurse practitioner and were denied for payment due to the lack of a trained physician’s involvement.

In response, the clinic hired Dr. Robert Schneider, an Iowa-licensed physician, to work at the clinic for the sole purpose of enabling James Healthcare & Associates to bill Medicare for the P-Stim devices, the lawsuit claims.

James then informed Kaiser he had a goal of billing Medicare for 20 devices per month, which would generate roughly $125,573 of monthly income, the lawsuit alleges.

The lawsuit also alleges Dr. Schneider rarely saw clinic patients in person, consulting with them instead through Facebook Live.

In April 2017, Medicare allegedly initiated a review of the clinic’s medical records, triggering additional communications between James and Kaiser. At one point, James allegedly wrote to Kaiser and said he had figured out why Medicare was auditing the clinic. “Anything over $7,500 is automatically audited for my area,” he wrote, according to the lawsuit. “We are now charging $7,450 to remove the audit.”

The clinic ultimately submitted 188 false claims to Medicare seeking reimbursement for the P-Stim devices, DHHS alleges, with Medicare paying out $4,100 and $6,300 per claim, for a total loss of $1,028,800.

DHHS is suing the clinic under the federal False Claims Act and is seeking trebled damages of more than $3 million, plus a civil penalty of up to $4.2 million.

An attorney for the clinic, Michael Khouri, said Wednesday he believe the federal government’s lawsuit was filed in error because a settlement in the case had already been reached. However, the assistant U.S. attorney handling the case said no settlement in the case had been finalized and the lawsuit was not filed in error.

James’ license is in good standing with the Iowa Board of Chiropractic and is scheduled to expire in June 2024.

State charged James in 2015

In 2015, the Iowa Board of Chiropractic charged Jason James with knowingly making fraudulent or untrue representations in connection with his practice, engaging in conduct that was harmful or detrimental to the public, and making untruthful statements in advertising.

The board alleged James told patients they would be able to be stop taking diabetes medication through the use of a diet and nutrition program, and that he had claimed to be providing extensive laboratory tests when not all of the tests for which he billed were ever conducted. The board also claimed James referred patients to a medical professional who was not licensed to practice in Iowa.

The case was resolved with a settlement agreement in which James agreed to pay a $500 penalty and complete 10 hours of education in marketing and ethics.

In 2019, Schneider sued the clinic for failing to comply with the terms of his employment agreement. Court exhibits indicate the agreement stipulated that Schneider was to work no more than two days per month and would collect $2,000 for each day worked, plus $250 per month for consulting, plus “$250 per device over six per calendar month.”

In March 2020, a jury ruled in favor of the clinic and found that it had not breached its employment agreement with Schneider.