Thousands of insurance appeals went to doctor feds say is fraud

For years, Spyros Panos seemed like a successful orthopedic surgeon, seeing dozens of patients a day and bringing in millions of dollars in fees for his suburban New York medical group.

Behind the scenes, however, he was inflating charges and billing for surgeries he didn’t perform, perpetrating a years-long fraud that culminated in a guilty plea on a single count in federal court in 2013.

That was the end of his surgical practice. But even as he was waiting to be sentenced, federal prosecutors say, Panos was beginning a new criminal scheme that would go undetected for years until he was arrested again in April.

Over the past five months, thousands of patients have received notices from several insurance companies that Panos had posed as another doctor in order to review their medical records in coverage disputes. Among the companies that indirectly used Panos' services was Indianapolis-based Anthem Inc.

At least 2,500 people nationwide were affected, according to data compiled by Bloomberg, but the full reach of the alleged fraud hasn’t been made public.

Panos is charged with infiltrating an obscure but essential piece of the American health-care business: a $4 billion industry that provides independent doctors to render expert opinions on which treatments are appropriate.

Whether Panos’s reviews resulted in claims being denied remains unknown. But the fact that his alleged fraud went undetected for years raises concerns about oversight in the independent medical review industry.

Those physicians weigh in when insurance companies and patients disagree about what medical care should be covered. If a health plan declines to pay for an expensive therapy to help a car crash victim learn how to walk again, the patient can appeal for an independent review. Same goes for a cancer patient refused an experimental treatment.

Panos collected $876,000 since 2013 working on medical and workers’ compensation claims, according to his most recent indictment on charges of wire fraud, health-care fraud and aggravated identity theft. In Connecticut, where he reviewed more than 200 claims, he recommended denying most of the them, according to state officials.

He has pleaded not guilty. Lawrence Fisher, an attorney for Panos, declined to comment.

It’s not clear if all the patients whose claims were reviewed by Panos have been notified or whether their cases have been reopened.

“The right recourse is to have a new independent review for every single case,” said Elisabeth Benjamin, vice president for health initiatives at the Community Service Society, a New York-based organization that helps consumers appeal health-insurance denials.

While some of the independent review companies involved have told authorities that they’ve taken steps to prevent unqualified people from posing as reviewers, they haven’t publicly said how they’ve changed their vetting processes to avert other frauds. None of the companies known to have directly contracted with Panos agreed to interviews or to respond to written questions from Bloomberg News.

Some insurance companies that indirectly used his services, including Anthem, Health Care Service Corp. and The Hartford, said they’ve notified patients and are evaluating cases that Panos may have swayed.

Other insurers notified consumers that their privacy had been violated—disclosures often required by law—without mentioning whether they would examine the claims that Panos worked on.

UnitedHealthcare recently sent one such letter to a Texas man named Stephen Johnson.

On a Friday evening in February 2017, the car in which Johnson was a passenger ran off the road and flipped into a creek. The driver died at the scene, and Johnson, four days shy of his 23rd birthday, suffered brain trauma and broken bones. He spent weeks unconscious in a Texas hospital, hooked to a feeding tube and ventilator.

After he emerged from the coma, his parents tried to get him therapy to help restore his ability to function. But they encountered a series of roadblocks from their insurer, UnitedHealthcare, which declined to cover rehabilitation while Johnson lived in a nursing home, according to court filings and an online journal kept by Cindy Johnson, his mother.

“Stevie continues to improve and UnitedHealthcare continues to deny him brain trauma rehab,” she wrote in September 2017.

In June, the letter from UnitedHealthcare revealed that its vendor, a company called Advanced Medical Reviews, had unwittingly hired a former doctor who “was impersonating another licensed physician” to conduct reviews of patient records. The insurer said the impostor, who wasn’t named, had been arrested. To the Johnsons, that seemed to explain the string of denials, which ended in October 2017—two months after UnitedHealthcare said the fake doctor ceased working for AMR.

It hasn’t been disclosed which of Johnson’s multiple appeals Panos may have been involved in, or whether the reversal was related.

The insurer, a unit of UnitedHealth Group Inc., offered Johnson a free year of identity-theft protection, a standard corporate response after data breaches. But its letter said nothing about whether the incident had influenced its decisions on Johnson’s care, or whether it would review the impostor’s rulings.

“We are NOT treating this as a privacy issue,” Cindy Johnson wrote at the time. “We are treating this as a denial of service that will cause Stevie additional disabilities that could have been avoided.”

In August, the Johnson family sued UnitedHealthcare and Advanced Medical Reviews in federal court in the Eastern District of Texas. The suit alleges that denials based on the tainted reviews contributed to Johnson’s lasting disability, including difficulty speaking and using his right hand and foot.

Asked for comment on the case, UnitedHealthcare spokeswoman Tracey Lempner said in an email, “Independent, external review is an option for people seeking a third-party review of certain clinical coverage decisions. We contract with multiple independent review organizations to provide this important resource.”

Advanced Medical Reviews declined to comment.

The lawsuit is the latest fallout in a decade-long stretch of criminal activity by the 50-year-old Panos, according to prosecutors. Over at least five years, he earned more than $7.5 million while inflating charges, according to court records. He would often perform 20 surgeries a day. In his office, he would regularly see 60 patients in a day, sometimes more than 90.

The scheme began to unravel in 2010, when New York state medical authorities asked for records on four of Panos’s patients. According to his sentencing memo, Panos falsified medical records to cover his tracks, leaving patients “in the position of not knowing what procedures Panos actually performed on them.”

In 2013, Panos surrendered his license and pleaded guilty to health-care fraud. He went to prison in April 2014 and was released in 2016 to a halfway house and then to home confinement. He also faced more than 250 malpractice lawsuits, including some claiming that he botched surgeries.

Those claims were settled by his insurers earlier this year with an agreement that could pay close to $40 million, according to Christopher Meagher, an attorney for plaintiffs. Panos didn’t admit wrongdoing in the settlement.

In the latest criminal case, prosecutors say Panos defrauded six review companies for $876,000, using a fake Google email address, a shell company registered in the name of a family member to a Brooklyn address and the credentials of another physician.

Panos has been released to home detention on $1 million bond, with electronic monitoring and the condition that he can’t use any internet-connected devices, court records show. He’s also receiving court-ordered mental health treatment.

The U.S. Attorney’s Office for the Southern District of New York declined to comment.

The industry that Panos is accused of defrauding began in the 1990s in response to concerns that insurance companies were inappropriately denying claims, said Marc Rodwin, a professor at Suffolk University Law School in Boston who has studied independent review organizations.

“These cases usually come up when they’re hard cases,” Rodwin said. State laws typically make reviewers’ decisions on coverage binding.

Any review conducted by an impostor “is unreliable and it should be thrown out,” Rodwin said. Insurers should revisit the reviews conducted by Panos, he said, “but it’s not clear what do you do then, because if it’s done a year or two before, the patient’s probably moved on.”

And then there’s the privacy issue. Under the Health Insurance Portability and Accountability Act, known as HIPAA, health plans, most medical providers and their business associates must report breaches of personal information to patients, authorities and, in some cases, the public, said Iliana Peters, a former HIPAA enforcement official at the U.S. Department of Health and Human Services.

HIPAA violations that affect at least 500 people must be disclosed publicly on a federal website. Breaches associated with Panos’s access to patient records don’t appear to be recorded there. HIPAA rules don’t apply to the workers’ compensation system, but some state laws require similar disclosures, said Peters, now an attorney at Polsinelli.

Prosecutors didn’t name the six independent review companies that Panos worked for, but disclosure letters identify some of them: Advanced Medical Reviews and Network Medical Review are both subsidiaries of a company called ExamWorks, which was acquired by the private equity firm Leonard Green & Partners LP for $2 billion in 2016. An outside spokesman for the companies declined to comment.

A review company called Dane Street LLC notified authorities in Iowa in July that fewer than 100 claimants in that state were affected. A representative for Dane Street declined to comment.

An attorney for MCMC LLC, another review company that Panos worked for, declined to comment.

Gallagher Bassett, a subsidiary of insurance brokerage Arthur J. Gallagher, told California authorities that 1,294 workers’ compensation claims in the state may have been affected through vendors who hired Panos. A spokeswoman for Gallagher Bassett did not respond to requests for comment.

In Connecticut at least 234 workers’ compensation claims were affected, said Stephen Morelli, chairman of the Connecticut Workers Compensation Commission. The regulator learned about Panos’s conduct when The Hartford, a large insurance group, came forward.

Most of the records reviews conducted by Panos in Connecticut “came back with a denial—not all, but most,” Morelli said. Despite Panos’s recommendations, many of the claims were paid, and none of the decisions are currently being disputed, Morelli said. The Hartford handled most of the affected claims the state knows about, he said. A spokesman for The Hartford said people whose claims may have been influenced by Panos’s opinion are being offered a chance for a fresh independent review.

Morelli put out a notice in June encouraging other workers’ compensation carriers in the state to report links to Panos, and so far four more have.

In Texas, after months of denials, UnitedHealthcare approved Stephen Johnson’s treatment at Baylor Rehabilitation Institute in October 2017, the same month prosecutors say Panos’s scheme ceased.

“I don’t know if it was my appeal letter, the pictures of Stevie I included or the Baylor doctor’s report but something clicked this time,” Cindy Johnson wrote in a celebratory post at the time.

Through their lawyer, the Johnson family declined an interview request while their lawsuit is pending.

The family alleges that the insurance denials, possibly influenced by Panos’s conduct, caused their son lasting harm. In their lawsuit, they say that Stephen Johnson could speak a few words clearly when he emerged from the coma three months after the car wreck. But without more focused treatment, the ability deteriorated.

“He cannot currently speak, and he would have continued to develop his speech had he received speech therapy early on,” the family said in the suit.