New Jersey Physician Pleads Guilty To $25 Million Healthcare Fraud

Acting U.S. Attorney William E. Fitzpatrick announced Friday a Margate physician pleaded guilty to defrauding insurers and New Jersey health benefits programs.

Fifty-five-year-old John Gaffney of Linwood, New Jersey signed prescriptions for patients he never treated. He was charged with conspiracy to commit health care fraud.

“Dr. Gaffney sold phony prescriptions for unnecessary medications to patients he never examined as part of a sophisticated scheme to defraud a prescription benefits program available to New Jersey state and municipal employees,” Fitzpatrick said in a statement. “In an era when many Americans work hard to maintain affordable health insurance for their families, Dr. Gaffney and his conspirators criminally exploited the health care system and left New Jersey tax payers on the hook for approximately $25 million in losses.”

Gaffney conspired with others – Robert Bessey, Matthew Tedesco, Thomas Hodnett, Michael Pepper and Steven Urbanski – to persuade people to buy medically unnecessary and expensive compounded medications, specialty medications that do not contain specific ingredients the patient is allergic to, from January 2015 through April 2016. The compounded medications were issued from an out-of-state pharmacy that was identified as “Compounding Pharmacy,” according to court documents.

New Jersey local and state government employees, such as teachers, police officers and firefighters, as well as retirees have insurance coverage for compound medications. When they recruited one of those employees they would complete a compounding pharmacy prescription form for each of them, resulting in them being reimbursed thousands of dollars for the fraudulent compound medication prescriptions.

Gaffney signed off on fraudulent compound medication prescription for more than 200 individuals. The Pharmacy Benefits Administrator paid approximately $25 million for those prescriptions. Gaffney received thousands for his role in the scheme.

The conspiracy to commit healthcare fraud carries a maximum 10-year prison sentence and a $250,000 fine. He must pay restitution of nearly $24,956,435.08 and forfeit $25,000. His sentencing hearing is scheduled for January 5, 2018.

The other five conspirators pleaded guilty in August and are awaiting sentencing.