Two brothers have been convicted for their roles in a $1.4 billion fraud scheme that used financially distressed rural hospitals in the Southeast to unlawfully bill for laboratory services, the Department of Justice (DOJ) announced Monday.
Defendants Jorge Perez and Ricardo Perez were convicted of conspiracy to commit healthcare fraud and wire fraud, five counts of healthcare fraud and conspiracy to commit money laundering of proceeds greater than $10,000, each of which have maximum penalties ranging from 10 to 20 years.
“The defendants in this case engaged in an elaborate scheme to prey upon distressed medical facilities across multiple states and defraud private insurers,” U.S. Attorney for the Middle District of Florida Roger Handberg said in a statement. “Today’s verdict clearly demonstrates our vigilance to prosecute those who violate our laws for profit.”
Jorge Perez managed and controlled the rural hospitals in addition to owning a medical billing and software company, according to an indictment against 10 defendants unsealed in 2020. Ricardo Perez was a part-owner and employee of the billing company.
The brothers’ scheme involved targeting financially strained rural hospitals with management agreements and purchases, DOJ said. Once controlled, the defendants pretended to convert the hospitals into laboratory testing sites but instead had samples processed at labs controlled by other defendants, DOJ said.
The defendants specifically targeted rural hospitals due to their higher private insurance reimbursement rates for lab testing services, the department noted. Once private insurance companies began to question the billings, DOJ said the defendants “would move on to another rural hospital, leaving the rural hospitals they took over in the same or worse financial status as before.”
The department said many of the billed services during the “years-long” scheme involved urine drug testing for addiction treatment patients, which the defendants paid recruiters and providers for via kickbacks. These tests were “often not medically necessary,” DOJ said.
Four hospitals in Florida, Georgia and Missouri ranging from 25 beds to 49 beds were involved in the case, according to DOJ, three of which were closed shortly after the defendants moved on to a different hospital.
“These defendants preyed on and exploited the vulnerable—vulnerable hospitals, vulnerable underserved communities, and vulnerable patients seeking treatment for addiction—to line their own pockets,” Assistant Attorney General Kenneth A. Polite, Jr. of the DOJ’s Criminal Division, said in a statement. “We will continue to work tirelessly to hold accountable those who exploit the integrity of the health care industry for profit.”
The majority of fraud tracked down by DOJ is housed in the healthcare industry. In fiscal 2021 alone, more than $5 billion of the total $5.6 billion in False Claims Act recoveries were tied to healthcare industry cases, the department announced in February.