In a recent case in the Eastern District of Texas, a man from Temecula, California, was found guilty of participating in a health care kickback scheme. Steven Donofrio, 49, conspired with others to pay and receive kickbacks in exchange for the referral of pharmacogenetic tests to clinical laboratories in California. These tests identify genetic variations that affect how an individual patient metabolizes certain drugs. The scheme involved more than $28 million in illegal kickback payments and caused unnecessary medical procedures at the expense of taxpayer dollars. U.S. Attorney Damien M. Diggs emphasized the commitment to protecting citizens from financial and physical harm and bringing those who engage in fraudulent activities to justice. The investigation was carried out by the U.S. Department of Health and Human Services, Office of Inspector General, and the FBI Dallas-Frisco Resident Agency.
California Man Convicted of Health Care Kickback Conspiracy
In the Eastern District of Texas, a man from Temecula, California, named Steven Donofrio has been found guilty of federal violations related to a health care kickback scheme. Donofrio conspired with others to pay and receive kickbacks in exchange for the referral and arrangement of health care business, specifically pharmacogenetic (PGx) tests. These tests identify genetic variations that affect how an individual patient metabolizes certain drugs. The illegal arrangement involved the referral of PGx tests to clinical laboratories in California, resulting in over $28 million in illegal kickback payments. Donofrio’s conviction marks the end of a case that exposed the abuse of the healthcare system and the theft of taxpayer dollars.
Overview of Health Care Kickback Schemes
Health care kickback schemes involve the exchange of illegal remunerations in return for the referral of, arranging for, or recommending the ordering of items or services payable under federal health care programs. These schemes corrupt the health care system and cause significant financial losses each year. In addition to monetary damages, kickback schemes undermine patient trust and the expectation of receiving quality care.
Illegal Remunerations and Referrals
Under the Anti-Kickback Statute, offering, paying, soliciting, or receiving remunerations in exchange for health care referrals is prohibited. This includes financial incentives or inducements offered to physicians, hospitals, or other health care providers. The purpose of this statute is to prevent conflicts of interest and ensure the integrity of health care decision-making.
Federal Health Care Programs
Federal health care programs, such as Medicare, Medicaid, and Tricare, provide medical coverage to eligible individuals in the United States. These programs rely on the proper and ethical functioning of the health care system to deliver quality care and control costs. The abuse of these programs through kickback schemes jeopardizes their effectiveness and diverts taxpayer dollars towards fraudulent activities.
Prosecution and Guilty Verdict
Announcement by U.S. Attorney’s Office
U.S. Attorney Damien M. Diggs announced Steven Donofrio’s guilty verdict on May 5, 2023. Donofrio was convicted by a jury following a two-week trial before U.S. District Judge Robert W. Schroeder, III. U.S. Attorney Diggs emphasized the importance of protecting citizens from physical and financial harm and the commitment of law enforcement to bring individuals like Donofrio, who prey on vulnerable citizens, to justice.
Role of U.S. District Judge
U.S. District Judge Robert W. Schroeder, III presided over the trial and oversaw the legal proceedings. Judges play a crucial role in ensuring a fair and impartial trial, upholding the rule of law, and interpreting and applying legal statutes and principles.
Statement by U.S. Attorney Damien M. Diggs
U.S. Attorney Damien M. Diggs expressed his condemnation of the defendants’ actions and their impact on the healthcare system. He reiterated the commitment of law enforcement to protect citizens from unnecessary medical procedures and the misuse of taxpayer dollars. The statement also emphasized the determination of the U.S. Department of Health and Human Services and the FBI to investigate and prosecute healthcare fraud cases.
Impact on Healthcare System
Abuse of Healthcare System
The health care kickback conspiracy perpetrated by Steven Donofrio and others highlights the abuse of the healthcare system for personal gain. By engaging in illegal kickback schemes, individuals not only defraud federal health care programs but also compromise the quality of care provided to patients. Such abuses undermine public trust in the healthcare system and contribute to escalating healthcare costs.
Financial and Medical Consequences
The financial consequences of healthcare kickback schemes are significant. In this case alone, over $28 million in illegal kickback payments were exchanged. These schemes divert taxpayer dollars away from legitimate healthcare services and cause financial losses to federal health care programs. Moreover, kickbacks can result in unnecessary medical procedures that may put patient health at risk or subject them to invasive treatments or tests that are not medically indicated.
Protection of Citizens and Taxpayer Dollars
Conducting investigations and prosecutions of health care kickback schemes is vital to protect citizens and safeguard taxpayer dollars. By holding individuals accountable for their illegal actions, law enforcement agencies, such as the U.S. Department of Health and Human Services and the FBI, send a clear message that fraudulent activities in the healthcare sector will not be tolerated. These efforts aim to deter potential offenders and preserve the integrity of the healthcare system.
Details of the Conspiracy
Conspiracy to Pay and Receive Kickbacks
Steven Donofrio conspired with others to pay and receive kickbacks in exchange for the referral of, and arranging for, health care business. This involved the illegal referral of pharmacogenetic (PGx) tests to clinical laboratories in California. The conspiracy resulted in millions of dollars in illegal kickback payments, revealing a widespread and coordinated scheme to defraud federal health care programs.
Pharmacogenetic testing, also known as pharmacogenomic testing, is a type of genetic testing that identifies genetic variations affecting how an individual patient metabolizes certain drugs. By analyzing an individual’s genetic makeup, healthcare providers can tailor drug therapies to optimize effectiveness and minimize adverse effects. The misuse and fraudulent referral of pharmacogenetic tests undermine the potential benefits of personalized medicine and exploit patient vulnerabilities for financial gain.
Illegal Referral of PGx Tests
The conspiracy orchestrated by Steven Donofrio involved the illegal referral of pharmacogenetic (PGx) tests to clinical laboratories in Fountain Valley, Irvine, and San Diego, California. These illegal referrals were part of a scheme to generate kickbacks and exploit federal health care programs. The involvement of multiple individuals across different states highlights the complexity and scale of the conspiracy.
Charges and Sentences
Indictment and Charges
In December 2019, twelve individuals from three different states, including Steven Donofrio, were charged for their roles in the health care kickback conspiracy. The indictment returned by a federal grand jury in the Eastern District of Texas accused the defendants of conspiring to commit illegal remunerations in violation of the Anti-Kickback Statute.
Guilty Pleas and Trial
Several defendants pleaded guilty to related charges prior to trial, including Nicolas Arroyo, Jimmy Walker, Timothy Armstrong, Virginia Blake Herrin, Patrick Ridgeway, Chismere Mallard, Ashley Kretzschmar, Kimberly Willette, and Edwin Chad Isbell. Vincent Marchetti, Jr. was found guilty by a jury after a month-long trial.
Sentencing and Prison Terms
Vincent Marchetti, Jr., and Nicolas Arroyo were both sentenced to federal prison for their roles in the conspiracy. Vincent Marchetti, Jr. received a 48-month prison term, while Nicolas Arroyo received a 21-month sentence. Other defendants, such as Kimberly Willette, received one year and one day in federal prison or probation and fine payments. The varying sentences reflect the individual level of involvement and responsibility in the kickback conspiracy.
Provisions and Prohibitions
The Anti-Kickback Statute prohibits offering, paying, soliciting, or receiving remunerations in exchange for the referral of or arranging for or recommending the ordering of items or services payable under federal health care programs. It sets forth strict regulations to prevent conflicts of interest, protect patients, and ensure the integrity of healthcare decision-making. Violations of the Anti-Kickback Statute can result in federal prison sentences of up to five years.
Punishments for Violations
Healthcare professionals convicted of violating the Anti-Kickback Statute face severe penalties, including potential imprisonment, fines, and professional sanctions. The statute aims to deter individuals from engaging in practices that compromise patient care or defraud federal health care programs. By enforcing these punishments, law enforcement agencies send a strong message that illegal kickback schemes will not be tolerated.
Investigation and Prosecution
Role of U.S. Department of Health and Human Services, Office of Inspector General
The U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG), played a crucial role in investigating the health care kickback conspiracy. As part of their mission, HHS-OIG conducts investigations to prevent fraud and abuse in federal health care programs and holds individuals accountable for their illegal actions. Their efforts in this case uncovered the widespread fraud and abuse within the pharmaceutical testing referral network.
Role of FBI Dallas – Frisco Resident Agency
The FBI Dallas – Frisco Resident Agency also played a significant role in investigating and uncovering the health care kickback conspiracy. The FBI collaborates with other law enforcement agencies to combat healthcare fraud and protect the interests of patients and taxpayers. Their expertise and resources contribute to successful prosecutions and deter future fraudulent activities.
Prosecution Team and Assistant U.S. Attorneys
The prosecution team, led by Assistant U.S. Attorneys Nathaniel C. Kummerfeld, Lucas Machicek, and Adrian Garcia, worked diligently to present the case against Steven Donofrio and his co-conspirators. The prosecution team was supported by Assistant U.S. Attorneys Stephan E. Oestreicher, Jr., Brent Andrus, and L. Frank Coan, Jr., as well as Special Assistant U.S. Attorney Laurel E.P. Simmons. Their collaborative efforts and expertise ensure a strong and effective prosecution.
The conviction of Steven Donofrio in the health care kickback conspiracy represents a significant milestone in the fight against healthcare fraud and abuse. The case exposes the extent of illegal activities within the healthcare system, demonstrating the need for robust enforcement efforts and collaboration among law enforcement agencies. By holding individuals accountable for their actions, authorities aim to protect citizens, preserve the integrity of federal health care programs, and ensure the delivery of quality care to patients.