The Miami businessman who attempted to purchase the Fulton Medical Center in in 2017 has been indicted for his alleged role in a nation-spanning fraudulent billing scheme.
Jorge Perez, 60, is among 10 defendants charged in an indictment filed in the Middle District of Florida and unsealed Monday.
Perez and his co-conspirators — including hospital managers, laboratory owners, billers and recruiters — were, according to the U.S. Department of Justice, involved in "an elaborate pass-through billing scheme" using rural hospitals in several states as billing shells to submit fraudulent claims for laboratory testing.
"Trust and integrity undergird the confidence and reliability in our healthcare system," said U.S. Attorney Maria Chapa Lopez for the Middle District of Florida. "Fraudulent and deceptive business practices undermine those values and erode the public's trust in that system. We will continue to pursue those who set these tenets aside and compromise the care and safety of our citizens for profit."
The indictment alleges from approximately November 2015 through February 2018, the conspirators billed private insurance companies approximately $1.4 billion for laboratory testing claims as part of this fraudulent scheme and were paid approximately $400 million.
According to the DOJ, the conspirators would take over small, rural hospitals, often in financial trouble, using management companies they owned and operated. The conspirators would then bill private insurance companies through those rural hospitals for millions of dollars of expensive urinalysis drug tests and blood tests, conducted mostly at outside laboratories they often controlled or were affiliated with, using billing companies that they also controlled.
While outside laboratories did most of these laboratory tests, the conspirators allegedly billed private insurance companies as if these laboratory tests were done at the rural hospitals.
According to the indictment, these rural hospitals had negotiated contractual rates with private insurers that provided for higher reimbursement than if the tests were billed through an outside laboratory. The scheme used the hospitals as a shell to fraudulently bill for such tests. The lab tests were often not even medically necessary.
The conspirators would obtain urine specimens and other samples for testing through kickbacks paid to recruiters and health care providers, often sober homes and substance abuse treatment centers. The indictment also alleges the conspirators engaged in sophisticated money laundering to promote the scheme and to distribute the fraudulent proceeds.
"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 Justice Department's Criminal Division.
While the conspirators made money, the hospitals they dealt with suffered. Cambellton-Graceville Hospital, a Florida hospital named in the indictment, was forced to close in June 2017. In total, a dozen hospitals affiliated with Perez have closed or been seized by court-appointed receivers, including the now-shuttered I-70 Community Hospital in Sweet Springs, Missouri.
Perez was charged with one count of conspiracy to commit health care fraud and wire fraud, five counts of substantive health care fraud, one count of conspiracy to commit money laundering and seven counts of substantive money laundering. He made his first appearance in court Monday afternoon.
Other individuals indicted include Seth Guterman, 54, of Chicago, Illinois; Ricardo Perez, 57, of Miami-Dade County, Florida; Aaron Durall, 48, and Neisha Zaffuto, 44, both of Broward County, Florida; Christian Fletcher, 34, of Atlanta, Georgia; James Porter Jr., 49, of Marion County, Florida; Sean Porter, 52, of Citrus County, Florida; Aaron Alonzo, 44, and Nestor Rojas, 45, each of Miami-Dade County, Florida.
For more information about Guterman, Durall, Zaffuto and Fletcher's roles in the scheme, see previous reporting: bit.ly/31vp21n. To read about the charges each defendent faces, visit https bit.ly/3eNFOwB.
One early warning sign regarding Perez and the company he directed and was vice president for, Hospital Partners Inc., came in August of 2017, when State Auditor Nicole Galloway released an audit of Putnam County Memorial Hospital. In September 2016, the Putnam County Hospital Board hired Hospital Partners Inc. to take over management of the hospital. Galloway said her office uncovered $90 million in inappropriate lab billings by hospital leadership and associates.
In a follow-up audit in February 2018, Galloway noted the vast majority of labwork billings were for patients who'd never been to or received services at PCMH. David Byrns, Perez's business partner and president of Hospital Partners, pleaded guilty in a case related to that scheme in 2019.
In September 2017, Perez showed up at a Fulton City Council meeting, where he introduced himself as the CEO of Kansas City-based Empower HMS and the new owner of the Fulton Medical Center. At the time, FMC was under threat of closure after part-owner MU Health Care sold their shares back to then-owner NueTerra, which planned to close the facility later that month. Isabel Schmedemann, then the hospital's CEO, told the Fulton Sun the sale was expected to be completed by December.
However, Empower HMS never actually obtained ownership of the company, instead managing it for several months into early 2018 before being dismissed by NueTerra.
FMC is now managed by Noble Health.