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Federal Physical Therapy Billing Fraud

Federal Physical Therapy Billing Fraud – What You Need to Know

Federal investigators are prosecuting physical therapists and clinic owners for billing fraud at increasing rates. If your clinic bills Medicare or Medicaid for physical therapy services, or if you work in a skilled nursing facility where therapy minutes determine reimbursement levels, you need to understand what federal prosecutors are looking for. Here is the first thing you should know: physical therapy billing fraud results in devastating federal prison sentences. Arisleidys Fernandez Delmas received 104 months in federal prison – over eight years – for her role in a $36 million physical therapy scheme that defrauded Blue Cross Blue Shield. Magaly Travieso received 9 years for conspiracy in the same scheme. These are not theoretical outcomes.

Welcome to Spodek Law Group. We handle federal healthcare fraud defense cases regularly, including cases where physical therapists first realize they are facing serious criminal exposure through exactly this kind of investigation. The second thing you need to understand is this: physical therapy fraud prosecutions often involve conduct that seemed like normal billing practices. Documenting more minutes then actually provided. Billing for individual therapy when multiple patients were treated together. The line between aggressive billing and federal fraud charges is thinner then most physical therapists realize – and the consequences are devastating.

Heres something most physical therapists dont realize about how these cases develop. The paradox is brutal. Patients were told to remain in the clinic for nearly an hour – but they just watched TV in a waiting room while the physical therapist billed Medicare for intensive therapy services. Hatem Behiry engaged in brief conversations with patients then completed paperwork billing for roughly an hour of physical therapy services. The patients recieved no physical therapy at all. They sat in a waiting room watching television. Behiry documented everything in detail as if the services actually occurred. The crime isnt providing physical therapy. The crime is billing for physical therapy that never happened.

The Phantom Therapy Problem

Heres the uncomfortable truth about phantom billing in physical therapy. Services that were documented in detail never actualy occurred – and the documentation itself becomes evidence of fraud.

Behiry provided no physical therapy whatsoever. The Brooklyn physical therapist was part of a $30 million scheme to defraud Medicare and Medicaid. Patients watched TV in a waiting room. Behiry engaged in brief pro forma conversations then completed paperwork billing for roughly an hour of physical therapy services. The therapy never happened. The documentation was fiction. Behiry received 24 months in federal prison.

The inverse relationship between billing and treatment. Heres the paradox that destroys physical therapy clinics. The more therapy billed, the less therapy actualy happened. Clinics billing the highest volumes were often providing the least actual treatment. The billing records showed comprehensive therapy sessions. The patients remembered watching television. When investigators interview patients, the gap between documentation and reality becomes evidence.

Complete documentation for services that never occurred. Physical therapy fraud isnt sloppy billing. Its meticulous false documentation. Treatment notes describe exercises that werent performed. Progress notes document improvement that didnt happen. The paperwork looks perfect becuase it was designed to look perfect. The services just never occurred.

Think about what that means for your physical therapy practice. Every treatment note you document must reflect services actualy provided. Every billing code must match actual treatment. Every minute documented must be a minute of actual therapy. The documentation that protects you when its accurate destroys you when its false.

The Kickback Pipeline

Heres something about physical therapy fraud that reveals the hidden machinery of these schemes. Patient referrals themselves become illegal kickback arrangements.

The Los Angeles scheme paid 55% of Medicare reimbursement as kickbacks. Ten defendants were charged in connection with a $15 million scheme to defraud Medicare through physical therapy billing. Patients were paid cash to serve as phantom patients. The kickback payments equaled more then half of what Medicare paid. The fraud payment was larger then the legitimate portion of the billing.

The recruiter-patient-billing cycle. Heres the hidden connection that exposes everyone involved. A recruiter pays a patient cash. The patient goes to the clinic. The clinic bills Medicare for phantom services. Medicare pays. The cycle continues. The recruiter gets paid for delivering patients. The patient gets paid for showing up. The clinic gets paid for services never provided. Everyone profits except the federal healthcare programs being defrauded.

Patients paid kickbacks used employer insurance. In the Florida scheme, patients receiving kickbacks had insurance through JetBlue, AT&T, and TJX. These employees participated in fraud against their own employers insurance programs. They recieved cash payments to serve as phantom patients. They helped defraud the companies they worked for.

The kickback makes every claim false. Even if services were provided, claims submitted based on kickback referrals are false claims. The Anti-Kickback Statute makes the referral itself illegal. The False Claims Act makes every resulting claim actionable. The kickback that seemed like a marketing expense becomes the evidence that proves criminal intent.

The SNF Minute Pressure

Heres something about physical therapy fraud in skilled nursing facilities that reveals how institutional pressure creates criminal exposure. SNF administrators routinely pressure therapists to maximize treatment minutes – and that pressure creates federal liability.

720 minutes means Ultra High RUG category. SNF reimbursement depends on Resource Utilization Group categories. Ultra High requires 720 minutes per week from at least two therapy disciplines. The facility revenue depends on hitting that target. SNF administrators pressure physical therapists to document 720 minutes wheather the patient received 720 minutes or not.

The billing target determines the therapy. Heres the irony that destroys physical therapists in skilled nursing facilities. The therapy provided should determine the billing. In fraudulent SNFs, the billing target determines the therapy documented. Administrators tell therapists what minutes they need. Therapists document what administrators need. Patient care is irrelevant. Billing optimization is everything.

Upcoding 30-minute sessions to 60-minute codes. Common physical therapy fraud involves billing longer sessions then actualy provided. The patient receives 30 minutes of treatment. The claim shows 60 minutes. The difference is fraud. Multiply that by hundreds of patients and thousands of sessions and the exposure becomes enormous.

Group therapy billed as one-on-one sessions. Physical therapists treating multiple patients simultaneously must bill group therapy rates. Billing individual rates for group sessions is fraud. If three patients are treated together and each is billed as if they recieved one-on-one care, thats three false claims per session.

Diversicare paid $9.5 million to settle therapy fraud allegations. The skilled nursing facility chain was accused of systematicaly billing for therapy services that werent medically necessary. The settlement included a 5-year corporate integrity agreement. The pressure to maximize therapy minutes created liability that cost millions.

The Cases That Show What Happens

If you think federal physical therapy fraud prosecutions are theoretical, look at what actualy happens to physical therapists and clinic owners when these schemes collapse.

Arisleidys Fernandez Delmas received 104 months in federal prison. Over eight years for her role in a $36 million scheme that defrauded Blue Cross Blue Shield through phantom physical therapy billing. She was the lead defendant among 15 people charged. The scheme involved paying kickbacks to patients who had insurance through major employers. 104 months is nearly a decade in federal prison.

Magaly Travieso received 9 years. Same conspiracy as Fernandez Delmas. Nine years for participating in a physical therapy fraud scheme. Two defendants from one scheme serving combined sentences of over 17 years.

Chang Goo Yoon received 27 months. The Massachusetts physical therapy clinic owner operated the scheme from 2014 to 2018. He submitted over $300,000 in false claims. The scheme eventually collapsed. The prison sentence followed.

Hatem Behiry received 24 months. The Brooklyn physical therapist who provided no therapy at all. Patients watched TV in the waiting room. Behiry documented an hour of intensive physical therapy. Two years in federal prison for billing fraud that seemed like easy money.

A Detroit-area physical therapist received 48 months. Four years in federal prison for physical therapy billing fraud. The sentence demonstrates that physical therapy fraud prosecutions result in years of incarceration, not months.

Kindred/RehabCare paid $125 million to settle therapy fraud allegations. The largest rehabilitation therapy provider in the country settled allegations that it pressured therapists to provide unnecessary services and maximize billing. $125 million in settlement payments. The institutional pressure to maximize therapy minutes created liability measured in nine figures.

Quality Therapy paid $9.7 million and Frances Parise was excluded from Medicare for 5 years. The settlement resolved allegations of systematic physical therapy billing fraud. Parise cannot participate in any federal healthcare program for five years. The exclusion means her career treating Medicare patients is over.

The New York scheme involved $20 million in fraudulent claims. A physician named Sklar didnt actually provide services – the claims were fabricated entirely. The scheme operated for years before investigation. The documentation looked legitimate. The billing codes were proper. The services just never occurred. Twenty million dollars in false claims eventually collapsed into federal prosecution.

Heres the uncomfortable truth about physical therapy fraud cases. When the government investigates, they interview every patient you billed for. They compare your treatment notes to patient recollections. They calculate the statistical probability that your billing patterns are legitimate. The gap between documentation and reality becomes the evidence that convicts you.

These arnt unusual cases. They represent standard enforcement outcomes. The sentences reach nearly a decade. The settlements reach nine figures. The careers that seemed secure collapse when investigation begins.

How Physical Therapy Investigations Begin

Heres something about how these cases develop that should concern every physical therapist. Investigations often begin long before anyone contacts you.

Billing patterns trigger Medicare audit. If your clinic bills significantly more therapy minutes then similar providers, thats flagged. If your patient retention rates are unusualy high, thats flagged. If specific procedure codes are billed at disproportionate rates, thats flagged. Medicare data analytics identify statistical outliers. Outliers trigger investigation.

Patient interviews reveal the truth. When investigators contact patients, they ask simple questions. How long were your therapy sessions? What exercises did you do? How often did you see the physical therapist? If patient answers dont match your billing records, the gap becomes evidence. Patients dont lie to protect therapists they barely know.

Whistleblowers file qui tam lawsuits. Employees who witness billing fraud can file False Claims Act lawsuits and receive 15-30% of any recovery. That billing clerk who questioned your documentation. That staff therapist who refused to sign notes for treatment they didnt provide. They can become government informants with financial incentive to expose everything.

Documentation audits expose the patterns. Medicare Administrative Contractors conduct targeted audits based on billing data. They request medical records. They compare treatment notes to billing codes. They calculate error rates. When error rates exceed thresholds, the audit becomes an investigation. The investigation becomes a referral to the OIG. The referral becomes a criminal case.

SNF compliance officers report irregularities. Skilled nursing facilities with corporate integrity agreements have compliance obligations. Compliance officers must report suspected fraud. If your minute documentation doesnt match actual treatment, the compliance officer faces personal liability for not reporting. The institutional safeguards designed to protect facilities become reporting mechanisms that expose individual therapists.

Insurance company investigators follow the data. Blue Cross Blue Shield and other major insurers have Special Investigation Units. They analyze billing patterns. They identify statistical anomalies. The $36 million Florida scheme that brought down Fernandez Delmas was prosecuted becuase BCBS investigators identified the pattern. Private insurers refer fraud to federal prosecutors just like Medicare does.

What You Cannot Do When Investigated

Heres what people do when they learn about physical therapy fraud investigations. They panic. They try to fix things. They make decisions that create additional criminal exposure.

Do NOT destroy or alter patient records. Treatment documentation, billing files, therapy notes, minute logs. Destroying any of this is obstruction of justice. The government probly already has copies through Medicare claims data and records subpoenaed from insurance companies. Destruction proves consciousness of guilt.

Do NOT contact patients to coordinate stories. If your billing doesnt match services provided, your natural instinct is to talk to patients. Dont. Coordinating testimony is witness tampering. Patients may already be cooperating with investigators. Your conversation could be recorded.

Do NOT continue questionable billing practices. If your documenting more minutes then actualy provided, stop. If your billing individual rates for group therapy, stop. But dont try to “clean up” by creating backdated documentation. Thats additional fraud.

Do NOT assume the problem will go away. Physical therapists often think billing audits are routine. They think cooperation will resolve everything. By the time federal investigators contact you, the audit phase is over. They have evidence. They have patient statements. They have statistical analysis. You need an attorney before you say anything.

The False Claims Math

Heres something about physical therapy fraud that exponentialy increases legal exposure. False Claims Act penalties apply per claim – and every therapy session is a seperate claim.

How the multiplier works. Each false claim carries penalties of up to $27,894. A physical therapist billing 20 patients per day creates 20 potential false claims per day. Over a year, thats over 5,000 claims. At maximum penalties, thats theoretical exposure exceeding $139 million from False Claims Act liability alone.

Healthcare fraud adds criminal exposure. 18 U.S.C. 1347 provides up to 10 years imprisonment per count of healthcare fraud. Wire fraud adds up to 20 years per count. Anti-Kickback violations add up to 10 years per count plus $100,000 fines. The civil penalties stack on top of criminal sentences.

Treble damages multiply everything. False Claims Act provides for treble damages – three times the amount defrauded. If your billing fraud cost Medicare $2 million, treble damages equals $6 million. Plus per-claim penalties. Plus criminal fines. Plus restitution. The $36 million Fernandez Delmas scheme demonstrates the scale of exposure.

Mandatory exclusion from federal healthcare programs. Conviction for healthcare fraud triggers mandatory exclusion from Medicare and Medicaid. You cannot bill federal programs. You cannot work for employers who bill federal programs. Your career as a physical therapist treating Medicare patients is over. Even if you avoid prison, the exclusion destroys your livelihood.

Civil monetary penalties compound criminal exposure. The Office of Inspector General can pursue civil penalties seperate from criminal prosecution. Up to $100,000 per kickback under the Civil Monetary Penalties Law. Plus treble damages. Plus permanent exclusion. Even if you avoid prison, the civil liability can bankrupt you.

Corporate integrity agreements impose ongoing obligations. Settlement often requires a 5-year corporate integrity agreement. Quarterly reporting. Independent review organization audits. Compliance program requirements. Annual certifications. The Diversicare settlement included these provisions. The settlement resolves past liability but creates ongoing compliance burdens that last for years. Violation of the agreement triggers additional penalties and potentialy exclusion.

What You Should Do Right Now

If federal investigators have contacted you about physical therapy billing, or if your billing practices might trigger scrutiny, heres exactly what you should do:

Contact a federal healthcare fraud defense attorney immediatly. Not a general business lawyer. Not your malpractice carrier. Someone who specificaly handles federal healthcare fraud cases and understands Medicare billing prosecution.

Do NOT speak to investigators without counsel. Federal agents may approach you or your staff for “voluntary” interviews. There is nothing voluntary about it. Anything said can be used to build the case against you. Politely decline and contact an attorney immediatly.

Preserve all documentation exactly as it is. Patient records, therapy notes, billing files, minute logs, referral agreements. Do not alter, destroy, or organize anything. Document preservation is critical.

Identify all potentially problematic billing patterns. Sessions documented longer then provided. Group therapy billed as individual. Referral relationships involving payments. Minute pressure from SNF administrators. Your attorney needs to understand the full scope.

Do NOT discuss the investigation with staff or colleagues. Anyone you talk to can be compelled to testify. They may already be cooperating with the government. Only attorney-client communications are protected.

Todd Spodek tells every physical therapist in this situation the same thing: federal physical therapy fraud investigations are serious criminal matters. Arisleidys Fernandez Delmas got 104 months. Hatem Behiry got 24 months for patients who watched TV instead of recieving therapy. Your response in the next few days could determine wheather this becomes a matter that resolves favorably – or federal charges that destroy your career and your freedom.

Call Spodek Law Group at 212-300-5196. Before you speak to federal investigators. Before you make decisions that create additional criminal exposure. Before a billing practice becomes a federal prosecution.

Federal physical therapy billing fraud is an enforcement priority. Medicare Administrative Contractors are analyzing your billing patterns right now. The sentences reach nearly a decade. The settlements reach nine figures. What you do right now matters enormosly.