Los Angeles woman and her home health agencies pay $33.8 million to settle Medicare fraud case

“Cappers,” doctors, nurses and patients paid to help in scheme

Oct. 10, 2006 -- A Los Angeles woman who owned and operated two home health agencies has paid the federal government $33.8 million to settle a whistleblower case alleging Medicare fraud and has pleaded guilty to related criminal charges.

Lourdes Perez, the primary owner and operator of Provident Home Health Services Inc. and Tri-Regional Home Health Care Inc., agreed to plead guilty as part of an agreement with the U.S. attorney’s office that required her to cooperate with a related criminal investigation in exchange for a reduced sentence. She is scheduled to be sentenced Oct. 16 in federal district court in Los Angeles.

The whistleblower (“qui tam”) lawsuit said Perez was defrauding Medicare through a network of paid recruiters and falsified documents.

“What’s unusual about this case is the enormous scale of the fraud orchestrated by one person,” said Michael P. Brown, a San Francisco attorney with Phillips & Cohen LLP, which represents the whistleblower. “In just over 18 months, her companies grew from start-ups to the top home health agencies in California, in terms of Medicare billings.”

Perez’s companies, Provident and Tri-Regional, were billing Medicare almost $80 million per year when the whistleblower lawsuit was filed, Brown said. “By Ms. Perez’s own admission, the vast majority of that reimbursement was for home health services that the defendants never provided.”

“It’s shocking how much one person can steal from Medicare,” Brown said, “and how long a vast scheme like this can go on before someone takes notice.”

Marietta Diaz, a former Provident Health Care employee, filed the qui tam lawsuit against Perez and her companies in federal district court in Los Angeles in 2003. Diaz handled payroll and billings to the Medicare and Medicaid programs.

Perez settled the whistleblower case last year. But the lawsuit and settlement were kept under seal (meaning they weren’t available to the public) to allow the related criminal investigation to proceed.

In her qui tam lawsuit, Diaz alleged that Perez employed “marketers” (also known as “cappers”) who recruited patients for home health services — whether the services were needed or not -- and then billed Medicare for tens of millions of dollars’ worth of home health services that were never provided. Cappers were paid as much as $400 per enrolled patient, according to the lawsuit. Often patients were paid to enroll as well. Some of the patients also were cappers, getting paid to recruit other patients. The lawsuit said Perez paid kickbacks to doctors to get referrals.

Perez’s companies obtained the necessary physician certifications that home health services were required, even though the doctors generally didn’t see the patients they were certifying for the services, the lawsuit said. The doctors often made up diagnoses to qualify patients for Medicare and Medicaid, according to the lawsuit.

Patients received few, if any, visits, once they were enrolled. The companies billed Medicare and Medicaid for regular visits, falsifying documents to obtain payments. The companies also obtained many signatures from patients in advance, so they could use those signatures as needed for forms that Medicare and Medicaid periodically required.

Brown lauded the U.S. Attorney’s office in Los Angeles, the FBI, the Office of Inspector General for the U.S. Department of Health and Human Services and other federal agencies for their work on the case.

“Once we filed this lawsuit, the U.S. Attorney’s office and other federal agencies moved quickly and aggressively to stop this criminal enterprise and bring the defendants to justice,” said Brown. “Without their fast work, the government wouldn’t have recovered as much as it did.”

The False Claims Act permits individuals to file qui tam lawsuits against companies that defraud the government. Liable companies pay as much as three times the government’s losses plus penalties for each false claim. When the government joins the case, whistleblowers are entitled to 15 percent to 25 percent of the government’s recovery.

Phillips & Cohen’s practice is devoted exclusively to representing whistleblowers in qui tam lawsuits. For more information about Phillips & Cohen's record, see P&C's Successful Whistleblower Cases.

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United States and the State of California ex rel. Diaz v. Lourdez Perez et al, CV 03 3074 DT (C.D. Cal.)