Detroit-Area Doctor Sentenced to 14 Years in Prison for Medicare Fraud Scheme

WASHINGTON—Farmington Hills, Mich., physician Jose Castro-Ramirez was sentenced today to 14 years in prison for his role in a wide-ranging conspiracy to defraud the Medicare program, the Departments of Justice and Health and Human Services announced. Castro-Ramirez was also ordered to pay $9.4 million in restitution and sentenced to a three-year term of supervised release following his prison term.

On March 11, 2010, after a three-week trial, a federal jury convicted Castro-Ramirez of one count of conspiracy to commit health care fraud, 11 counts of health care fraud and one count of conspiracy to launder the proceeds of the fraudulent scheme. Castro-Ramirez was sentenced today by U.S. District Judge Sean F. Cox in the Eastern District of Michigan.

Evidence at trial established that beginning in 2003, the defendant, a physician licensed in the state of Michigan, entered into an agreement with co-conspirator Suresh Chand to defraud the Medicare program. Chand, who was sentenced to 81 months in prison in April for his role in the scheme, owned and controlled several companies operating in Warren, Mich., including Continental Rehab Services Inc. (CRS), and Pacific Management Services Inc. (PM), that purported to provide physical and occupational therapy services to Medicare beneficiaries. In reality, Chand and his associates at CRS and PM created fictitious therapy files, appearing to document physical and occupational therapy services provided to Medicare beneficiaries, when in fact no such services had been provided. The fictitious services reflected in the files were billed to Medicare through sham Medicare providers controlled by Chand and his co-conspirators. The fictitious therapy files Chand and his co-conspirators created would appear to justify the billings to Medicare, when in fact no physical or occupational therapy services had been provided.

Evidence introduced at trial established that in order to create the fictitious therapy files, Chand and his co-conspirators paid cash kickbacks and other inducements to Medicare beneficiaries, in exchange for the beneficiaries’ Medicare numbers and signatures on documents falsely indicating that they had received therapy services. Chand also would pay licensed physical and occupational therapists to sign fictitious “progress notes” and other documents that appeared to reflect that physical and occupational therapy services had been provided to the beneficiaries, when in fact they had not. Castro-Ramirez, as the physician participant in the scheme, would sign therapy prescriptions and other documents in the fictitious therapy files falsely indicating that he had evaluated the Medicare beneficiaries and certified the need for physical and occupational therapy services. In fact, Castro-Ramirez did not oversee any treatment provided to the patients and was fully aware that his signatures were part of a fraudulent scheme.

One of the inducements that Chand and his co-conspirators used to recruit Medicare beneficiaries into the scheme was the provision of prescriptions for controlled substances and other drugs, including vicodin and xanax. Over the course of the scheme, Chand would provide Castro-Ramirez with lists of the controlled substances or drugs the beneficiaries preferred, and Castro-Ramirez would write prescriptions for the substances without ever seeing the patients. Between January 2003 and March 2007, Castro-Ramirez wrote thousands of prescriptions for a variety of drugs for patients that he had never seen. Castro-Ramirez was fully aware that the purpose of the prescriptions was to induce beneficiaries into the scheme, so that Chand and others could bill Medicare for physical and occupational therapy services purportedly provided to the patients, when in fact, such services had never been provided.

Evidence at trial demonstrated that Castro-Ramirez profited from his participation in the scheme in several ways. Castro-Ramirez’s largest source of fraudulent proceeds came from his own billings to Medicare for “home visits” that he purportedly made to Medicare beneficiaries Chand recruited into the scheme. In fact, Castro-Ramirez never conducted “home visits” with the vast majority of these patients, and never discussed or ordered therapy services for the few he did see. Chand and other co-conspirators also distributed proceeds of the fraud directly to Castro-Ramirez on occasion, and did so through transactions designed to disguise the nature, source, ownership, control and location of the tainted funds. Castro-Ramirez knew that the cash and checks he received from Chand were structured so as to conceal the fact that they were proceeds of Medicare fraud.

Between approximately January 2003 and approximately June 2007, Chand and his co-conspirators submitted claims to the Medicare program totaling approximately $18.3 million for physical and occupational therapy services that were supposedly ordered and supervised by Castro-Ramirez but were in fact never rendered. Medicare actually paid approximately $8.5 million on those claims. In addition, Castro-Ramirez submitted approximately $1.4 million in claims to the Medicare program for “home visits” purportedly provided to beneficiaries recruited into the scheme by Chand and his co-conspirators. Medicare actually paid approximately $929,000 on those claims.

Today’s sentencing was announced by Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney for the Eastern District of Michigan Barbara L. McQuade; Special Agent in Charge Andrew G. Arena of the FBI’s Detroit Field Office; and Special Agent in Charge Lamont Pugh III of the HHS Office of Inspector General’s (HHS-OIG) Chicago Regional Office.

The case was prosecuted by Assistant Chief John K. Neal of the Criminal Division’s Fraud Section and Special Assistant United States Attorney Thomas W. Beimers of the U.S. Attorney’s Office for the Eastern District of Michigan. The FBI and the HHS Office of Inspector General (HHS-OIG) conducted the investigation.

Since their inception in March 2007, Medicare Fraud Strike Force operations in seven districts have obtained indictments of more than 810 individuals who collectively have falsely billed the Medicare program for more than $1.85 billion. In addition, the HHS Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.