While federal prosecutors in Dallas prepare for upcoming health care fraud trials, the FBI and other investigators are continuing to raid more medical businesses, looking for evidence of illegal kickbacks.

Last week, the FBI searched the Dallas offices of Next Health, which owned a network of testing labs and pharmacies. Next Health is already facing fraud allegations from insurance giant United Healthcare, which claims the company gave people gift cards to urinate in cups in Whataburger bathrooms.

The FBI also searched the offices of Critical Health Care Management, which agents say took over Next Health's operations.

Andrew Hillman and Semyon Narosov, who allegedly control both businesses, are charged with health care fraud in an unrelated federal case in Dallas involving the defunct Forest Park Medical Center.

Next Health is one of several Dallas-area health care businesses that are currently the subject of federal indictments and investigations. The recent raids indicate the government is not done cracking down on testing labs and compounding pharmacies, which have been a focus of kickback investigations nationwide for the past few years.

Michael McCaslin, a Dallas FBI agent, said during a July 24 court hearing that the bureau is looking at whether Next Health paid kickbacks to doctors for referring patients to the company’s pharmacies.

The agent also said Next Health is suspected of using animal drugs in its pharmacies and manipulating ingredients to overcharge insurance companies.

McCaslin said doctors invested in Next Health’s pharmacies and were paid kickbacks in the form of dividends that in some cases were tied to the volume of their referrals.

“You had to be prescribing or else you’d be asked to leave,” the agent said.

McCaslin's testimony was given during a detention hearing for Hillman and Narosov, who were recently arrested on drug distribution charges related to a marijuana dispensary they allegedly owned in Los Angeles.

An attorney for Next Health did not respond to requests for comment about the raids and FBI investigation.

Next Health is fighting United Healthcare's $100 million lawsuit, which was filed in 2017. Its lawyers recently tried to get the lawsuit tossed on the basis of several legal arguments.

But U.S. District Judge Karen Gren Scholer on July 20 ruled that the majority of United's claims can go forward. United Healthcare alleges in its fraud lawsuit that Next Health paid bribes and kickbacks to doctors and other providers for ordering overpriced and unnecessary drug and genetic tests under the guise of a wellness study.

Semyon Narosov (left) (Facebook)

Matthew Rodriguez, a United Healthcare spokesman, said the company is pleased that the judge allowed the lawsuit to proceed.

“United Healthcare has taken an active role in recent years in prosecuting instances of lab fraud, and this decision will continue to shine light on companies engaged in inappropriate lab services that put patients at risk and drive up costs,” he said.

It’s not the first time a Hillman and Narosov business has faced fraud allegations in the healthcare industry.

One of Next Health's testing labs, Medicus, agreed to pay $5 million in 2014 to settle a federal civil complaint that it defrauded Medicare over urine testing services.

And in 2005, Hillman and his high school friend, Jason White, were indicted on mail fraud and health care fraud charges for an alleged scheme to defraud workers' compensation insurance companies by getting them to pay for unnecessary medical equipment.

The following year, the U.S. attorney’s office in Dallas dropped the charges against Hillman after White took blame for the fraud and said Hillman had nothing to do with it, according to court records.

In the Forest Hill Medical Center case, Hillman and Narosov are accused of earning about $190,000 in kickbacks and bribes for referring patients for surgeries and other procedures at the hospital.

White noise

The Next Health search warrants were executed by agents on July 19.

McCaslin said the FBI also plans to seize vehicles from Hillman and Narosov.

Hillman’s attorney declined to comment on the FBI investigation. An attorney for Narosov, who until May was a licensed physical therapist, could not be reached.

McCaslin said in court that agents were surprised to encounter speakers playing white noise outside conference rooms during the recent searches.

Jay Ethington, an attorney who represents Narosov in the drug smuggling case, suggested during the detention hearing that the white noise was used for privacy reasons, so discussions about private medical information would not be overheard.

McCaslin said agents also found a drug during their search that is approved for use in animals but could cause blindness in humans. The agent said the U.S. Food and Drug Administration only allows the drug, called DMSO, to be used for treating bladder cancer in humans via a catheter.

McCaslin said the FBI’s investigation also is looking at whether Next Health was overcharging insurance programs by continually changing ingredients in its compounded medications. The reason, he said, is to turn a $1,000 prescription into one costing $6,000. The ingredients are chosen with money in mind, not the patient, he said.

FBI agents load boxes into a van while the federal agents raid the Medoc Health Services company in Dallas, Wednesday, May 9, 2018. (Jae S. Lee / Staff Photographer)

The agent said Hillman and Narosov talked about buying pharmacies and closing them down if questions arose during insurer audits.

If an insurer finds that improper claims were paid, it attempts to “claw back” some of the money, McCaslin said. But if the pharmacy no longer operates, there’s no money to claw back, McCaslin said.

Allan Cohen, an alleged partner with Hillman and Narosov in the California marijuana dispensary, agreed to tape record phone conversations he had with Hillman and Narosov for the marijuana distribution case, court records say.

Assistant U.S. Attorney Chad Meacham said during the hearing that the government has many hours of recordings — some of which turned out to be revealing.

“They’re involved in a lot of criminal activity,” he told the judge about Hillman and Narosov.

After hearing evidence and testimony from both sides, federal Magistrate Judge David Horan ordered that both men be held in detention pending trial.

FBI stays busy

Next Health is not alone in facing fraud allegations in the Dallas area.

The FBI in May also raided the Dallas offices of Medoc Health Services, which manages and operates several pharmacies.

The bureau has not commented on the search warrant.

Southwest Laboratories in Dallas also is accused of paying kickbacks to doctors to drum up business, according to federal court documents. It's unclear whether Southwest's offices were raided. The business has closed.

One of Next Health's former marketing contractors, the ADAR Group, was implicated in an unrelated criminal case involving an alleged laboratory kickback scheme. Three others were indicted last year in that case.

Next Health offices in Dallas. (Kevin Krause / Kevin Krause)

Prosecutors say the defendants paid kickbacks to physicians for ordering bogus urine tests at North Texas labs. Soldiers were given Wal-Mart gift cards in exchange for providing saliva and urine, court records in that case say.

Erik Bugen, an ADAR co-founder, has pleaded guilty to fraud in that case and was sentenced in May to 36 months in prison, court records show. United Healthcare also is suing Bugen in its Next Health lawsuit.

Dallas-based Trilogy Pharmacy is the subject of a $100 million kickback fraud indictment involving 13 defendants that remains active in federal court.

And eight people are charged in an alleged $158 million fraud involving Fort Worth's Ability Pharmacy. In one instance, the pharmacy spent about $15 per container of pain cream and then charged the government $28,000 for it, according to federal agents and prosecutors.