The married owners of several wound care companies in Arizona were sentenced to roughly 15 years in prison for their role in a scam involving false and fraudulent claims billed to Medicare and other insurance companies for medically unnecessary skin substitute products, according to the Department of Justice (DOJ).
Alexandra Gehrke and Jeffrey King were also required to pay hundreds of millions of dollars in civil liability for billing $1.2 billion in false and fraudulent claims for products applied to elderly and terminally ill patients, with the goal of acquiring illegal kickbacks from manufacturers.
The case marks the first major prosecution involving Medicare claims for amniotic skin substitutes, a significant concern for the government, accountable care organizations, and clinicians.
"The fraud in this case was unconscionable and knew no bounds," said Jeffrey Dickstein, a partner and whistleblower attorney at Phillips & Cohen, in a press release. "Patients at or near end of life were subject to exorbitantly expensive, dignity-robbing medical care they didn't need and didn't benefit from."
Gehrke and King were among the 200 people that the DOJ charged in a sweeping healthcare fraud crackdown last year. Gehrke owned two companies that contracted with so-called sales representatives tasked with identifying Medicare enrollees in Arizona with any type of wound. Once patients were found, Gehrke told the sales representatives to order pricey amniotic grafts, often made from human placenta, for their wounds. To reap the most profits, she directed the sales representatives, who lacked medical training, to order the largest-size products, regardless of whether they were medically appropriate, the DOJ said.
Through Gehrke's companies, and another co-owned by King, the couple bought skin substitutes from a wholesale distributor. They also contracted with nurse practitioners who billed Medicare and other health plans, directing them to "suspend their medical judgment," according to the DOJ, applying whatever size and amount of product that had been ordered by the sales representatives, whether medically necessary or not.
This directive "resulted in large grafts applied to small wounds, several grafts applied to single wounds, grafts applied to non-existent wounds, and grafts applied to terminally ill patients receiving palliative care, some of whom died within days or the same day of the allograft application," the DOJ said.
From November 2022 to May 2024, Gehrke, King, and their co-conspirators billed about $1,212,005,778 in false and fraudulent claims to health insurers, including more than $960 million billed to Medicare and other federal health plans. In total, the federal and commercial plans paid $614,945,420 for the claims.
Gehrke received more than $279 million in illegal kickbacks from the skin substitute distributor through her companies, and diverted $100 million to personal accounts. She used tens of millions in kickbacks to pay the sales representatives. The company she co-owned with King received another $130 million from the same skin substitute distributor.
The couple were arrested at the Phoenix airport while boarding a flight to London in June 2024. Authorities believed the couple anticipated their arrest and were attempting to flee. A book titled How to Disappear: Erase Your Digital Footprint, Leave False Trails, and Vanish Without a Trace was found among the couple's possessions, according to court documents.
Gehrke and King pleaded guilty to charges of conspiracy to commit healthcare fraud and wire fraud in October 2024 and January 2025, respectively.
In addition to $97 million the government seized in assets from 28 bank accounts, the government also seized three life insurance annuities worth over $21 million; four luxury vehicles worth over $988,000; $367,150 in cash; and more than $348,000 in gold and silver bars and coins.
Gehrke and King were sentenced to 15.5 years and 14 years in prison, respectively. Gehrke was ordered to pay $614.9 million in restitution and to forfeit $279.9 million in fraudulent proceeds, and King was ordered to pay $605.7 million in restitution and to forfeit $130.8 million in fraudulent proceeds.
In addition to the criminal case, Gehrke and her wound care marketing company, Apex Medical, agreed to pay $279.9 million in civil liabilities under the False Claims Act, while King agreed to pay $30 million.
Thomas Lally, MD, founder, CEO, and chairman of Bloom Healthcare, said Apex was the first "bad actor" his accountable care organization identified through claims data back in 2022. "We are hopeful that other bad actor skin sub corporations will face the same consequences," he noted.
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.