Record-Setting $1 Billion Skilled Nursing Fraud Case Hits Snag

The case against a former Miami-area skilled nursing operator accused of pulling off the largest Medicare fraud on record hit a snag this week as a judge tossed crucial pieces of evidence.

Defense lawyers for Philip Esformes scored a major victory when a judge found that federal investigators improperly seized evidence that was protected under attorney-client privilege, the Miami Herald reported.

Magistrate Judge Alicia Otazo-Reyes called the government’s actions “deplorable” and accused investigators of attempting to “obfuscate the evidentiary record,” according to the Herald.


The Department of Justice in 2016 charged Esformes with a host of crimes surrounding his network of more than 30 nursing homes and assisted living facilities, which the feds say Esformes used to bilk Medicare and Medicaid out of more than $1 billion.

“This is the largest single criminal health care fraud case ever brought against individuals by the Department of Justice, and this is further evidence of how successful data-driven law enforcement has been in the ongoing fight against health care fraud,” assistant attorney general Leslie Caldwell said in a statement back in July 2016.

Esformes and his associates allegedly accepted residents who did not qualify for skilled nursing and other medical services provided at his Esformes Network facilities; these patients were also sometimes referred to other third-party providers, such as home health agencies and mental health facilities, in exchange for kickbacks, the government said.


But the judge’s recent ruling could make the Department of Justice’s case against Esformes more difficult.  The legal issues stem from a 2016 search of Eden Gardens, an assisted living facility in Miami where the operating company’s lawyer also maintained an office. Government agents collected 70 boxes of evidence from that facility, the Herald reported, and the judge’s ruling suppresses any documents covered under attorney-client privilege — along with other evidence deemed to be “improperly obtained and handled.”

The trial is still on track to begin in January, the Herald noted, and both sides have about two weeks to respond to the judge’s ruling. District Judge Robert Scola, who currently presides over the case, will have the final decision on whether the evidence will be allowed at trial.

Even with a trial still months away, the Esformes case has had a direct impact on the Florida long-term care industry: The state’s Agency for Health Care Administration (AHCA) last year tightened its internal data-custody controls after discovering that an employee had leaked confidential information in exchange for bribes.

Bertha Blanco, a 29-year veteran of the AHCA, allegedly accepted tens of thousands of dollars after providing Esformes’s team with dates of unannounced inspections and pending patient complaints.

Written by Alex Spanko

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