Hazard Physician And Wife Sentenced For Unlawful Distribution Of Prescription Opioids And Health Care Fraud

FRANKFORT, Ky. – A Hazard, Ky. physician and his wife have been sentenced to 180 months in prison and 80 months in prison, respectively, following their federal convictions on multiple charges relating to the unlawful distribution of prescription opioids, health care fraud, and money laundering.

Yesterday, U.S. District Judge Gregory Van Tatenhove sentenced Dr. James “Ace” Chaney, 52, and his wife, Lesa Chaney, 51, on their convictions.  In April 2016, a federal jury convicted Dr. Chaney of conspiracy to commit drug trafficking, 62 counts of illegal distribution of controlled substances, two counts of maintaining a premise for drug distribution, conspiracy to commit money laundering, 20 counts of money laundering, conspiracy to commit health care fraud and 84 counts of health care fraud.  The same jury convicted Lesa Chaney, the President and CEO of Ace Clinique of Medicine LLC,  of conspiracy to commit drug trafficking, two counts of maintaining a premise for drug distribution, conspiracy to commit money laundering, 20 counts of money laundering, conspiracy to commit health care fraud and 13 counts of health care fraud.

“This case is an example of a physician systematically betraying the trust of patients, placing his own profit over medical judgment, defrauding taxpayer-funded medical assistance programs, and fueling the opioid epidemic that has ravaged our state,” said Carlton S. Shier, IV, Acting United States Attorney for the Eastern District of Kentucky.  “Dr. Chaney’s conduct has damaged our community immeasurably and has deprived government assistance programs of critical resources.  Combatting health care fraud and prescription opioid abuse have been, and will continue to be, key priorities for our office.  Without the great work of our law enforcement partners in this case, we would not have been able to prosecute this disgraceful scheme.”   

From 2006 to 2014, James and Lesa Chaney owned and operated Ace Clinique of Medicine, in Hazard.  The trial evidence established that Dr. Chaney pre-signed prescriptions for controlled substances, to be filled out by clinic staff while he was vacationing or otherwise not present at the clinic, and that Dr. Chaney knowingly provided prescriptions for controlled substances to individuals who were diverting the pills for sale and to individuals who were abusing the drugs.  Dr. Chaney also required all of his patients to undergo monthly urine drug screening to test for the presence of the drugs he prescribed, as well as illegal narcotics.  When the results showed the patients were not taking the prescribed pills, or were taking illegal narcotics, Dr. Chaney directed his staff to alter the test results to falsely indicate an appropriate result.  These fraudulent test results were then submitted to Medicare, Medicaid and private insurers for payment.

The evidence at trial also showed that patients would frequently wait eight hours or longer, each month, to be seen by a health care provider at Ace Clinique.  The examinations would then typically be of short duration and the patient would receive a prescription for controlled substances.  The Chaneys would nonetheless bill for an office visit that falsely indicated a thorough physical examination had occurred.  The evidence further showed that the Chaneys billed Medicare for work Dr. Chaney allegedly did while he was vacationing outside the United States.

The Chaneys billed Medicare and Medicaid nearly $88,000,000 during the period of the conspiracy, and received more than $21,000,000.  The court ruled at the sentencing hearing that 60% of those payments resulted from the Chaney’s fraud, and they will be ordered to pay restitution back to Medicare and Medicaid, in an amount equal to what they fraudulently obtained. 

Under federal law, the Chaneys must serve 85% of their prison sentences and will be under the supervision of the U.S. Probation Office for three years after their release from prison.

Acting United States Attorney Shier; Amy S. Hess, Special Agent in Charge of the FBI’s Louisville Field Office; and Richard Sanders, Commissioner of the Kentucky State Police, jointly announced the sentences.