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Miami Hospital Pays $15.4 Million to Resolve Fraud Case
for Kickbacks & Medically Unnecessary Treatments

WASHINGTON – Larkin Community Hospital in Miami and its current and former owners, Dr. Jack Michel, Dr. James Desnick, Morris Esformes and Philip Esformes, have paid $15.4 million to settle federal and Florida civil health care fraud claims against them, the Justice Department announced today. Additionally, 34 related companies owned by the Esformes that were used to operate nine assisted living facilities are part of the settlement along with Claudia Pace, an employee of one of the Esformes-owned companies; and Frank Palacios, a long-time employee of the hospital.

The settlement resolves the civil case entitled United States v. Jack Jacobo Michel, M.D., et al., which the government filed in 2004, alleging violations of the False Claims Act. The state of Florida joined the suit later that year.

The government alleged that in 1997, Larkin, then owned by Desnick, paid kickbacks to physicians in return for patient admissions. The United States contended that the primary recipient of the kickbacks was Jack Michel, who was paid for patient admissions to Larkin by himself and his brother, Dr. George Michel. Jack Michel purchased Larkin in 1998. In 2000, Desnick was a party to a $14 million settlement with the United States for a similar kickback scheme from 1992 to 2000 at another facility he owned, Doctors Hospital of Hyde Park in Chicago.

The United States also alleged in the Michel suit that from 1998 to 1999, Jack Michel, George Michel, Morris Esformes, Philip Esformes, Frank Palacios and Claudia Pace conspired to admit patients to Larkin for medically unnecessary treatment. The government asserted that some of these patients came from assisted living facilities owned and operated by Jack Michel, Morris Esformes and Philip Esformes.

“The Department of Justice is committed to vigorously litigating cases about conduct that undermines the integrity of the Medicare and Medicaid programs,” said Peter D. Keisler, Assistant Attorney General for the Department’s Civil Division. “We will not tolerate health care providers who pay kickbacks or perform medically unnecessary treatments on elderly beneficiaries in order to generate Medicare and Medicaid payments.”

The case was investigated by the U.S. Department of Health and Human Services, Office of Inspector General; the Federal Bureau of Investigation; and the Florida Medicaid Fraud Control Unit. The case was handled by the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Southern District of Florida in Miami and the Office of the Attorney General of the state of Florida.