It was CBS News that turned Miami businessman Jorge Perez and Sunrise personal injury attorney Aaron Durall into poster boys for alleged billing fraud schemes.
In broadcasts that began airing in March 2018, the network spoke of how the two men took over financially struggling hospitals, ramped up billing for urine tests conducted by outside labs and raked in tens of millions of dollars by charging insurance companies far more than they could have charged otherwise.
One of those hospital was the Fulton Medical Center, which separated from a management agreement with Perez earlier this year. The hospital continues to operate under the management of new CEO Mike Reece. (See Feb. 6 Fulton Sun story: bit.ly/2HNfG6S).
Perez and Durall were not the only ones involved.
Lawsuits, news reports and criminal investigations reveal at least a dozen other entrepreneurs allegedly participated in similar laboratory billing programs since 2010.
Many of these people knew each other and worked in tandem.
Their initial approach to struggling hospitals invariably involved preaching salvation. And for a few short months, they delivered. Millions of dollars miraculously flowed through near bankrupt institutions. But it wasn't long before insurance companies discovered what was going on and halted the payment of grossly inflated claims.
Perez, who sold himself as the savior of rural hospitals, proved he had a knack for convincing executives at troubled institutions to let him take over.
Throughout it all, he maintained there was nothing illegal about his laboratory billing strategy.
He once pointed to a book — "The Profit Machine in the Hospital Basement" — to prove that ramping up lab testing was mainstream idea, and he created the National Alliance of Rural Hospitals in 2016 to convince hospital executives that billing programs were their last, best hope for survival.
Perez tapped Mike Murtha, a former Florida Congressional staffer, as the organization's president, and several of Perez's associates, including Mark Blake and Christian Fletcher, held seats on the board.
Murtha came to Fulton in September 2017 with Perez to announce their association with the Fulton Medical Center (see Fulton Sun article: bit.ly/2QDl4w5).
Lawsuits filed by insurers and documents from a Florida bankruptcy case show that both Blake and Fletcher ran labs that performed urine testing for hospitals that Perez directed. So did Robert F. Porter Jr., who co-managed a company with Perez — Hospital Laboratory Partners — that allegedly received $62.5 million for its participation in the Putnam Memorial billing program.
Blake, Fletcher and Porter have all denied the allegations in court documents.
Born in Pakistan, Tariq Mahmood obtained his Texas medical license in 1978 and began buying rural hospitals in the state 20 years later.
By 2010, he controlled six.
Regulators repeatedly cited those hospitals for shoddy care, questionable management practices and failure to maintain facilities
Then in 2013, federal investigators indicted Mahmood for submitting false claims to Medicare and Medicaid.
Mahmood insisted he was innocent and took the case to trial. But a jury found him guilty on all 15 charges and he was sentenced to 11 years in prison.
Shortly after his arrest in 2013, Mahmood sold one of his Texas hospitals to a company co-managed by South Florida businessmen David Byrns.
There was no indication the two men knew each at the time, but by 2016 they were in business together.
A lawsuit filed by insurance companies shows that Mahmood's company, Lucenta Labs, processed urine tests for Byrns and Perez in connection with an alleged billing fraud scheme at Putnam Memorial Hospital in Missouri.
"Lucenta labs generated patients' specimens through its sales personnel, tested the specimens, reported results to its clients, and provided information about the tests to its co-conspirators so that they could be billed to the (insurance company) under the contract as if performed at and by Putnam," the lawsuit says.
The lawsuit, which remains pending, goes on to accuse Byrns of fraud, and a report issued by the Missouri State Auditor accuses him of self-dealing.
The report says Byrns increased his salary from $160,000 to $200,000 without board approval. He funneled $700,000 into his management company, and he had the hospital reimburse him for thousands of dollars in expenses that were clearly not business related.
Reached at his home in Lighthouse Point, Florida, Byrns immediately hung up. He did not return a message left on his cell phone.
A Chicago physician and businessman, Seth Guterman developed a software program to manage hospital billing and used it to maximize revenues at rural hospitals.
In May 2016, he took control of Newman Memorial Hospital in Shattuck, Oklahoma.
Within months, Guterman and his associates increased the volume of lab testing from an average of six tests per month to more than 800. Annual billings climbed to more than $21 million, court documents show.
"Defendants reaped millions of dollars in ill-gotten gains by repeating this process thousands of times at Newman and other Aetna-affiliated facilities throughout the country," a lawsuit filed by insurers says.
Guterman "unequivocally" denied the allegations against him and his company, saying in an email that the lab program he set up at Newman Memorial helped the hospital.
"Health insurance companies were not only aware of, but were given specific details on, the reference lab program at Newman Memorial Hospital that provided medically necessary laboratory testing for patients," Guterman said.
The lawsuit remains pending.
Other court documents filed by a hospital board and a bankruptcy trustee in Florida allege that Guterman's company — People's Choice Hospital — participated in at least one other alleged laboratory billing scheme. But Guterman remained behind the scenes — letting Perez take charge at Campbellton-Graceville Hospital in Florida.
Documents filed by Guterman's company blame Perez for any questionable billing practices there.
In August 2016, Durall purchased Chestatee Regional Hospital in North Georgia and promptly increased urine testing from an average of 30 tests per month to about 4,800.
It was more of the same when he took charge at Sonoma West Hospital in Northern California the following year.
In a lawsuit filed in California, insurers hit on the extraordinary lengths that Durall and his associates went to carry out the plan.
"Approximately 90 percent of lab specimens originated in Orange County, California — nearly 500 miles from Sonoma West," the lawsuit states. "But that was just the beginning of their journey."
The samples first travelled 2,300 miles east to Reliance Labs, Durall's company in Sunrise, Florida. They then boarded a plane to fly 2,600 miles back to Northern California where a basic screening test was supposedly performed at Sonoma West.
"These nearly 5,000 miles were a trip not just around the country, but an end-run on Anthem's professional fee schedule," the lawsuit states.
Atlanta attorney Brian McEvoy, who represents Durall, said his clients has denied all the allegations and the suits were settled in April. But McEvoy said the details remain confidential.
Neisha Carter Zaffuto
Lawsuits filed against Neisha Zaffuto in Georgia and California place her at the center of alleged billing fraud schemes at both Chestatee and Sonoma West.
The South Florida businesswoman allegedly submitted fraudulent claims from those hospitals to insurance companies, and helped to hide the fact that urine testing was not being conducted there, court documents say.
When insurers first suspected the scam at Sonoma West, they contacted the hospital's billing department. Employees, who knew nothing about the billing strategy, confirmed the urine tests had not been ordered for Sonoma West patients. But Zaffuto quickly got back in touch, telling insurers she was able to locate all the patients the insurance company had questions about.
When the insurers asked for proof, Zaffuto wasn't able to deliver, court documents state.
"To this day, Sonoma West has been unable to provide Anthem a single requisition form indicating that the testing had actually been ordered by a physician, let alone that Sonoma West had been the entity from whom the testing had been ordered," the lawsuit states.
Zaffuto has denied allegations of fraud.
During a town hall meeting last year, Beau gertz outlined his plans for taking over Surprise Valley Community Hospital in Northern California.
He also acknowledged that he worked in sales and marketing for Perez for 18 months before heading out on his own. But he insisted he was nothing like the Miami businessman.
Sure, he intended to use Surprise Valley Hospital to bill insurers for lab tests conducted all over the country, but Gertz said he was going to do it the right way.
"The hospital can't simply take a specimen, have someone else run it, and then submit it through with nobody in that hospital ever seeing the patient," Gertz said at the time.
Meanwhile, a lawsuit filed in Missouri alleges Gertz participated in the alleged billing fraud scheme at Putnam Memorial Hospital with his business partner, Mark Blake.
The suit says that the companies controlled by the two men allegedly collected more than $26 million from processing urine tests.
Gertz and Blake have denied the allegations.
Christian Fletcher's company — LifeBrite Laboratories — also processed urine tests at Putnam Memorial, court documents show.
But unlike some of the other lab operators that did business with Perez, Fletcher also conducted his own laboratory billing operation after buying a hospital in North Carolina in December 2016.
A lawsuit filed by insurers shows that LifeBrite saw its lab billings jump more than 22,000 percent from an average of $37,400 per month to approximately $8.5 million per month after Fletcher took over.
"The testing billed by LifeBrite was not for patients being treated at LifeBrite, or by LifeBrite-credentialed healthcare providers, or for patients who resided in the relatively small territory serviced by LifeBrite," court documents filed by insurers say.
Fletcher denied accusations of fraud in court documents and in the press, saying he was confident that LiefBrite's billing practices were lawful.
But Blue Cross Blue Shield and other major insurance companies halted reimbursements to LifeBrite in August of last year.
Jonathan Riley and Michael Braga are reporters for the Columbia Tribune and granted the Fulton Sun permission to use their stories in this matter. The Fulton Sun also provided reporting.
Part One ran in Tuesday's edition of Fulton Sun.