James Spina, Jeffrey Spina, Kimberly Spina and Andrea Grossman were arrested on Aug. 30 and charged with running a bogus medical practice from Dolson Avenue Medical in Middletown.
James and Jeffrey Spina ran the day-to-day operations and “routinely showed little, if any, regard for which medical services or treatments were medically necessary, or even whether the services were actually provided to patients,” the federal indictment states. Instead, they allegedly billed insurance providers to maximize reimbursements “and, ultimately, their own profits.”
They entered not-guilty pleas at their arraignments before Magistrate Judge Judith C. McCarthy in White Plains federal court.
The defendants are accused of filing $80 million in insurance claims and netting tens of millions of dollars for unnecessary procedures, services that were not provided and services that were double billed. James and Jeffrey Spina were also accused of impeding a federal audit.
The alleged scheme ran from 2011 to September 2017 and was centered on the Dolson Avenue clinic, where pain management and rehabilitation were offered, including chiropractic services, physical therapy, acupuncture and diagnostic testing.
New York law requires medical services corporations to be owned and operated by licensed physicians. But Dolson was actually owned and operated by James and Jeffrey Spina, licensed chiropractors, the indictment states. They are accused of recruiting medical doctors to act as nominal owners of Dolson and associated companies.
One of those doctors, Charles Bagley, 69, of Great Neck, was charged in a separate indictment with conspiracy to commit health care fraud. He pleaded guilty before Judge McCarthy, and he will be sentenced on Nov. 30.
The associated corporations include Catskill Medical Care doing business as Middletown Physical Therapy and Pain Management, Hudson Valley Chiropractic, Middletown Chiropractic doing business as ChiroCare, Middletown Physical Medicine and Rehabilitation, Mid-Hudson Acupuncture, Orange County Neurology, Physical Medicine and Diagnostic, and Physical Therapy of Orange County.
James Spina, 59, and Jeffrey Spina, 56, allegedly ran the businesses. Kimberly Spina, 54, was an administrator. Andrea Grossman, 59, was the bookkeeper.
The indictment states that James and Jeffrey went to great lengths to conceal their ownership of the businesses. When a doctor who was one of their nominal owners died in June 2017, they allegedly transferred his purported ownership to another doctor, using backdated transfer forms and a forged signature of the dead doctor.
Nominal owners were allegedly given scripts so that they could provide basic information if questioned by insurance providers.
When insurance providers audited the businesses, James, Jeffrey and Kimberly fabricated missing medical reports, according to the indictment. In other instances, James and Jeffrey hid patient records at Jeffrey’s house or a local storage facility.
By the fall of 2016, undercover investigators were posing as patients. One investigator, for example, sought treatment for purported injuries from a car accident, spent four minutes in the clinic bathroom and received no treatment or services. An insurance provider was allegedly billed for two procedures.
In some instances, the defendants outsourced services to clinics they did not own. They still profited, the indictment states, by arranging kickbacks disguised as rent or marketing fees paid to companies controlled by James and Jeffrey.
The indictment also cites a secretly recorded conversation that Grossman had with a co-worker, in which she allegedly said, “You’ve got to be able to think like a f—ing crook.”
The arrests were jointly announced by New York Comptroller Thomas P. DiNapoli and U.S. Attorney Geoffrey S. Berman. The FBI, the Office of the Inspector General for the U.S. Department of Health and Human Services, the Orange County sheriff and district attorney, the Sullivan County district attorney, the National Insurance Crime Bureau, Liberty Mutual Insurance and USAA Insurance assisted with the investigation.