Health care software exec pleads guilty to $1B in Medicare fraud

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A Medicare fraudster targeted beneficiaries to create phony medical orders tallying more than $1 billion, according to the U.S. Department of Justice (DOJ).

While the White House takes action to improve government efficiency and to reduce the federal bureaucracy, it was unclear what could be the next actions on nailing down health care fraud.

$1 billion in bogus medicine

DMERx, an Internet-based platform, generated bogus claims for orthotic braces, pain creams and other items for beneficiaries. Its operating company vice president, Gregory Schreck, 50, of Johnson County, Kansas, pleaded guilty to conspiracy to commit health care fraud and faces a maximum penalty of 10 years in prison, according to a DOJ news release.

Schreck and co-conspirators used the false claims to collect $360 million from Medicare and insurers. DMERx used misleading mailers, television advertisements, and calls from offshore call centers to get personally identifiable information from beneficiaries and used that to file the claims. Schreck admitted he offered to connect pharmacies, durable medical equipment suppliers, and marketers with telemedicine companies that would get kickbacks and bribes for transmitted signed doctors’ orders via the DMERx online platform.

“Schreck and his co-conspirators received payments for coordinating these illegal kickback transactions and referring the completed doctors’ orders to the DME suppliers, pharmacies, and telemarketers that paid for them,” the DOJ announcement said. “The fraudulent doctors’ orders generated by DMERx falsely represented that a doctor had examined and treated the Medicare beneficiaries when, in reality, purported telemedicine companies paid doctors to sign the orders without regard to medical necessity and based only on a brief telephone call with the beneficiary, or sometimes no interaction with the beneficiary at all.”

Enforcing medical fraud rules

DOJ announced the plea on Feb. 20. The $1 billion investigation followed 2024 investigations that tallied more than $4.36 billion in expected recoveries and receivables, according to the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). That office’s investigators work with DOJ on health care fraud enforcement.

However, HHS-OIG Inspector General Christi A. Grimm was among eight inspectors general that were fired by President Donald J. Trump in his first week in office. Grimm and other inspectors general have since filed a federal lawsuit claiming they were terminated wrongly.

HHS-OIG had an estimated 1,570 employees responsible for overseeing HHS’s $2.3 trillion budget, which paid for more than 80,000 workers and more than 100 programs, the lawsuit said. Grimm previously worked in the administrations of Presidents Bill Clinton, George W. Bush, Barack Obama, Trump, and Joe Biden, the lawsuit said.

As of Feb. 21, the HHS-OIG website listed Principal Deputy Inspector General Juliet T. Hodgkins as its top leader. Hodgkins served as deputy chief of staff since April 2019 and as acting chief of staff from 2020 to 2022. Hodgkins also worked for the U.S. Election Assistance Commission and the Louisiana Department of Elections and Registration. She earned her juris doctor degree from Louisiana State University, according to her official biography.

More nominees

It was unclear if Hodgkins would remain working for Trump and HHS Secretary Robert F. Kennedy Jr.

As of Feb. 21, HHS announced the president had nominated people for other leadership roles in HHS:

• Gustav Chiarello, MPP, JD, to be assistant secretary for financial resources. Currently he is senior special counsel to the House of Representatives Committee, chaired by Rep. Jim Jordan (R-Ohio).
• Gary Andres, PhD, to serve as assistant secretary for legislation. Currently his is Republican staff director for the House Budget Committee.
• Michael Stuart, JD, as general counsel. Currently he is an elected state senator in West Virginia.

HHS’ official website lists a number of vacancies under Kennedy on its leadership section as of Feb. 21. The president has nominated some candidates for high-level leadership roles, but as of Feb. 21, the official websites of the Senate Committees on Finance and on Health, Education, Labor & Pensions, two key panels to consider the nominees, did not list hearings for them.

2024 tally

As for HHS-OIG, from April 1 to Sept. 30, 2024, the inspector general issued 53 audits and 22 evaluations that identified systemic weaknesses and opportunities for advancement. For the total fiscal year 2024, HHS-OIG issued 434 recommendations and 1,548 criminal and civil actions, identifying more than $7.13 billion in expected recoveries and receivables, according to the HHS-OIG semiannual report to Congress, published in December 2024.

“OIG’s innovative, data-driven, technology-savvy workforce produces outsized impacts for the American people,” Grimm wrote in that report. “OIG’s work consistently yields a positive health care return on investment of around $10 returned for every $1 invested, including expected and actual recoveries of funds to HHS programs. As evidenced by this report, our work identifies misspent taxpayer funds, stops fraud, and finds opportunities to improve the quality and efficiency of HHS programs. OIG stands ready to do even more. With additional resources, we have in place the infrastructure and expertise to deliver even greater results for the American people.”

As the Biden Administration was winding down, HHS-OIG listed its top management and performance challenges facing HHS:

• Public health, including the opioid epidemic, maternal health and food safety
• Financial integrity, including improper payments, cost effectiveness and program integrity
• Medicare and Medicaid, including nursing home quality of care
• Beneficiary safety, including access to services and children in foster care

Data and technology security, including cybersecurity compliance and sensitive data