10 indicted in $1.4B rural hospital fraudulent billing scheme: DOJ

File folders labeled "insurance," "fraud," "claims," and "under investigation"
The Department of Justice has indicted 10 people in connection with a rural hospital fraud scheme (Getty Images/Olivier Le Moal)

The Department of Justice (DOJ) has indicted 10 people, including a Miami-based hospital executive, in connection with a pass-through billing scheme that used rural hospitals as shells to submit fraudulent bills for lab tests.

Between November 2015 and February 2018, private plans were billed for $1.4 billion in tests and paid out $400 million, according to the DOJ. The indictment was unsealed Monday.

Hospital executive Jorge Perez, 60 of Miami-Dade County and nine others were charged in the indictment. Perez's EmpowerHMS company at one time owned 18 rural hospitals, 12 of which have since gone bankrupt, Kaiser Health News reported last year. Eight have closed.

According to the indictment, Perez and his co-conspirators purposefully sought out struggling rural hospitals and would take them over to further the scheme. They would then bill private payers for pricey urinalysis drug tests and blood tests, which were largely conducted at outside labs they often controlled, according to DOJ.

The billing companies were also often controlled by the co-conspirators, DOJ said.

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The hospitals would negotiate for higher reimbursement rates from health plans, according to the indictment. The tests were often not medically necessary, and the co-conspirators would obtain samples by paying kickbacks to recruiters and providers, frequently sober homes or substance abuse treatment facilities.

The co-conspirators also conducted an extensive and "sophisticated" scheme to launder money brought in through the fraud scheme, according to the indictment.

“This was allegedly a massive, multi-state scheme to use small, rural hospitals as a hub for millions of dollars in fraudulent billings of private insurers,” said Assistant Attorney General Brian A. Benczkowski of the DOJ’s Criminal Division in a statement. “The charges announced today make clear that the department is committed to dismantling fraud schemes that target our health care system, however complex or elaborate.”

Perez was charged alongside Seth Guterman, 54, of Chicago; Ricardo Perez, 57, of Miami-Dade County, Florida; Aaron Durrall, 48, of Broward County, Florida; Neisha Zaffuto, 44, of Broward County, Florida; Christian Fletcher, 34, of Atlanta; James Porter Jr., 49, of Marion County, Florida; Sean Porter, 52, of Citrus County, Florida; Aaron Alonzo, 44, of Miami-Dade County, Florida; and Nestor Rojas, 45, of Miami-Dade County, Florida.