Alabama Sales Rep and Clinic Owner Sentenced in $28M Billing Fraud Scheme

A medical sales representative and a pain clinic owner in Alabama have been sentenced to years in prison for their roles in a long-running, $28 million fraud scheme that involved a compounding pharmacy, unneeded nerve tests and a former workers’ compensation treating doctor.

James E. Ray, 53, of Gadsden, Alabama, last week was sentenced to 40 months for conspiracy to commit health care fraud. He also must forfeit some $850,000 and attempt to pay more than $5 million in restitution, according to court records and the U.S. Attorney’s Office for Northern Alabama.

U.S. District Judge Scott Coogler also sentenced David Shehi, 43, of Rainbow City, to 28 months in federal prison and ordered him to pay restitution. Shehi owned Etowah Pain, a clinic in Rainbow City. He had accepted kickback payments in exchange for ordering unnecessary nerve-conduction testing, prosecutors said.

Also named in Ray’s 2022 indictment was John Hornbuckle, president of QBR Inc., which provided the electro-diagnostic testing, and Dr. Eric Beck, of Huntsville. Beck, who previously had treated injured workers in his practice, owned Valley Center for Nerve Studies and Rehabilitation. Beck pleaded guilty in 2022 and was sentenced to 15 months, plus restitution. Hornbuckle was sentenced in 2023 to six years in prison, federal court records show.

Prosecutors said the scheme ran from 2012 through 2018. Ray was paid kickbacks to lure medical providers into ordering unneeded meds and services, including expensive compounded drugs, durable medical equipment, and the nerve tests from QBR. Ray also paid kickbacks to the providers, court papers contend.

The doctors billed Medicare, Medicaid, TriCare, BlueCross BlueShield and other insurers as much as $28 million over the years, according to court records and news reports.

“Shehi also caused his practice to routinely bill health insurance programs for patient office visits using the code that would generate the highest reimbursement—even though that code was not appropriate and Shehi was warned that billing in this way was not allowed,” the U.S. Attorney’s Office said in a press release last week.

Ray’s indictment did not mention if workers’ compensation insurance carriers were billed. But compounded drugs and medical equipment have long been a component of alleged workers’ comp fraud cases. Insurers have for years complained about the difficulty in controlling the cost of compounded medications.

Ray had owned Integrity Medical, through which he marketed health products and services, the indictment shows.

Photo: nerve conduction testing.