The $1 billion fraud: Bribes, escorts and nursing homes

On April 5, health-care providers and health-care attorneys were bluntly reminded why compliance is key when nursing home and assisted living facility mogul Philip Esformes was found guilty of 20 criminal charges in Miami of health-care fraud, including paying bribes and kickbacks in a scheme to foster increased and illegal Medicare and Medicaid payments ($1 billion) in what has been touted as the largest health-care fraud case in U.S. history. Most health-care lawyers take pride in counseling their hospital, nursing home, physician and other health-care provider clients in steering away from health-care fraud and abuse, avoiding fines and penalties and even criminal prosecution. Indeed, counseling health-care clients on proper compliance measures to avoid health-care fraud and abuse laws like the Federal Anti-Kickback Statute or the False Claims Act provides great comfort to our clients and their operations.

But it is more than a little disturbing that despite decades of compliance and fraud and abuse counseling that criminals like Esformes still persist in health care, and worse, on such an audacious and grand scale. We can all learn something from this case and from the upcoming sentencing which may see Esformes’ initially denied bond and current incarceration from 2016 extend to the rest of his life.

What’s worse about the Esformes case is that it gives a bad name to healthcare providers who have diligently made sometimes extraordinary efforts to comply with myriad healthcare fraud and abuse laws. There is also a Chicago connection in that Philip and his father Morris Esformes, a Chicago rabbi who made a fortune in the healthcare business, were once partners in a similar chain of skilled-nursing and assisted-living facilities in Chicago before expanding to Miami.

Indeed, the allegations and charges read like a bad movie, something Hollywood might have concocted as an outrageous story of avarice and patient exploitation. This story is so outrageous that it even includes several illegal payments uncovered in the recent college admissions scandal for Esformes’ son.

The sheer numbers in the fraud

A 12-person jury found Esformes, who owns some 20 nursing homes and assisted living facilities, guilty of criminal activity that spanned from 1998 to 2016. Here is a short list of his exploits:

• Scheme involved $1 billion in Medicare and Medicaid fraud, with all other co-conspirators already pleading guilty and who testified against Esformes.
• Esformes made illegal kickback payments to doctors in cash so that doctors would refer patients to his facilities.
• Drug addicts, some of whom did not need nursing home care, were provided OxyContin and fentanyl without a physician’s order as a way to entice them to stay at Esformes’ facilities.
• Esformes also accepted kickbacks from other providers who sought access to Esformes’ patients to bill Medicare for services that were unnecessary or fake.
• In 2015, Esformes plotted to help one of his co-conspirators to leave Miami for Israel to avoid trial, a plot that was caught on tape by the Feds due to one of the co-conspirators wearing a wire.
• Also around the time of his indictments, Esformes was ordered by a federal judge to return money he had wrongfully transferred to his father, Morris, in Chicago in a failed attempt to protect his assets.
• At least one payment of $5,000 was made to Florida regulators at the Agency for Health Care Administration to provide advanced information about unannounced health inspections to Esformes’ facilities so that Esformes could falsify records in advance of agency inspection visits.

Watches, cars and colleges

In the next phases of the prosecution, federal prosecutors will now look to see how Esformes can pay back the alleged $1 billion in Medicare and Medicaid fraud taken illegally from taxpayers as restitution. Here are some of what federal prosecutors will be focusing on, and it reads like a laundry list of scandals and greed:

• Esformes lived a lavish life, owning 20 nursing homes and assisted living facilities in the Miami area.
• Esformes has 13 real estate properties in Miami Beach, Miami, Chicago and Los Angeles, as well as numerous bank accounts worth $9 million.
• A Ferrari Aperta sports car worth $1.65 Million.
• A Grubel Forsey watch worth $360,000
• $400,000 paid to Rick Singer, the man at the center of the college bribery scandal, Operation Varsity Blues.
• $300,000 paid to University of Pennsylvania basketball coach Jerome Allen who testified that he received bags of cash and wire transfers to get Esformes’ son on the Penn basketball team and into the Wharton School of Business.
• $3,500 paid to Martin Fox, a sports coach in Texas who was arrested and charged in March 2019 with arranging several bribes in connection with the college admissions scandal.
• A co-conspirator stated that he was referring patients to Esformes whether they needed services or not, and paid kickbacks to Esformes for Esformes to refer residents to use the co-conspirators’ therapy provider, home health care and other services.
• Many payments to Esformes were disguised as escort payments for Esformes, and travel and hotel expenses, not to mention a Saks Fifth Avenue wardrobe for Esformes.
• Esformes received kickbacks from corrupt medical professionals, including perks such as “high-end escorts” who were flown to Orlando, Fla., and chauffeured in limousines for liaisons with Esformes at the Ritz-Carlton Hotel.

In the end, whatever the sentencing and restitution paid by Esformes, the message has to be that this type of greed and focus on money rather than patients cannot survive in health care. We have to remind ourselves that these few poor operators should not be indicative of the whole as most providers truly care about their patients and would never dream of putting this type of ostentatious greed ahead of proper patient care.