Arizona Couple Pleads Guilty to One of the Largest Healthcare Frauds in U.S. History

Last month, a Phoenix couple pleaded guilty to criminal charges involving healthcare fraud. Unfortunately, this is not remarkable, with approximately 500 annual convictions for healthcare fraud in the United States each year over the past five years.

What makes this case unique is the staggering size of the fraud, which occurred over a very short period of time. The government alleges that the defendants, husband-and-wife team Alexandra Gehrke and Jeffrey King, submitted $1.2 billion in fraudulent claims to Medicare, Medicaid, CHAMPVA, TRICARE, and private insurers.

In recent years, the median amount of harm in a healthcare fraud conviction was about $1.2 million, roughly one-one-thousandth of the size of this wrongdoing.

The various fraud schemes involved billing for wound care procedures, include several of the following:

• Receiving $279 million worth of kickbacks from wound graft companies in exchange for consistently using those companies to source the amniotic grafts;
• Consistently using larger-than-necessary (and hence, more expensive) wound grafts to maximize insurance reimbursements;

• Paying kickbacks to sales representatives marketing the defendants’ companies, including Apex Medical and Viking Medical Consultants; and

• Ignoring medical necessity and prescribing grafts regardless of whether wounds were already healed or responding to the grafts, to maximize insurance reimbursement.

As part of the scheme, Gehrke’s two companies, Apex Medical LLC and Viking Medical Consultants LLC, contracted with untrained sales representatives to locate elderly patients with wounds at nursing homes or on hospice and order grafts for them from a designated graft distributor. Once patients were identified, Gehrke then referred them to a company co-owned by her husband, Mr. King, that contracted with nurse practitioners to apply the grafts. As alleged in the charges, the entire fraud lasted only 18 months, during which $1.2 billion of claims were submitted to public and private insurers, with $960 million in claims to federal programs alone.

Each defendant has agreed to pay over $600 million in restitution and faces over 20 years in prison. Sentencing for Alexandra Gehrke is scheduled for August.

To date, the government has seized $100 million of Gehrke’s and King’s assets. The charges detail the defendants’ profligate spending of their ill-gotten gains, including a Ferrari, a quarter-million-dollar Mercedes, several properties, including a $5.6 million house, and hundreds of thousands in precious metals and jewelry.

And the government’s net has been expanding. Last week, Daylon Bennett, the Director of Sales at Gerkhe’s and King’s companies, was charged with conspiracy to commit healthcare fraud.

Mr. Bennett is alleged to have ordered grafts for elderly nursing home residents who did not need them. Two nurses who worked with Gerkhe and King, Bethany Jameson and Carlos Ching, have also been charged as part of this scandal.   

For those who want to learn more about this remarkable story of graft in the graft business, a short documentary about the facts of the case is available on YouTube.