Health Care Business Owner is Sentenced to Four Years in Prison, Pays a Million-Dollar Civil Settlement, and Agrees to 20-Year Exclusion from Medicare and Medicaid in Connection with Illegal Kickback Scheme
Babubhai Rathod is the Ninth Person Convicted of Felony Charges in a Joint Federal-State Investigation Resulting from a Whistleblower Lawsuit

GRAND RAPIDS, MI—U.S. Attorney Patrick Miles announced today that Babubhai Rathod, age 44, of Okemos, Michigan, was sentenced to four years in prison and two years of supervised release for his lead role in a conspiracy to pay illegal kickbacks to health care practitioners and others to induce the referral of patients to medical clinics, physical therapy clinics, and a home health care agency. U.S. District Judge Janet T. Neff also ordered Rathod to pay $950,000 in restitution, $900,000 of which Rathod paid prior to sentencing under the terms of a related $1,000,000 civil False Claims Act settlement. As part of that civil settlement, Rathod also agreed to a 20-year exclusion from federal health care programs, including Medicare and Medicaid. In sentencing Mr. Rathod, Judge Neff described the kickback charges as “very, very serious” and having “consequences to...very important government programs in which millions of Americans participate.”

Rathod’s conviction and the related civil settlement arose from a superseding indictment and civil complaint which alleged that between at least January 2007 and January 2012, Rathod directed a scheme to pay physicians, mid-level practitioners, and others for referring patients to medical clinics (Lakeshore Spine & Pain P.C., based in Ludington, Michigan), physical therapy clinics (U.S. Rehab Services P.C., among others, based in Mt. Pleasant, Michigan), and a home health care agency (Lakeshore Home Health Care Inc., based in Lansing, Michigan). The illegal payments were made in cash and checks disguised as bonuses, mileage reimbursements, and payments under sham contracts for medical director and consulting services that were never performed. During the sentencing hearing, Judge Neff specifically noted that the physicians who received such kickbacks stole from government programs that provide “crucial medical services.” Judge Neff further emphasized, with respect to such medical professionals, that “[a] thief is a thief.”

The superseding indictment and civil complaint also alleged that between at least January 2007 and January 2012, Rathod directed a scheme where Lakeshore Spine & Pain P.C. routinely submitted claims for medical services in order to fraudulently obtain higher insurance reimbursements than those to which the company was entitled, a practice known as upcoding. Notably, Rathod was able to own and operate this network of affiliated health care companies and direct these kickback and upcoding schemes, despite the fact that in 2003, Rathod pleaded one of his physical therapy companies guilty to a felony charge of falsifying medical records and subsequently lost his physical therapy license as the result of an assault conviction involving a patient.

Rathod’s sentencing follows the felony convictions of five other persons who paid or received illegal kickbacks in exchange for referring patients to Rathod’s health care companies for physical therapy, electrodiagnostic testing, and home health care services. Judge Neff imposed the following sentences for those individuals:

• Lino S. Dial, Jr., D.O. (Physician, Edmore, Michigan). Dial was sentenced to four months’ imprisonment and $70,000 in restitution. Dial has also been excluded from federal health care programs for five years.

• Clinton J. Cornell, P.A. (Physician Assistant, Mt. Pleasant, Michigan). Cornell was sentenced to fourteen months’ imprisonment and $38,430 in restitution. Cornell is also subject to a minimum five-year exclusion from federal health care programs.

• John E. Roberts, P.A. (Physician Assistant, Mt. Pleasant, Michigan). Roberts was sentenced to four months’ imprisonment and $70,000 in restitution. Roberts has also been excluded from federal health care programs for five years.

• Natalie J. Schutte, P.A. (Physician Assistant, Edmore, Michigan). Schutte was sentenced to two years’ probation and $120,000 in restitution. Schutte has also been excluded from federal health care programs for five years.

• Raju G. Nakum (Practice Administrator, Mt. Pleasant, Michigan). Nakum was sentenced to three months’ imprisonment and $345,000 in restitution. Nakum is also subject to a minimum five-year exclusion from federal health care programs.

Two other individuals employed by Lakeshore Spine & Pain P.C. were convicted of felony health care fraud for their roles in the illegal upcoding scheme. Judge Neff imposed the following sentences for those individuals:

• Rajesh Makwana (Practice Administrator, Ludington, Michigan). Makwana was sentenced to twelve months and one day imprisonment and $71,000 in restitution. Makwana is also subject to a minimum five-year exclusion from federal health care programs.

• Sandeepkumar Patel (Biller, Ludington, Michigan). Patel was sentenced to two years’ probation. Patel has been excluded from federal health care programs for five years and will be deported from the United States.

In addition to these individuals and Rathod, a ninth individual, Kevin Witt, D.O., of Jackson, Michigan, was charged and convicted by the Michigan Attorney General’s Office on a related state felony charge for accepting kickback payments from Rathod. Witt has been excluded from federal health care programs for five years.

This case resulted from a civil lawsuit filed by a whistleblower who worked in one of Rathod’s offices. The lawsuit, known as a qui tam action, was filed under the False Claims Act and Michigan Medicaid False Claims Act, which allow private whistleblowers to bring lawsuits on behalf of the United States and the state of Michigan and receive a share of any recoveries. In this case, the United States and state of Michigan intervened in the whistleblower’s lawsuit, recovered $1,140,000 to date, and are pursuing additional claims against over a dozen other physicians and mid-level practitioners. The whistleblower has received $240,100 of these settlement proceeds, as well as additional amounts for attorney’s fees and costs.

“Whistleblowers play a key role in protecting federal health care programs from fraud and abuse, including kickback schemes that are often difficult to detect and result in the referral of unnecessary and upcoded services,” said U.S. Attorney Miles. “Paying kickbacks for patient referrals distorts the motives of health care professionals. The U.S. Attorney’s Office will continue to aggressively investigate and prosecute such kickback schemes and seek all available civil and criminal remedies including treble civil damages, monetary penalties, and felony prosecutions.”

“It is essential to maintain integrity in our health care system. Patients deserve to know that when a doctor refers them for additional treatment, the decision to do so is based upon quality health advice—not what is best for the doctor’s bottom line,” said Attorney General Bill Schuette. “Kickbacks with the Medicaid program do not just hurt patients, they affect the taxpayers whose hard-earned dollars subsidize healthcare for those in need.”

FBI Special Agent in Charge Robert D. Foley, III stated, “Those who provide health care must be held to the highest standards of ethics and integrity. The FBI remains committed to pursuing and prosecuting such criminals who abuse the system by receiving illegal kickbacks.”

“Paying kickbacks for the referral of Medicare or Medicaid patients is a serious crime,” said Lamont Pugh, III, Special Agent in Charge, U.S. Department of Health & Human Services, Office of Inspector General-Chicago Region. “Kickbacks inappropriately influence health care practitioners’ medical decision making process, lead to overutilization and/or upcoding of services, and further increase program costs. The OIG will continue to aggressively pursue all available remedies whether criminal, civil, or administrative to ensure the integrity of the Medicare and Medicaid programs and protect vital taxpayer dollars.”

These convictions and settlements were the result of a coordinated effort by the U.S. Attorney’s Office for the Western District of Michigan, the Michigan Attorney General’s Office, the Federal Bureau of Investigation, the U.S. Department of Health and Human Services-Office of Inspector General, and Blue Cross Blue Shield of Michigan.