Oxendine pleads guilty in healthcare fraud scheme

ATLANTA — Former Georgia Insurance Commissioner and gubernatorial candidate John Oxendine pleaded guilty in federal court Friday to conspiracy to commit healthcare fraud in a scheme involving the ordering of unnecessary medical tests.

Oxendine, 61, admitted that his insurance consulting business ordered the tests from a lab company in Texas in return for hundreds of thousands of dollars in kickbacks, working with a co-conspirator, Dr. Jeffrey Gallups.

"This scheme to bill for unnecessary services has no place in our health-care system," said Keri Farley, special agent in charge of the FBI's Atlanta office. "It not only increased health-care costs for all beneficiaries, but they also violated the trust of patients."

Oxendine, a Republican from Johns Creek, was elected insurance commissioner in 1994 and served four terms. He ran for governor in 2010 but finished fourth in the GOP primary.

According to U.S. Attorney Ryan Buchanan, Oxendine and Gallups submitted fraudulent insurance claims for medically unnecessary tests from Next Health, a lab in Texas. Physicians associated with Gallups' ear, nose, and throat practice were pressured to order the tests.

The lab company agreed to pay Oxendine and Gallups a kickback of 50% of the profit from eligible specimens Gallups' practice submitted to the company.

The pair submitted claims seeking more than $2.5 million from private health insurers, which paid Next Health almost $700,000. The company then paid $260,000 in kickbacks.

When a compliance officer raised questions about the kickbacks, Oxendine told Gallups to lie and say the payments were loans. Oxendine then told Gallups to repeat the lie after Gallups was questioned by federal agents.

"John Oxendine, as the former statewide insurance commissioner, knew the importance of honest dealings between doctors and insurance companies," Buchanan said. "He will now be held accountable for violating the public's trust."

Gallups also has pleaded guilty to health-care fraud. Oxendine is scheduled to be sentenced in July.