Vice President of Health Care Software and Services Company Pleads Guilty to $1B Health Care Fraud Conspiracy

A Kansas man pleaded guilty today to operating an internet-based platform that generated false doctors’ orders to defraud Medicare and other federal health care benefit programs of more than $1 billion.

According to court documents, Gregory Schreck, 50, of Johnson County, admitted that he and his co-conspirators targeted hundreds of thousands of Medicare beneficiaries to provide their personally identifiable information and agree to accept medically unnecessary orthotic braces, pain creams, and other items through misleading mailers, television advertisements, and calls from offshore call centers. Schreck and his co-conspirators owned, controlled, and operated DMERx, an internet-based platform that generated false and fraudulent doctors’ orders for orthotic braces, pain creams, and other items for these beneficiaries. Schreck, a vice president of the company that operated DMERx, admitted that he offered to connect pharmacies, durable medical equipment (DME) suppliers, and marketers with telemedicine companies that would accept illegal kickbacks and bribes in exchange for signed doctors’ orders that were transmitted using the DMERx platform. Schreck and his co-conspirators received payments for coordinating these illegal kickback transactions and referring the completed doctors’ orders to the DME suppliers, pharmacies, and telemarketers that paid for them. The fraudulent doctors’ orders generated by DMERx falsely represented that a doctor had examined and treated the Medicare beneficiaries when, in reality, purported telemedicine companies paid doctors to sign the orders without regard to medical necessity and based only on a brief telephone call with the beneficiary, or sometimes no interaction with the beneficiary at all. The DME suppliers and pharmacies that paid illegal kickbacks in exchange for these doctors’ orders generated through DMERx billed Medicare and other insurers more than $1 billion. Medicare and the insurers paid more than $360 million based on these false and fraudulent claims.

Schreck pleaded guilty to conspiracy to commit health care fraud and faces a maximum penalty of 10 years in prison. A sentencing hearing will be scheduled at a later date. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Supervisory Official Antoinette T. Bacon of the Justice Department’s Criminal Division; Acting Special Agent in Charge Isaac Bledsoe of the Department of Health and Human Services Office of Inspector General (HHS-OIG) Miami Regional Office; Acting Special Agent in Charge Justin E. Fleck of the FBI Miami Field Office; Special Agent in Charge David Spilker of the Department of Veterans Affairs Office of Inspector General (VA-OIG)’s Southeast Field Office; and Special Agent in Charge Jason Sargenski of the Department of Defense Office of Inspector General, Defense Criminal Investigative Service (DCIS), Southeast Field Office made the announcement.

HHS-OIG, FBI, VA-OIG, and DCIS are investigating the case.

Trial Attorneys Darren C. Halverson and Jennifer E. Burns of the Criminal Division’s Fraud Section are prosecuting the case. Fraud Section Trial Attorneys Andrea Savdie and Shane Butland assisted in the prosecution.

The Fraud Section leads the Criminal Division’s efforts to combat health care fraud through the Health Care Fraud Strike Force Program. Since March 2007, this program, currently comprised of nine strike forces operating in 27 federal districts, has charged more than 5,800 defendants who collectively have billed federal health care programs and private insurers more than $30 billion. In addition, the Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, are taking steps to hold providers accountable for their involvement in health care fraud schemes. More information can be found at www.justice.gov/criminal-fraud/health-care-fraud-unit.