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BH FRAUD UPDATE: Three psychiatric hospital executives sentenced in $67 million healthcare fraud scheme

October 1, 2013
by Shannon Brys, Associate Editor
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Three executives of Hollywood Pavilion LLC (HP), an inpatient psychiatric hospital located in Broward County, Florida, have been sentenced for their roles in a $67 million Medicare fraud scheme.

Karen Kallen-Zury, 60, of Lighthouse Point, Florida; Daisy Miller, 44, of Hollywood, Florida; and Christian Coloma, 50, of Miami Beach, Florida, were sentenced by U.S. District Judge Jose E. Martinez in the Southern District of Florida. Kallen-Zury was sentenced to serve 25 years in prison; Miller was sentenced to 15 years in prison; and Coloma was sentenced to 12 years in prison. In addition to their prison terms, Kallen-Zury and Miller were ordered to pay more than $39 million in restitution, jointly and severally with certain co-defendants. Coloma was ordered to pay more than $20 million in restitution, jointly and severally with certain co-defendants. The sentencing hearing for Michele Petrie, another convicted executive of HP, is scheduled for December 18, 2013.

On June 28, 2013, Kallen-Zury and Miller were found guilty of one count of conspiracy to commit wire fraud and health care fraud, five substantive counts of wire fraud, and two substantive counts of health care fraud. Coloma was convicted of one count of conspiracy to pay bribes in connection with Medicare. Kallen-Zury and Coloma were also convicted on five substantive counts of paying bribes.

“These defendants from Hollywood Pavilion who were sentenced are the first executives from a licensed state hospital prosecuted by the Medicare Fraud Strike Force,” said Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division. “They abused the public’s trust by deliberately targeting disabled substance abusers and conning them into spending weeks locked down at a psychiatric hospital. Their conduct proves that health care fraud is not only about harm to the public—it is about real harm to individuals in need of medical care. Thanks to the hard work of the Strike Force, the nine-year, $67 million scheme was discovered, the hospital was shut down, and the executives will now spend as much as 25 years in prison.”

Evidence at trial demonstrated that the defendants and their co-conspirators caused the submission of false and fraudulent claims to Medicare through HP, a state-licensed psychiatric hospital that purportedly provided, among other things, inpatient psychiatric care and intensive outpatient psychiatric care. The defendants paid illegal bribes and kickbacks to patient brokers to obtain Medicare beneficiaries as patients at HP who did not qualify for psychiatric treatment. The defendants then submitted claims to Medicare for those patients who were procured through bribes and kickbacks.

According to evidence at trial, Kallen-Zury, the CEO and registered agent of HP, attempted to conceal the payment of bribes and kickbacks by creating false documents to make it appear as if legitimate services were being rendered. Miller, the clinical director of HP’s inpatient facility, and Petrie, the head of HP’s intensive outpatient program, facilitated the payment of bribes to patient recruiters and oversaw the fraudulent admissions and treatment of unqualified patients. Coloma, the director of physical therapy for an entity associated with HP, facilitated the payment of bribes and kickbacks, and he supervised the creation of false documents to conceal the bribery scheme.

From at least 2003 through at least August 2012, HP billed Medicare nearly $70 million for services that were not properly rendered, for patients that did not qualify for the services being billed, and for claims for patients who were procured through bribes and kickbacks.

Since its inception in March 2007, the Medicare Fraud Strike Force operations in nine locations have charged more than 1,500 defendants that collectively have billed the Medicare program for more than $5 billion. In addition, HHS’s 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.

To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to