The Doctor Behind the Fall of FTX; Health Data Spies; Repeat Medicare Fraud Too Easy

Welcome to the latest edition of Investigative Roundup, highlighting some of the best investigative reporting on healthcare each week.

The Doctor Behind the Fall of FTX

James Block, MD, is a doctor with an unlikely hobby on the side: investigating suspicious crypto companies. In a Q&A with the Atlantic, he talked about his prescience when it came to the spectacular downfall of Sam Bankman-Fried’s cryptocurrency company FTX, and where he thinks crypto as a whole is headed.

Block is credited with hastening the downfall of the Bankman-Fried’s trading company thanks to a post he wrote for his newsletter that went viral less than a week before FTX filed for bankruptcy. He built off a Coindesk report warning of FTX’s closer-than-usual ties to Alameda Research, Bankman-Fried’s other company. According to Coindesk, Alameda Research’s balance sheet was full of FTX tokens — meaning that Alameda’s value was backed mostly by the its own crypto-currency’s tokens — not independent assets.

Block took the allegations a step further, outlining how a crypto business model built on thin air would effectively function. FTX, he writes, was a “flywheel scheme” where crypto tokens are created, and many of them kept by, effectively, the company that created them. Their price is inflated, and the valuation of a company’s assets on paper increases because of the price increase, attracting investors, who will loan the company real money. They continue the cycle by buying more tokens using the invested money.

Block believes most crypto companies are effectively Ponzi schemes, borrowing from their customers to stay afloat — which can’t continue indefinitely. Crypto, he said, is just a way to make money by moving money around, “because there’s nothing linked to it at all. There’s no economic activity in this space. There’s nothing produced by these companies.”

Ultimately, Block told the Atlantic he thinks crypto is destined to become a fringe hobby. “I mean, Beanie Babies still exist. Pogs still exist. Will bitcoin still exist? I think it’ll be like owning a ham radio, with hobbyists doing their niche thing together,” Block said.

Telehealth Sites and Tech Giants Share Personal Health Data

On at least 49 telehealth websites like Cerebral, Hims/Hers, and Mindbloom, tracker tools from giant tech companies transmit personal health information back to those companies — all while promising privacy, an investigation by STAT and The Markup found.

Companies including Google, Facebook/Meta, Bing, TikTok, and Snapchat offer their advertisers and others (in this case, the telehealth companies) business tools or cookies to keep track of certain “events” that occur on their websites — like which pages customers visit, or when they add something to a cart.

These trackers, called pixels, are a way for a company like Mindbloom, for example, to know the habits of their customers and advertise to future ones. They choose which “events” or customer actions to track by embedding a pixel into the code of certain web pages. But the hosts of these pixels — in this case, Google, Facebook, and five others — also receive the data.

STAT and The Markup found that almost all the telehealth companies sent URL information to a big tech platform, while 35 companies sent full names, email addresses, or phone numbers. Also, 13 sites even sent users’ answers to questionnaires on the site to big-tech hosts.

The telehealth sites are designed to make seeking mental health services, gender-affirming care, or reproductive health products easier and more discreet than visiting a doctor. A dozen companies even wrote on their websites that they were “HIPAA-compliant” — when in reality, they live in a legal grey-area. Because many of these platforms are third parties that, they argue, simply connect consumers to providers that can actually make diagnoses and write prescriptions — they may not be covered by HIPAA.

Nevertheless, they transmit data like past diagnoses of depression, addiction, or other sensitive information to tech giants — who may then resell it.

“There is so much intransparency, and that makes it complex and maybe even deceptive for consumers,” Sara Gerke, a professor of health law and policy at Penn State Dickinson Law, told STAT and The Markup.

Repeat Medicare and Medicaid Fraud Is Surprisingly Easy

An investigation from Kaiser Health News (KHN) found that gaps in the federal government’s health fraud system make it easy to cheat — again and again.

The Office of the Inspector General at HHS keeps an “exclusion” list of people banned from being paid by Medicare, Medicaid, and other federal health programs. But according to KHN, it relies on an honor system to prevent repeat offenses. Big hospitals or health systems normally vet new hires for their “exclusion” status, but smaller practices and independently owned companies can easily alter paperwork to work around it.

KHN found that of 300 listed people, 8 were working in roles that could violate their bans, 6 simply transferred control of their business to family members, 9 had previous felony or fraud convictions and had gone on to commit health fraud, and 7 were repeat violators who together took “tens of millions of federal health care dollars before getting caught by officials after a prior exclusion,” KHN reported.

Federal regulators also don’t look for repeat offenders on their list serving in new roles. One former HHS official, Nelson Mullins, told KHN that he saw a “steady phenomenon” of people violating their exclusions. For example, one man, Donald Peterson, left an infusion center he started called IVXpress in 2018 after he was charged with altering medical claims, submitting fake receipts for drugs, and paying a doctor kickbacks. He got a five-year exclusion, but in 2020, co-founded private-equity backed Noble Health Corp., which bought two Missouri hospitals.

Peterson is listed on documents as one of two directors, as the secretary, vice president, and assistant treasurer. The hospitals received $20 million in COVID relief money. But Peterson says since he owns only 3% of the company, and isn’t involved in the operations of the hospital, he wasn’t violating his exclusion.

Dennis Pangindian, an attorney who used to work for the Office of the Inspector General at HHS, told KHN that regulators often rely on whistleblower complaints or journalism to expose repeat violators. KHN also found that gaps in time between fraud findings and a name being added to the list can take years.