1 July 2004 – LAWFUEL – Marcos Daniel Jiménez, United States Attorney for the Southern District of Florida, announced today that the United States has filed a civil lawsuit against defendants, Larkin Community Hospital, a Miami-based hospital; Jack Michel, M.D., James Desnick, M.D., and Morris Esformes, its current and former owners; and ten (10) assisted living facilities (“ALFs”) owned by Jack Michel and Philip Esformes, for violations of the False Claims Act, 31 U.S.C. § 3729. The lawsuit is based upon two schemes at Larkin. The first scheme involved the payment of kickbacks to doctors, primarily Jack Michel, at Larkin in 1997. The second scheme involved the churning of patients from the ALFs to Larkin for medically unnecessary services and procedures from 1997 to 1999.
Also named in the lawsuit were defendants, George Michel, M.D., who admitted the bulk of the patients; Claudia Pace, an administrator at several of the ALFs; Francisco Palacios, Jack Michel’s assistant; Oracle Health Systems, Inc. (“Oracle’); and numerous holding corporations owned and controlled by the individual defendants.
Based on the allegations of the Complaint, in 1997, when Larkin was owned by Dr. Desnick, Larkin paid Jack Michel and Oracle approximately $70,000 per month in kickbacks, which were disguised as payments for operating the Larkin Emergency Room, Radiology Department, and House Call Program. In return for these payments, Jack and George Michel admitted approximately 50% of the patients to Larkin in 1997, and many of these admissions were medically unnecessary. Additionally, Larkin paid kickbacks to other doctors for their admissions to Larkin that were disguised as Medical Directorship salaries. These doctors admitted approximately 25% of the patients to Larkin in 1997, and many of these admissions were medically unnecessary. Many of these patients were residents of ALFs with whom Jack Michel had long-term relationships, including Oceanside Extended Care, owned by the Esformes.
The Complaint further alleges that in early 1998, when Jack Michel purchased Larkin from Dr. Desnick, the defendants began a second scheme in which primarily George Michel admitted patients to Larkin for medically unnecessary treatments. These patients came from ALFs, including those owned by Jack Michel and the Esformes. This scheme continued through the end of 1999.
Mr. Jiménez commended the investigative efforts of the Federal Bureau of Investigation, the United States Department of Health and Human Services, the State of Florida Medicaid Fraud Control Unit, and the Florida Agency for Health Care Administration. This case is being prosecuted by Department of Justice Commercial Litigation Branch Attorney Alicia Bentley and Assistant United States Attorney Magda Lovinsky.