CEO of Health Care Software Company Convicted of $1B Fraud Conspiracy

A federal jury convicted the CEO of Power Mobility Doctor Rx, LLC (DMERx) for his role in operating a platform that generated false doctors’ orders to defraud Medicare and other federal health care benefit programs of more than $1 billion.

According to court documents and evidence presented at trial, Gary Cox, 79, of Maricopa County, Arizona, and his co-conspirators targeted hundreds of thousands of Medicare beneficiaries who provided their personally identifiable information and agreed to accept medically unnecessary orthotic braces, pain creams, and other items through misleading mailers, television advertisements, and calls from offshore call centers. Cox and his co-conspirators owned, controlled, and operated DMERx, an internet-based platform that generated false and fraudulent doctors’ orders for these items. As part of the scheme, Cox connected pharmacies, durable medical equipment (DME) suppliers, and marketers with telemedicine companies that would accept illegal kickbacks and bribes in exchange for signed doctors’ orders transmitted using the DMERx platform. Cox 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 kickbacks and bribes for the orders.

The fraudulent doctors’ orders generated by DMERx falsely represented that a doctor had examined and treated the Medicare beneficiaries when in fact purported telemedicine companies paid doctors to sign the orders without regard to medical necessity, based only on a brief telephone call with the beneficiary or no interaction with the beneficiary at all. The DME suppliers and pharmacies that paid illegal kickbacks in exchange for these doctors’ orders billed Medicare and other insurers more than $1 billion. Medicare and the insurers paid more than $360 million based on these claims. According to evidence presented at trial, Cox and his co-conspirators concealed the scheme through sham contracts and by eliminating from doctors’ orders what one co-conspirator described as “dangerous words” that might cause Medicare to audit the scheme’s DME suppliers.

“The defendant orchestrated a scheme to defraud government health care benefit programs on a massive scale, creating fraudulent doctors’ orders used to bill insurers over $1 billion,” said Matthew R. Galeotti, Head of the Justice Department’s Criminal Division. “Americans are all too familiar with junk mail and spam calls that target seniors to steal their personal information and promote waste, fraud, and abuse in our economy. The Criminal Division will continue to aggressively prosecute health care fraud schemes to hold criminals accountable, protect the vulnerable, and recover financial losses.”

“Fraud schemes perpetrated against veterans are abhorrent and will be thoroughly investigated,” said Special Agent in Charge David Spilker of the Department of Veterans Affairs Office of Inspector General’s Southeast Field Office. “The VA OIG, along with our law enforcement partners, will continue to combat these schemes to ensure the integrity of VA’s healthcare programs for veterans and their families.”   

“The defendant deliberately exploited the federal health care system by prioritizing personal enrichment over the medical needs of vulnerable patients,” stated Deputy Inspector General for Investigations Christian J. Schrank of the Department of Health and Human Services Office of Inspector General (HHS-OIG). “By fraudulently billing the government for medically unnecessary durable medical equipment, the defendant not only violated the law but also assaulted the public’s trust placed in health care providers. There is zero tolerance for those who abuse federal health care programs, and HHS-OIG remains steadfast in its commitment to ensure that individuals who engage in such egregious fraud are held fully accountable.”

“Medicare fraud and other health care related frauds are, unfortunately, nothing new,” said Assistant Special Agent in Charge Mark McCormick of the FBI Miami Field Office. “As such, the FBI and our partners devote considerable resources to investigate, arrest, and prosecute those committing this fraud. The victims are U.S. taxpayers - you and me.  Our message to those who commit health care fraud and steal from U.S. taxpayers is clear: you will be caught, and you will face justice.”

Cox was convicted of conspiracy to commit health care fraud and wire fraud, three counts of health care fraud, conspiracy to pay and receive health care kickbacks, and conspiracy to defraud the United States and make false statements in connection with health care matters. Cox faces a maximum penalty of 20 years in prison for the conspiracy to commit health care fraud and wire fraud conviction, 10 years for each health care fraud conviction, five years for the conspiracy to pay and receive health care kickbacks conviction, and five years for the conspiracy to defraud the United States and make false statements in connection with health care matters conviction. A sentencing hearing will be scheduled at a later date. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

HHS-OIG, FBI, VA-OIG, and DCIS investigated the case.

Trial Attorneys Darren C. Halverson and Jennifer E. Burns of the Criminal Division’s Fraud Section are prosecuting the case. Fraud Section Trial Attorneys Andrea Savdie and Shane Butland assisted in the prosecution. Trial Attorney Evan N. Schlom with the Fraud Section’s Special Matters Unit provided valuable assistance.

The Fraud Section leads the Criminal Division’s efforts to combat health care fraud through the Health Care Fraud Strike Force Program. Since March 2007, this program, currently comprised of nine strike forces operating in 27 federal districts, has charged more than 5,800 defendants who collectively have billed federal health care programs and private insurers more than $30 billion. In addition, the Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, are taking steps to hold providers accountable for their involvement in health care fraud schemes. More information can be found at www.justice.gov/criminal-fraud/health-care-fraud-unit.