LAWRENCEVILLE, Ga. (Reuters) - The genetic-screening sales reps turn out at health fairs, houses of religion, parks and elder enclaves, offering seniors a chance to learn if they or their loved ones are at risk of developing cancer. All they need, the reps say, is a free cheek swab.

Janet Putrah, a retired university IT supervisor, poses for a photo in her home in Mankato, Minnesota, U.S. September 23, 2019. REUTERS/Nicholas Pfosi

In truth, U.S. federal investigators say, some of the sales representatives are part of a burgeoning industry that threatens to become what multiple government investigators call the next big frontier in healthcare fraud: genetic testing, which is reaping millions of dollars from unnecessary tests that target senior citizens.

Shimon Richmond, assistant inspector general for investigations with the Office of Inspector General for the Department of Health and Human Services, said his office has seen a steady stream of complaints into genetic testing. In 2018, the inspector general’s office received about one or two complaints per week. Now, he said, the fraud hotline burns with as many as 50 calls weekly.

“We have investigations going on in this space across the country. It is not limited to one geographic region,” Richmond said in an interview. “This is touching every corner.”

In all, more than 300 federal investigations, conducted by multiple law enforcement agencies, are examining genetic testing fraud schemes, said a law enforcement official who spoke on condition of anonymity because the inquiries are not yet public. The investigative crush was sparked in part by unusual Medicare billing data patterns that started to emerge in 2015.

In the United States, genetic testing has skyrocketed. For Medicare, the public insurance program for elderly and disabled Americans, payouts for genetic tests jumped from $480 million in 2015 to $1.1 billion in 2018, a Reuters analysis found. Those figures do not include invoices for spending by state Medicaid programs, which serve the poor, or supplemental Medicare insurance programs offered by private insurers.

The investigations are examining billings submitted to federal health insurance programs. By law, all diagnostic lab tests must be ordered by a doctor treating a patient for a specific condition.

In the cases under review, investigators and patients told Reuters, marketers get elderly residents to turn over their Medicare or Medicaid information, along with their driver’s license and other identifying information, and tell them they will take a free cheek swab that can help them understand their risks of developing cancer or whether their genetics could unlock clues about how they will respond to drug treatments. They then get a doctor to sign off and approve the test and ship the swab off to a lab, which seeks Medicare payouts.

But many of the lab tests are not relevant to the patient’s history, and some of the doctors sign off on the results without conferring with the patient, said investigators familiar with the operations and patients interviewed by Reuters. Suspect companies pocket thousands, with a cut going to doctors, but the seniors get little, if any, benefit, investigators say.

Brian Benczkowski, the assistant attorney general for the U.S. Department of Justice’s Criminal Division, estimated that fraudulent billings submitted over the last few years are expected to total “north of $1 billion.” He called genetic testing of the elderly “the next big frontier in federal healthcare fraud enforcement.”

“There is a huge pot of money that entrepreneurial criminals are trying to figure out how to access,” Benczkowsi told Reuters.

Investigators say genetic testing became a ready target thanks to advances in medical technology and a rise in the technique’s popularity. Companies such as 23&Me, which offers health-and-ancestry genetic tests directly to consumers for $199, have entered the mainstream. Their success, federal investigators say, has drawn the attention of scamsters looking to capitalize on the trend.

Rebecca Kinney, the acting director for the Office of Healthcare Information and Counseling, part of HHS, said seniors should be on the lookout for red flags and any genetic tests should be ordered by their own doctors. “The thing that we really try to tell people to pay attention to in any kind of marketing scheme or fraud scheme are the phrases ‘Free to you’ or ‘Free if you have Medicare,’ ” she said.

TARGETING SENIOR CITIZENS

In Delray Beach, Florida, Janet Putrah participated in a cheek swabbing event hosted by her condo building’s social committee in February 2018.

She said none of the tests, which were sent to a lab called Clio Laboratories, made any sense to her. She was stunned to learn the lab billed her Medicare Part B insurance plan more than $30,000 and was paid more than $12,000.

The test results “were useless,” she wrote in a complaint to the condo board. “There were pages and pages with information about drugs. It listed 12 drugs that I may have an ‘unfavorable’ response to. I don’t take any of the drugs listed.”

Putrah said she only participated because her grandmother had died of colon cancer and she was told the test would be paid for by Medicare. In July 2018, she contacted Medicare to raise concerns about her billing statement, and then in December 2018 she called the inspector general’s fraud hotline and forwarded supporting documents.

“It’s my money you’re taking from me in taxes,” she said. “This is just insane.”

Jean Stone, a Medicare fraud specialist who worked for the federal Centers for Medicare & Medicaid Services and now often testifies as an expert witness, said the test results Putrah received appear “useless.”

“They paid $12,000 they shouldn’t have paid,” Stone said of Medicare, calling the test “wasted taxpayer dollars.”

“Who gets the test results?” she asked. “They don’t even know who the woman’s doctor is.”

Another condo resident, Arlene Pallack, said her Humana Medicare Advantage plan in 2018 paid for $2,225.17 of the $4,625.42 Clio charged for her cheek swab. Humana is concerned about the “growing health care issue” of testing fraud, a spokeswoman said, and targets misuse.

Until she was interviewed by Reuters this August, Pallack had never received the results. She only got them after calling the lab to inquire.

A spokesperson for the Centers for Medicare and Medicaid Services said it uses an “aggressive” approach to address fraud prevention.

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Janet Shaver, the current treasurer of the condo board where Putrah and Pallack participated in the cheek swabbing event, said the board’s leadership has since changed, but that she intends to follow up “to make as many people as possible aware of this.”

Victoria Nemerson, Clio’s general counsel, said in a statement that the company’s testing is proper and that it has “extensive experience providing important testing and laboratory services for physicians and patients.” She added: “We commit substantial time and resources to meeting our legal duties.”

Other companies are also riding the genetic testing wave.

In California, Jean Reeves, Lura Tamm and Patti Falkenberg said they had their cheeks swabbed at a free event in February 2019 by a pleasant woman named Ronda Butman, a sales representative who later told Reuters she worked on contract with two different marketing companies. One of those businesses was called MyDNACancerTesting; the other marketing company went by MedMolecular.

The women said Butman told them the genetic test could help predict if they were at risk of developing cancer and tell them how their genetics could impact the way their bodies metabolize their medications – a scientific field known as “pharmacogenetics.”

All three recall being told the cancer and pharmacogenetic screenings would only cost Medicare a few thousand dollars. All they needed to provide, they said they were told, was a swab of their DNA, their Medicare card number, and other sensitive information, which they shared.

But Medicare explanation-of-benefits statements, reviewed by Reuters, revealed that a lab in Arlington, Texas, called Spectrum Diagnostic Labs LLC had in two cases tried to charge Medicare more than $15,000 per patient, and received around $5,000.

“I’m worried about my Medicare information and my Social Security out there. I thought ‘My gosh, they’ve got all of this information,’ ” Falkenberg said.

The tests were approved, records show, by a physician the women say they never met: Dr. Cornelius J. O’Leary. Before taking part in genetic testing, public records show, he had filed for bankruptcy in 2012, had been convicted of misdemeanor battery in 2015, and in two lawsuits in 2012 and 2014 had alleged law enforcement officials were harassing him and using counter-terrorism units to sleep-deprive him.

O’Leary could not be reached for comment. He did not respond to emails or calls seeking an interview at multiple numbers listed for him. A relative declined to help Reuters get in touch with him.

Butman, the sales rep, said she later quit her job at MyDNACancerTesting. MedMolecular, the other company, later shut down its genetic testing business.

Butman has since gone back to those from whom she collected cheek swabs to warn them the billings for the tests might be improper. She said she has filed complaints with several state attorneys general against MyDNACancerTesting and some of the labs she fears were overbilling.

“I feel like a victim,” said Butman, who said she got involved to help those at risk of cancer.

Jerry Pfeister, the founder of MyDNACancerTesting, told Reuters he contracted with a different company which dealt with the labs, but his company did not interact with labs or doctors. He said MyDNACancerTesting severed ties and stopped collecting cheek swabs for the company that dealt with the labs in April. “We never had any interactions with any doctors or labs,” Pfeister said.

Monique Deckter, formerly vice president of operations at the other company, MedMolecular, said her small marketing firm contracted with a larger distributor that helped facilitate the tests, which were later shipped to Spectrum Diagnostic. She said she closed MedMolecular in April 2019 amid concerns the telemedicine company she was told to use was not strictly following Medicare rules.

Justo Méndez, an attorney for Spectrum Diagnostic Labs, said every sample it receives comes with a medical order signed by a doctor and a patient consent form. “Spectrum has processes in place to ensure compliance with the required documentation needed from the referring physician,” he said.

The amounts billed are handled by a third party, he said, and the company has no financial relationships with doctors.

Perry Holloway, a company principal, said he was unaware of any problems. His attorney Samy Khalil said his client “did not know of or intentionally participate in any fraud.”

In a common trend nationwide, sales reps were enticed by some marketing firms through ads on recruitment websites, with the promise they could earn from anywhere from $200 to more than $1,000 for every swab collected and sent to the lab, said investigators and several sales reps interviewed by Reuters.

In some cases, investigators warn, such payments could be construed as a kickback. Anti-kickback laws prohibit medical referrals in exchange for a reward or anything of value in connection with federal healthcare programs. In 2018, Congress doubled the maximum prison term in such cases to 10 years per offense.

TANGLED TESTING WEB

A little-explored world surrounds the marketing companies, laboratories and telemedicine companies involved in elder genetic testing. Among them is Spectrum. Another is Clio Laboratories, the Georgia-based lab that is part of an interconnected network of labs, medical billing operations, a telemedicine firm and other healthcare-related limited liability companies, company records show.

Several patients said they filed complaints with state or federal agencies against Clio and Spectrum, either by phone or through written complaints seen by Reuters.

In a handful of cases, the patients who had DNA samples sent to Clio or Spectrum said they never spoke with a doctor about why the cancer or pharmacogenetic tests were medically necessary. Moreover, when test results were completed, they were mailed directly to patients’ homes. That is not the norm, say doctors and medical experts. Usually, the ordering physician receives results first, then reviews them with the patient.

Nemerson, the Clio lawyer, declined to comment on these specifics, citing her statement to Reuters that the company diligently follows testing rules.

Spectrum’s lawyer said the company has not been contacted by the government concerning any patient complaints.

In 2017, the most recent data available, Clio billed Medicare $8.6 million for genetic testing and was paid about $4.6 million.

Clio Laboratories and a cluster of companies – including Elite Medical Laboratories, 360 Laboratories and billing company Laboratory Experts – are connected to Jordan Satary, an entrepreneur in his mid-twenties whose father once ran a lab that went bust, records show.

His father, Khalid Ahmed Satary, had earlier founded and led Confirmatrix, a Georgia toxicology lab. Satary started that company after his April 2008 release from federal prison; he had pleaded guilty to charges filed in 2003 involving fraud, trafficking in counterfeit products and copyright infringement related to a compact disc company he operated.

Confirmatrix was raided by federal investigators in 2016, media reports say, as part of a probe into a kickback scheme involving opioid pain clinic owners who were routing urine drug tests to toxicology labs. The lab was accused, but not charged, with being part of the scheme in a 2017 indictment filed in Tennessee. The investigation is ongoing.

Confirmatrix filed for bankruptcy November 4, 2016. Some of the former employees of the defunct company now work for multiple other labs with ties to the Satary family.

Elite Medical Laboratories, for instance, lists its lab director as Stanley Wu, the former Confirmatrix lab director. Wu hung up on Reuters when it sought his comment and did not respond to an email seeking comment.

Reuters journalists stopped by Elite’s office last month. From outside the offices through large front windows, they saw UPS and FedEx boxes stacked inside, with cheek swabs and other DNA samples spilling out. Two men stood at a table sorting them.

Elite has “a long history of providing valuable services” and is “committed to upholding” its legal obligations, Nemerson said in a statement.

Khalid Satary did not respond to text messages or emails seeking comment. An attorney who previously represented Satary told Reuters he could not comment.

Son Jordan is listed in an April 2019 document as the CEO and CFO of a medical billing operation, GNOS Medical, which is located in the same business plaza with Elite and Clio. It has since changed its name to Laboratory Experts, public records show.

Jordan Satary lists Laboratory Experts as belonging to him on his own corporate website. He was separately listed in 2018 as a registered agent for Clio’s Florida-based location, which later merged with the Georgia office. The contact information on the website for Elite Medical Labs contained an email address as recently as August for his media company, Shufe Media. The reference was later removed, after Reuters inquiries.

Jordan Satary could not be reached for comment. When a reporter stopped by Clio Laboratories in August, the office said he was out of town and referred Reuters to Nemerson, the company’s general counsel. He did not respond to subsequent emails listed for his various companies, or to a text message.

DISCIPLINED DOCTORS

Some of the doctors involved in the genetic testing wave also have checkered pasts.

One California doctor was signing off on genetic tests for patients even as two states had disciplined him or were preparing to do so after he was criminally convicted in Los Angeles.

Orthopedic surgeon Dr. Mitchell G. Cohen pleaded guilty in November 2015 to filing a false tax return in connection with an illegal kickback scheme, cooperated with the government’s investigation, and later served more than eight months in a halfway house in central California through March 2019, court records show. Cohen was not charged with making an illegal kickback, but pleaded guilty to making a false tax return in a case federal authorities said involved kickbacks.

New York and California each took disciplinary action based on the conviction, with both placing him on probation in June 2018 and June 2019, respectively.

Cohen was approving genetic tests for Medicare patients during his stint in the halfway house and after his probation period ended. He approved the medical necessity of genetic tests handled by labs including BioConfirm in Georgia and Elite Medical Laboratories, lab records show.

He signed off on the genetic test for Elite in September 2018, as he was serving his sentence in the halfway house, records show. He approved the medical necessity of tests sent to Bioconfirm on May 10, 2019.

Scott Grubman, an attorney for BioConfirm, said his client “relies in good faith on the information submitted to it by the ordering provider,” complies with its legal obligations and is not aware of any issues related to Dr. Cohen.

Contacted by Reuters, Cohen said he was in surgery and hung up. Mark Werksman, his attorney, said Cohen stopped working for several telemedicine companies authorizing genetic tests for Medicare patients on May 20, 2019, after the government suspended his Medicare billing privileges, an action that typically occurs after a doctor is convicted.

Under the probation terms, he said Cohen was allowed to work during the day while spending nights in the halfway house. He said Cohen consulted with patients before the tests and followed up to discuss the results.

“He believes he was providing a medically necessary and important service to his patients,” Werksman said.