Guilty Pleas Entered in $200M Medicare Fraud Case

Two South Florida companies entered guilty pleas this week in a Miami federal court for what prosecutors called a "staggering in scope" fraud scheme that falsely billed Medicare for more than $200 million and collected $80 million of the bogus claims, the Departments of Justice and Health and Human Services announced in a joint statement.

The companies were identified as American Therapeutic Corp., the Miami-based operators of seven partial hospitalization programs for the severely mentally ill in South Florida, and Medlink Professional Management Group Inc., which was described by prosecutors as a shell company that abetted ATC's efforts to hide its ill-gained profits, federal prosecutors said.

"The fraud scheme was staggering in scope, and those who concocted the scheme exhibited a complete disregard for the elderly, infirm, and disabled victims who were used to commit it," Assistant Attorney General Lanny A. Breuer of the Justice Department's Criminal Division said in a statement. "These guilty pleas mark an important step forward in our effort to hold accountable everyone -- and every entity -- involved in the scheme, and to recover the maximum amount possible on behalf of American taxpayers."

ATC and Medlink were each charged with conspiracy to commit healthcare fraud in an indictment unsealed on Feb. 15. ATC was also charged with healthcare fraud and conspiracy to defraud the federal government, and to pay and receive illegal healthcare kickbacks, federal prosecutors said.

"The defendants altered patient files, diagnoses, and medication types and levels to make it appear that patients being treated qualified for PHP treatments," said U.S. Attorney Wifredo Ferrer for the Southern District of Florida, in a media release. "This was done so that the defendants could fraudulently bill Medicare for more than $200 million in medically unnecessary services. We are pleased to have put these unscrupulous operators out of business."

ATC President Marianella Valera, and Medlink President Lawrence S. Duran pleaded on behalf of the two corporations before a federal magistrate judge in Miami on Tuesday. On April 14, Valera and Duran each pleaded guilty individually to dozens of felony counts, including conspiracy to commit healthcare fraud, healthcare fraud, conspiracy to pay and receive illegal healthcare kickbacks, conspiracy to commit money laundering, money laundering and structuring to avoid reporting requirements, federal prosecutors said.

With this week's plea, Duran and Valera admitted that their companies together, and with other coconspirators defrauded Medicare beginning in 2002 and until their arrest in October 2010. Duran and Valera also admitted that they used American Sleep Institute, identified as another shell company, to submit fraudulent Medicare claims, federal prosecutors said.

Duran, Valera and their coconspirators falsely altered patient files and therapist notes to make it appear that ATC patients qualified for PHP treatments. Duran and Valera also told employees and doctors to alter diagnoses and medication types and levels to make it falsely appear that ATC patients qualified for PHP services, federal prosecutor said.

Duran, Valera and others paid kickbacks to owners and operators of assisted living facilities and halfway houses, and to patient brokers in exchange for delivering ineligible patients to ATC and ASI. Some patients were paid kickbacks. 

Duran, Valera and their coconspirators used Medlink to hide the fraud and kickbacks from Medicare and law enforcement. Once Medicare paid ATC and ASI for the bogus services, Duran, Valera, and others transferred millions of dollars to Medlink. Duran and Valera used Medlink to distribute those millions of dollars to shell corporations and people to launder the money into cash to pay kickbacks.

Sentencing for the two corporations is scheduled for July 13. Both corporations, which have been out of business since the arrests of their owners in October 2010, face financial penalties of more than $80 million, the amount paid by Medicare from the scheme. The corporations' assets were frozen in October 2010 through civil forfeitures. 

Coconspirator Margarita Acevedo, also charged in the February 2011 superseding indictment, pleaded guilty on April 7. A fourth person charged in the indictment, Judith Negron, will be tried on Aug. 1.