Orchestrator of landmark healthcare fraud scheme given 20-year prison sentence

Conspiracy ran for nearly 20 years, netting owner of assisted living and skilled nursing facilities $37 million.

The primary orchestrator of what federal authorities called the most wide-reaching healthcare fraud scheme ever uncovered has been sentenced to 20 years in state prison – far short of the 30 years prosecutors had reportedly sought, but a term sure to draw attention throughout the industry at large.

Philip Esformes, 50, of Miami Beach, Fla., was handed the sentence Thursday by U.S. District Judge Robert N. Scola of the Southern District of Florida, who also sentenced Esformes to three years of supervised release. A hearing to determine restitution and forfeiture has been scheduled for Nov. 21.

The case against Esformes involved an intricate scheme of kickbacks and money laundering connected to a pattern of fraudulent claims to Medicare and Medicaid for services deemed medically unnecessary.

According to the evidence presented during an eight-week trial that ended in April, between January 1998 and July 2016, Esformes led a conspiracy to keep the scheme afloat, using the network of more than a dozen assisted living facilities and skilled nursing facilities he owned. Esformes bribed physicians to admit patients into his facilities, then cycled the patients through the facilities, where they often failed to receive appropriate medical services or received medically unnecessary services billed to Medicare and Medicaid.

It all added up to some $37 million.

“For nearly two decades, Philip Esformes bankrolled his lavish lifestyle with taxpayer dollars, paying bribes with impunity and robbing Medicare and Medicaid by billing for services that people did not need or get,” U.S. Assistant Attorney General Brian A. Benczkowski said in a statement. “It is a credit to the tenacity of our prosecutors and law enforcement partners that the man behind one of the biggest healthcare frauds in history will be spending 20 years in prison.”

Esformes concealed the scheme from authorities for so long by bribing an employee of a Florida state regulator for advance notice of surprise inspections scheduled to take place at his facilities. The evidence further showed that the “lavish lifestyle” Benczkowski alluded to included luxury automobiles, a $360,000 watch, and, according to the Chicago Tribune, a luxurious penthouse apartment in a Chicago skyscraper and a mansion in the Los Angeles area.   

The newspaper further noted that the scheme had a few outrageously tragic results, recounting an incident at the Oceanside Extended Care Center in Miami Beach in which “an elderly patient was attacked and beaten to death by a younger mental health patient who never should have been at (a nursing facility) in the first place,” according to prosecutors’ remarks in a pre-sentencing memo.

“Philip Esformes is a man driven by almost unbounded greed,” said Deputy Special Agent in Charge Denise M. Stemen of the FBI’s Miami Field Office. “The illicit road Esformes took to satisfy his greediness led to millions in fraudulent healthcare claims, the largest amount ever charged by the Department of Justice. Along that road, Esformes cycled patients through his facilities in poor condition, where they received inadequate or unnecessary treatment, then improperly billed Medicare and Medicaid. Taking his despicable conduct further, he bribed doctors and regulators to advance his criminal conduct and even bribed a college official in exchange for gaining admission for his son to that university.”

“The FBI and its partners are constantly investigating healthcare fraudsters, big and small, who steal money from taxpayers at the expense of patients in need of quality medical care,” Stemen added.

After his eight-week trial, Esformes was found guilty in April 2019 of one count of conspiracy to defraud the United States, two counts of receipt of kickbacks in connection with a federal healthcare program, four counts of payment of kickbacks in connection with a federal healthcare program, one count of conspiracy to commit money laundering, nine counts of money laundering, two counts of conspiracy to commit federal program bribery, and one count of obstruction of justice. Several witnesses testified at trial, describing the poor conditions in the facilities Esformes owned and the inadequate care patients received.

The Chicago Tribune noted that the sentencing judge did recognize that Esformes had a long and consistent record of philanthropy, as his attorneys said he had donated more than $15 million to various charitable causes over the years, often anonymously.

“Philip Esformes will now spend years in prison for orchestrating a kickback and money laundering scheme that defrauded America’s healthcare system out of millions of dollars,” said U.S. Attorney Fajardo Orshan of the Southern District of Florida. “The U.S. Attorney’s Office for the Southern District of Florida remains committed to working with our partners at the Department’s Criminal Division, the FBI, and HHS-OIG (U.S. Department of Health and Human Services Office of Inspector General) to root out healthcare fraud and protect taxpayer dollars for patient care.”

Esformes’s coconspirator, physician’s assistant Arnaldo Carmouze, previously pleaded guilty to conspiracy to commit healthcare fraud and was sentenced in April to 80 months in prison, also ordered to pay a little more than $12.5 million in restitution. Co-conspirator Odette Barcha also pleaded guilty to one count of conspiracy to violate the anti-kickback statute, and was sentenced to 15 months in prison and three years of supervised release, ordered to pay about $700,000 in restitution.

This case was investigated by the FBI and HHS-OIG and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Florida, with assistance from Florida Attorney General’s Office Medicaid Fraud Control Unit.