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The Full Scope of Borrego Health Fraud, Lawsuit

 

Last updated 8/26/2022 at 2:25pm



Borrego Community Health Foundation (Borrego Health) recently filed a lawsuit to regain funds stolen from state and federal Medicare, Medi-Cal and Denti-Cal funds, and bring the people to justice that conspired to violate the laws and mission of the non-profit health network. These were funds intended for people unable to pay or otherwise afford primary medical care, not to line the pockets of private individuals. Borrego Health currently operates 23 clinic facilities and 10 mobile clinics.

The following are actual statements from the lawsuit, charging the Defendants of Racketeering (RICCO) with violations of federal and state health care laws. The lawsuit was filed in the United States District Court Southern District of California, in San Diego, California on July 19.

Note: Everything in parentheses is added by the Borrego Sun’s reporter to provide additional information or clarify statements from the newspaper’s investigation.

Borrego’s Health’s Lawsuit divided the 48 defendants into categories of: “Insiders,” “Board Insiders,” “Daryl Priest and Priest Enterprises,” “Contract Dentists” and “Others”

The Insiders: Were motivated by various forms of personal benefit. First, they used the excessive revenue generated by (fraudulent) schemes to set over market salaries for themselves, friends and family, and create other forms of compensation such as automotive benefits, retirement benefits, and free healthcare goods and services from Borrego Health. They siphoned off money from Borrego Health that was meant to serve the communities (33 clinics, 10 of which are mobile units). The schemes include selling useless assets to Borrego Health at inflated prices, entering into one-sided agreements with Borrego Health to its detriment, committing and/or covering up healthcare fraud through improper billing of dental services, entering into leases that were many times above fair market rates. Specifically, the Insiders:

- Used the excessive services and attendant revenue from Medi-Cal to justify employing friends and family members at Borrego Health, also at inflated salaries.

- Allowed outsiders to participate in fleecing Borrego Health in exchange for kickbacks and other benefits; and covered up the fraudulent dental billing scheme.

- Tried to purchase the De Anza Country Club; (which, like the purchase of the Valley View Assisted Living Home, and the Frugal Coyote, in Borrego Springs, were outside Borrego Health’s funding, licenses, and capabilities as a Primary Health Provider).

- Attempted to pay Bruce Hebets a $5 million dollar payout/retirement/gift/ bonus. They paid $1.9 million instead, (and illegally reported it as payroll to the IRS for the ill former CEO, who died halfway in the work year).

- Funneled money to James Hebets, Bruce Hebets’ brother, through insurance scams.

“A major example, is the false and fraudulent over billing of dental services, resulting in Borrego Health’s suspension of California’s Medicaid dental program – Denti-Cal. Besides corruption and fraud, the state and federal government are investigating Borrego Health for tax issues, its non-profit status, a civil suit, and many other things due to the Insiders’ schemes.”

Bruce Hebets: Named CEO of Borrego Health in 2004, Hebets was the architect of the illegal schemes and proponent of nepotism, hiring family and friends, paying excessive salaries, and benefits such as car leases, and executive tax-free insurance plans. In many cases, these individuals lacked the expertise or credentials to serve in the positions for which they were hired. (Hebets also used the salaries to benefit friends for favors such as Dr. Alfredo Ratniewski with a salary of $700,000, plus benefits, buying two of the doctor’s clinics that a California Court declared could not be reimbursed because, “Client lists do not make a clinic.” Without proof of assets, Borrego Health lost the $2.3 million, paid to Dr. Ratniewski for the clinics, and never sought to recover the funds. Another friend, Hebets’ construction manager and real estate guru, Daryl Priest, was encouraged to charge inflated rents on property leased to Borrego Health, and partner in a fraudulent, healthcare management scheme, earning up to $25 million annually).

“Unfortunately, Hebets is deceased and cannot be sued.” In 2017, Bruce Hebets’ salary as CEO was $529,000, plus over $87,00 in “bonus,” in addition to car and cell phone allowance. In 2018, a partial year, during his illness, he received more than $467,000 in salary, plus over $321,000 in “bonus.” (Then there was the $1.9 million retirement bonus/buyout in 2018, also claimed as annual salary).

Those named as Defendants are:

Karen Hebets: Bruce Hebets’ wife, and Borrego Health’s vice president of business services. Her salary in 2018 – 19, was more than $227,000, with $41,000 in bonus. She was also the owner of two shell companies – Borrego Independent Physicians Association (IPA) and Borrego Management Services Organization (MSO). Both companies had only one client – Borrego Health. She received a loan of $440,000 from Borrego Health, which was never paid back, and sold the companies, which had no assets to Borrego Health for $2 million. Other Insiders in the IPA, MOS scams included Mikia Wallis, attorney for the companies, and Dr. Alfredo Ratniewski, an executive officer.”

Mikia Wallis: Legal advisor to Hebets, participant and legal counsel for many schemes, she was named CEO, following Hebets’ retirement in 2018. In 2017, she was paid over $440,000. As CEO, she protected and continued Hebets’ illegal activities. The most egregious was keeping “Outsider Daryl Priest’s,” Dental and rental scams from staff intervention, and information about Hebets’ other illegal business dealings from the Board of Trustees.”

Diana Thompson (Troncoso): Chief Financial Officer of the $300 million plus enterprise, Thompson lacked both the financial education or credentials this position demanded. Thompson’s salary in 2017, was nearly $338,000. She also participated in the Borrego Health Executive Finance Committee meetings where the schemes were discussed among the “Insiders” and “Insider Board Members.” In addition, she signed off on IRS 990 tax returns that purposely failed to disclose Borrego Health’s secret deals such as the Priest/Premier Healthcare Management contracts. Thompson, a prime example of nepotism, had six family members working for her or in other jobs at Borrego Health.”

Former “Board of Trustees Insiders:”

“While some have described themselves as volunteers, each of the board insiders were compensated for his service on the board, including free medical care and other benefits. Moreover, the Board Insiders are being sued, not only for their negligent acts and omissions, but their intentional misconduct, including fraud and breaches of their fiduciary duties to Borrego Health. All were members of the Executive Finance Committee.”

Chuck Kimball: A member of the board of trustees, starting in 2011, and chair of the board from 2017, until he was replaced by Dan Anderson in approximately 2018. He was also the board’s secretary and member of the Executive Finance Committee. Kimball, a resident of Julian, and president of the Julian Medical Foundation, leased a horse barn to Borrego Health, with a 20-year lease, paying him up to $7,000 plus, in monthly rent. The “horse barns” illegal rental rationale was that the barn was to be a future clinic.”

Dennis Nourse: A former administrator of Borrego Health, Nourse hired Hebets as CEO in 2004. He was a member of the board of trustees from mid-2012, and member of the Board’s Executive Finance Committee. Nourse sold a piece of private property, located in Borrego Springs, which was valued at $450,000 to Borrego Health. The purchase was reportedly for a new clinic to be developed by Daryl Priest Construction. The clinic was never built and the money never returned.” (In addition, Nourse took out a $2 million loan from Borrego Health. The funds were never returned and, reportedly, written by Borrego Health Insiders as bad debt).

Harry Ilsley: Member of the board of trustees and a member of the Board’s Executive Finance Committee, as well as chairman of the board until 2017.”

Mike Hickok: was a member of the board of trustees, and a member of the Executive Finance Committee.” (The Sun has proof that while Hickok was aware of the Premier deal, he was not informed of the illegal terms of the contracts. When Hickok, and another former Board Member, Sarah Rogers, began asking questions, they were removed from the board).

(It appears the major offense of Ilsley and Hickok was their membership on the Executive Finance Committee).

Premier, Priests and other Priest Related Entities.

“Bruce Hebets developed a scheme to contract with a company owned and created by Daryl Priest to manage Borrego’s private “Dental Contract” program in 2014. Priest, well respected in El Cajon, California, for his construction and real estate success, charitable donations, and community activism, was a longtime friend and construction/real estate manager for Hebets. “Insiders allowed Premier to get paid tens of millions of dollars to purportedly provide management services for a private dental program. Premier Healthcare Management was aware it was not capable of meeting the federal and state responsibilities of a management company in regards to state and federal regulations of state Medicaid, dental funds.”

“Furthermore, the company, not only failed to monitor the activities of the dentists, but encouraged contract dentists to pursue illegal practices.” (Originally, Hebets envisioned owning the management company, independent of Borrego Health; and leasing it back to the non-profit, (at a profit), or partnering with Priest in the same scheme. He was, however, convinced by outside attorneys that such a plan would not pass any smell test).

“Summit Healthcare Management, INC, also owned by Daryl Priest and created by Bruce Hebets, applied the same formula used for managing contract dentists to hire independent physicians, allowing Borrego Health, and participating doctors, to access millions of Medicare dollars, in addition to Medicaid through potentially illegal practices.”

“While true, Premier was derelict in its obligations to enforce state and federal regulations, the Premier Defendants actively supported dental fraud committed by the individual dentists. Premier Defendants coached dentists on how to fraudulently bill Borrego Health, including coaching them on “claim splitting” and “billing for non-covered bridges.”

“A valuation conducted by BKD, determined that the fair-market value of the contract dental services were supposed to perform totaled $19 million. However, Borrego Health (charged Denti-Cal) and paid over $60 million for the services. The fair market value of the Summit Contract Medical services (which had only begun operations) was $145,000 over the term of the Medical MSAs. However, Borrego Health billed Medicare and Medicaid over $385,000.

Quote from Hebets to Board Insiders at a 2017, Executive Finance Committee meeting, “We’ve already made Daryl rich, but he has made us richer.”

Defendants:

Daryl Priest: Owner of Premier Healthcare Management and Summit Healthcare Management. Priest had no previous healthcare experience or training, but owned 30 plus state-licensed construction, real estate sales and investment corporations.”

Nicholas Priest: Daryl Priest’s son, and chief executive officer of Premier and Summit. His education and background were in the sports arena, and his father’s construction/real estate practices. According to Nicholas Priest’s resume, he eventually returned to college for an administrative health degree. (The lawsuit differs from this account by stating he achieved a law degree).

“Travis Lyon: Former president and chief operating officer of Premier Healthcare, Lyon is currently, the President of Real Estate Operations at Priest Development Company, Lyon was described in the lawsuit as providing aggressive intervention in any attempts to challenge the illegal practices of the contract dentists by Borrego Health staff. For example, according to the lawsuit, any attempts to rein in Dr. Aldairi was rebuffed personally by Lyon. (Lyon and Insiders had everything to gain from protecting dentists, billing illegal and fraudulent patient visits, because Premier was being paid $25 per visit, and Borrego Health was being reimbursed by Denti-Cal per visit).

Defendant Dentists:

“Certain Dentists submitted fraudulent bills with the knowledge and support of Premier and Borrego Insiders. Based on both Medi-Cal and Borrego Health’s billing and payment structure, some of the dentists were also motivated to provide as many services to Borrego Health patients as possible. In many instances, the services were not medically necessary, but done to maximize profits. Even more egregious, some dentists split services that could have been done in one encounter to multiple encounters so that they could collect multiple times. More egregious than that, some dentists provide multiple services, for a single encounter, but billed the services as multiple encounters. Finally, most egregious of all, some dentists billed for services they never provided.”

The Following are Examples of the Larger Patterns of Dental Fraud:

“Husam Aldairi: Served as an independent, contract dentist for Borrego Health, beginning in 2016 and 2018. His earnings of $8 million were reported in the 2019-tax return. Patient charts would have notes for services rendered on days when Dr. Aldairi’s office was closed. Program Integrity calculated a 65 % rate of falsely billed appointments (meaning face-to-face encounters). In one event, Dr. Aldairi billed for 147 client visits, which he claimed occurred that day.

Ayed Hawatmeh: Billed for a patient’s tooth that x-rays showed no longer existed, and shaving down a tooth for a crown on a tooth that had an implant at that location.”

Alborz Mehdizadeh: Billed Borrego Health for patient visits that did not occur, or that were provided by others that were not disclosed, or credentialed by Borrego Health (actually Premier was doing the credentialing, Borrego Health was merely rubber stamping). He Billed for 146 patients, he claimed, visited his office on a Saturday; and billed for 29 surgical extractions on one patient in 29 individual settings. Mehdizadeh also submitted duplicate bills in order to receive insurance reimbursements for the same services’ multiple times.”

Jilbet Bakramian: Regularly billed for more visits in a day than is humanly possible. For example, he billed for 111 patient visits, performed on one day in July 2019.”

Mohammed Altekreeti: An assistant to Dr. Aldairi, like Aldairi, Altekreeti, billed for patient visits that either did not occur, or were provided by others, not disclosed, or credentialed by Borrego Health. He also billed for 135 patient visits on one day.”

Magaly Velasquez: An audit of his dental claims revealed 150 claims were duplications. He billed Borrego Health for a patient that received dental services 26 days in the month, despite there only being 22 business days in May 2019. Velasquez also billed the same patient for 22 more visits in June, 2019, totaling 48 visits over a two- month period.”

Aram Arakelyan: Regularly billed for filling teeth and root canals on teeth the patient did not have, he also billed 18 different encounters for one patient, despite the fact, there were only 20 business days in the month. Eventually, the same patient received 58 different visits in the course of five months. When the egregious billing practices were discovered, Dr. Arakelyan informed Borrego Health’s auditor that, “It was the Premier Defendants who advised him to bill in this manner.”

Michael Hoang: Billed duplicate claims to Borrego Health AND Denti-Cal.”

Waleed Stephan: Claimed to be buying ceramic crowns from a lab, which he was actually making himself, at a much-reduced cost.”

Santiago Rojo: Billed for patient visits in his California office, while never leaving his residence in Florida; and submitted what were largely duplicate billings.”

Marcelo Toledo: Billed for restoration of eight teeth, which were not medically necessary; and billed for fillings already completed. Toledo also billed for an average of 20 patients a day; and one day, he saw 97 clients. He also regularly engaged in “Claim Splitting;” billing for identical services; and “false billing.” For example, a singular visit by a patient was duplicated and billed as four.”

Marlene Thompson: Billed for multiple visits for one encounter, and hired Dr. Maura Tuso, whose license had been suspended from taking Denti-Cal patients. (Dr. Tuso, may have only been named in the lawsuit because she reported illegal activities in Dr. Aldairi’s office to Timothy Martinez, Borrego’s Dental Officer; and, also, voluntarily gave information about what, she believed, were Martinez’s additional efforts to protect the offending dentists, to lawyers handling this lawsuit).

Douglas Ness: Billed Borrego Health for services provided by unlicensed dental providers.”

George Jared: Billed for services provided by unlicensed dental providers.”

“Despite its promises to do so; its representations that it could do so; and its concealment of the fact it could not do so, Premier, completely lacked the ability to appropriately conduct claims monitoring. In fact, it was not until 2019, that Premier hired its first and only employee with any clinical experience. That person was related to another employee of Premier, and had only received his dental license two years prior to being hired.”

The Borrego Insiders Entered into Leases with Daryl Priest-Owned Entities for Above Market Rents and Terms Many times the Market Amount:

“The next schemes involved Borrego Health leasing real estate property from Daryl Priest, the Premier Defendants, at rents and terms that were well above market value. Borrego Health was victimized by three grossly overpriced, 30-plus-year term facility leases engineered by Borrego Insiders and Premier Defendants. The full-term lease price of three the properties owned by Daryl Priest was $100 million. These leases were never subjected to due diligence and were executed by Borrego Insiders without submitting them to the full board of trustees. If enforceable, the Priest’ Leases would have siphoned over $58 million in fair-market-rent money from the life of the leases. To date, Borrego Health has paid $11.8 million for the Promenade clinic Lease, in El Cajon.”

The Borrego Insiders Funneled Money to Bruce Hebets’ Brother, Jim Hebets, and Jim Hebets’ Firm.

James Hebets: Owner of Hebets Insurance, LLC, in Phoenix Arizona, and Bruce Hebets’ brother, James Hebets served at one time as the Borrego Health Benefits Officer. Borrego Insiders entered into arrangements on behalf of Borrego Health with Jim Hebets and/or companies owned or controlled by Jim Hebets that funneled additional Borrego Health funds to Insiders, Insider cronies and family members.

On the website, www.hebetsco.com, he boasts of specializing in FQHCs and creating ways to increase executive compensation/benefits beyond what is specified in the IRS code. Hebets’ firm also boasts of “Estate planning” for the “exceptionally wealthy,” not a good match for a non-profit, which does not exist for the personal benefit of employees.”

“The Hebets’ company was part of a scheme to increase executive compensation through Borrego Health contributions to automatic bonuses that were paid to 162B plans. Though the 162B plans appeared at first glance to be life insurance plans, they were never intended as such; but were, instead, a strategy to pay above market salaries to Insiders and others, without the scrutiny of tax liability. For example, Bruce and Karen Hebets worked directly with the vice president and general manager of the Hebets’ company to “borrow” from their 162B accounts and transfer the funds from their respective 162B plans to their checking accounts. These were significant payments.”

“By 2017, Bruce Hebets was receiving $5,000 per month of tax-free income. On top of these payments, Borrego Health was also paying a tax increase. Even after the loans the value of these plans was substantial. As of July 9, 2018, Bruce Hebets’ 162B-life insurance value was $1,236,000. It appears this approximate value was paid out to Bruce Hebets’ estate at the time of his death in January 2019.”

“For scale, Borrego Health paid in full for a bridge life insurance policy that allowed staff, losing their 162B plan benefit, to retain up to two-times their salary, up to $500,000 in group term life insurance until they could select their own insurance at their own cost via annual open enrollment. The cost of the plan to Borrego Health was $15,420 per month, per individual. Hebets’ would also provide the compensation analysis the Board members had to rely on, as they had no other resources to question, or access to facts that might put them on inquiry notice that Jim Hebets and the Hebets’ insurance company and the Insiders were working together to siphon funds from Borrego Health.” (By the way, James Hebets was still receiving $240,000 in monthly commissions, in 2020, for the 162B Insurance scam).

The “Others”: Defendants 46 – 49. The lawsuit does not clarify any actual criminal or fraudulent activities as to why the “Others” are listed as defendants. In addition to questioning the meaning of listing the “Others,” the Borrego Sun will provide details of the connections the “Others” have to the lawsuit, revealed by the newspaper’s sources, and research, and information omitted from the lawsuit.

The Others: The Julian Medical Foundation; Timothy Martinez, D.D.S, and chief dental officer; Maura Tuso, D.D.S; and Dr. Alfredo Ratniewski, Borrego Health’s executive Medical Officer.

Without adequate explanations, including possible illegal activities of the California Dental Board, the next installment of the Sun’s summations of the “Borrego Sues Itself Lawsuit,” will include research, analysis and questions of why these “Other” individuals are named without criminal accusations, and what role these individuals played in the fraudulent activities of Borrego Health.

To read the full lawsuit, please visit: https://www.borregosun.com/story/2022/08/01/stop-press/bchf-lawsuit/7246.html

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