Bucks County man must reimburse Medicare $16.2 million following fraud conviction

By Jim Boyle | May 29, 2014

A Bucks County man convicted in October of health care fraud will spend more than 14 years in federal prison and pay more than $32 million in reimbursements and fines, according to a sentence ordered Friday.

Matthew Kolodesh, 52, of Churchville, Pennsylvania, was sentenced to 176 months in prison and ordered to pay $16.2 million in restitution to Medicare and $16.2 million in a forfeiture money judgment for orchestrating a scheme to defraud Medicare through his home hospice business, among other crimes, announced United States Attorney Zane David Memeger.

In October 2013, following a four-week jury trial, a federal jury found Kolodesh guilty of conspiracy to commit health care fraud, 21 counts of health care fraud, 11 counts of money laundering, and two counts of mail fraud.

From 2003 to 2008, Kolodesh’s business, Home Care Hospice Inc. (HCH), located on Grant Avenue in NE Philadelphia, submitted false claims to Medicare totaling approximately $16.2 million for patients that were not eligible for hospice services and for patients that never received the level of hospice services billed by HCH. Ineligible patients were patients who were not terminally ill and patients who were on service for more than six months.

The scheme was successful because nurses and other staff participated in a massive fraud that involved altering patient records to make patients appear eligible for hospice services, when in reality they were not.

At the direction of Kolodesh and co-owner and co-conspirator Alex Pugman, who was the director of HCH, nurses and supervisory staff routinely “fixed” patient files and re-wrote nursing documentation to make patients appear sicker “on paper” by showing decline in medical condition through false entries for infections, fever, and weight loss, among other things. Old records were destroyed, court documents say.

The staff was also paid to falsely document 24 hour periods of high cost, intensive hospice care than was actually provided to the patient.

In order to buildup patient enrollment, Kolodesh and Pugman also paid health care professionals, including doctors, for referring patients to HCH, even when those patients were not eligible or appropriate for hospice services, prosecutors found.

In an effort to mask the kickback scheme, HCH fraudulently represented that some of those health care professionals were paid for services as medical directors, advisers, or hospice physicians.

“This massive fraud on a critical federal program costs taxpayers dearly,” said U.S. Attorney Zane David Memeger. “Today’s sentence makes clear that the justice system will punish severely those criminals who engage in this type of fraud and abuse. We will continue to work diligently with our federal partners to bring to justice those who defraud the government and deprive federal programs of valuable tax dollars.”

Kolodesh siphoned $7.77 million dollars from HCH’s bank account for his own personal enrichment. His spouse was set up as a sham CEO of the company and received millions of dollars in salary draws and bonuses. Kolodesh also used funds for extensive renovations to his mansion, travel expenses for his family and friends, college tuition for his son, and a luxury automobile.

He siphoned substantial sums of cash from the HCH operating account through cash kickback arrangements with various HCH vendors using a system of phony and inflated invoicing and through a charitable donation scam arranged with a local synagogue in which he was a member.

The mail fraud convictions stemmed from another scam orchestrated by Kolodesh which involved the Philadelphia Development Corporation (PIDC). In 2005, Kolodesh and Pugman applied for a low-interest loan worth $2.5 million with PIDC, a program designed to stimulate business investment and create jobs in the city of Philadelphia. The loan money was to be used to acquire and renovate a property for the business and to create 50 bona fide jobs in Philadelphia at 2801 Grant Avenue, the site of HCH.

However, between August 2005 and July 2009, the job quota was not being met. To prevent default on the loan, Kolodesh set up a sham office at the Grant Avenue location purportedly for Community Home Health (CHH), his Bucks County health care business. Kolodesh falsely identified 73 CHH employees as working at that office location on Grant Avenue who, in fact, did not work there.

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