Chiropractor accused of fraud could soon face million-dollar default judgment

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A Keokuk chiropractor accused of defrauding Medicare could soon be facing a default judgment for millions of dollars.

In June 2023, the U.S. Department of Health and Human Services filed a civil lawsuit against Jason James of the James Healthcare & Associates clinic. The suit alleged James and his wife, Deanna, who was the clinic’s co-owner and office manager, had filed dozens of claims with Medicare for a disposable acupuncture device, which is not covered by Medicare, as if it were a surgically implanted neurostimulator for which Medicare can be billed.

According to the lawsuit, more than 180 such claims were filed by the clinic between July 2016 and September 2018.

The use of an actual neurostimulator is reimbursed by Medicare at approximately $6,000 per claim, while the so-called “P-Stim” devices purchased by the Keokuk clinic cost just $667, DHHS alleges. The clinic was “being paid thousands of dollars for just a few minutes, at most, of work,” the department claims.

The department also alleges James knew his billings were fraudulent in part because the P-Stim device is “nowhere close to even resembling genuine implantable neurostimulators” and do not require surgery.

In the 13 months since DHHS first filed its complaint against the couple, the case has been largely dormant, at least in terms of public filings and court proceedings. James and his wife never filed a formal response to the government’s allegations, and the one motion filed in the case – which involved the government seeking a hearing on the status of the matter — was filed under seal because DHHS lawyers said it contained “details regarding pretrial compromise offers and negotiations.”

The requested status hearing was held in June, after which the judge in the case reported the “potential settlement” in the case had stalled due to James failing to turn over various financial documents necessary to finalizing the deal.

The judge’s docket entry indicates that lawyers for the government have said that while they intend to continue settlement talks, they also are prepared to file a motion for a default judgment in the case. A default judgment is a court ruling favoring the plaintiff, and is typically issued in cases where the defendant fails to respond to a complaint or doesn’t appear in court.

A default judgment could easily be sought since the deadline for James to file an answer to the government’s claims has long passed.

DHHS is suing the clinic under the federal False Claims Act and is seeking trebled damages of more than $3 million, plus a civil penalty of up to $4.2 million.

Lawsuit: Doctor was paid $2,000 per day

DHHS alleges that on June 15, 2016, when Jason James was first contemplating the use of the P-Stim devices, he sent a text message to a P-Stim sales representative asking, “Is there a limit on how many Neurostims can be done on one day? Don’t wanna do so many that gives Medicare a red flag on first day. Thanks.”

The clinic then hired Dr. Robert Schneider, an Iowa-licensed physician, for the sole purpose of enabling James Healthcare to bill Medicare for up to 20 such devices per month – a number that would generate roughly $125,573 of monthly income, the lawsuit alleges. The clinic ultimately submitted 188 false claims to Medicare seeking reimbursement for the P-Stim devices, DHHS alleges, with Medicare paying out $4,100 and $6,300 per claim, for a total loss of $1,028,800.

DHHS alleges Schneider rarely saw clinic patients in person, consulting with them instead through Facebook Live.

Schneider subsequently sued the clinic for failing to comply with the terms of his employment agreement. Court exhibits indicate the agreement stipulated that Schneider was to work no more than two days per month and would collect $2,000 for each day worked, plus $250 per month for consulting, plus “$250 per device over six per calendar month.” Aa jury ruled in favor of the clinic and found that it had not breached its employment agreement with Schneider.

Licensing board fined James $500

An attorney for James Healthcare & Associates, Michael Khouri, said last year that he believed the federal government’s lawsuit was filed in error because a settlement in the case had already been reached at that time – a claim that was denied by the assistant U.S. attorney handling the case.

In 2015, the Iowa Board of Chiropractic charged Jason James with knowingly making fraudulent or untrue representations in connection with his practice, engaging in conduct that was harmful or detrimental to the public, and making untruthful statements in advertising.

The board alleged James told patients they would be able to be stop taking diabetes medication through the use of a diet and nutrition program, and that he had claimed to be providing extensive laboratory tests when not all of the tests for which he billed were ever conducted. The board also claimed James referred patients to a medical professional who was not licensed to practice in Iowa.

The case was resolved with a settlement agreement in which James agreed to pay a $500 penalty and complete 10 hours of education in marketing and ethics.

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