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From Health Law Daily, June 20, 2014

Health care conspiracy, tax evasion conviction of former nursing home owner stands

By Susan L. Smith, JD, MA

The arguments of a former owner of three nursing home facilities who was convicted of conspiring to commit health care fraud and failure to pay payroll taxes and file income tax returns failed to convince the Eleventh Circuit Court of Appeals to overturn the district court’s decision. The district court found George Houser guilty of the charges and entered an order that described in detail its finding of the extremely neglected state of the nursing facilities’ physical properties; deficient, inadequate, and substandard services to residents; and appropriation of Medicare and Medicaid payments for Houser’s personal use. The court sentenced Houser to 240 months’ imprisonment and ordered him to pay nearly $7 million in restitution to Medicare and Medicaid and more than $870,000 to the Internal Revenue Service (IRS) (United States v Houser, June 19, 2014, Ripple, K).

Houser’s ownership. Houser was convicted of one count of conspiracy to commit health care fraud in violation of 18 U.S.C. sec. 1349, payroll tax fraud in violation of 26 U.S.C. sec. 7202, and failure to timely file income tax returns in violation of 26 U.S.C. sec.7203. Houser was operating two nursing home facilities in Rome, Georgia, when the IRS seized one facility and placed tax liens on both of the nursing homes after Houser failed to pay payroll taxes for employees. At that time, the state revoked Houser’s license to operate nursing homes. Although Houser never paid the full amount owed to the IRS, in 2003, when the liens expired, he sought to reestablish his control over the two nursing homes. He created Forum Healthcare Group, Inc. (FHG), which assumed management of the two facilities and later a third facility. The facilities were licensed care facilities and certified recipients of Medicare and Medicaid funds. Houser’s then-girlfriend, Rhonda Washington, was listed in state records and Medicare and Medicaid provider applications as the owner, president, and office manager of FHG. In 2004, Houser formally assumed control of the three facilities. The Medicare provider application listed a change of ownership of FHG from Washington to Houser and Houser was listed as president and chief executive officer. Medicaid applications listed Houser along with FHG and his mother as the owners.

Conditions at the facilities. During the period that Houser was in control of the nursing facilities, the record indicated that the physical condition of all of the facilities and the provision of services were “barbaric” and “uncivilized,” in a large part due to unpaid bills putting patients at risk and the homes in jeopardy of closure. For example, the facilities (1) had leaking roofs that caused ceiling tiles to fall, flood residents’ rooms, and damage residents’ property; (2) lacked heating or air conditioning; (3) lacked cleaning and sanitizing supplies, and (4) had no trash service. In addition, residents’ physical and medical needs were not met. Because of unpaid bills, medications were not available; diapers and basic nursing supplies frequently were not available; laboratory services ordered by physicians were not performed; transportation was not provided for dialysis services; and residents were not provided sufficient food. Furthermore, facilities were without medical directors and physical therapy services for significant periods of time and were severely understaffed.

Although Houser instructed facilities to increase staffing levels and services when annual surveys were conducted, the facilities were regularly cited for violations and, in 2007, the facilities were given ratings so low that closure was required. The state gave Houser notice that it was terminating Medicaid provider agreements for all three facilities. Prior to closure, Medicare and Medicaid had paid FHG close to $33 million for resident care. Between 2003 and 2007, large sums of money were deposited or transferred to Houser and Washington’s person bank accounts as well as Houser’s construction company operating account. Payments for real estate, luxury automobiles and alimony also were drawn from FHG funds. During the same period, although Houser was withholding payroll taxes, he failed to turn over withheld amounts to the IRS and some checks that were submitted were returned insufficient funds.

Health care conspiracy, failure to pay taxes. The appellate court concluded that the government had met its burden of proof with respect to the conspiracy charge. The court explained that it was clear from the district court’s order that during the course of the conspiracy, the three nursing facilities, under the direction of Houser, had submitted fraudulent claims that were paid by Medicare and the state Medicaid program “for services that were worthless in that they were not provided or rendered, were deficient, inadequate, substandard, and did not promote the maintenance or enhancement of the quality of the residents of the nursing facilities.” The court noted that the record reflects that Houser did not simply demonstrate “gross negligence” in the provision of services mandated by statute, but demonstrated “an intentional disregard of those requirements.” Furthermore, the court found that “there was more than sufficient circumstantial evidence to establish Washington’s agreement to participate in the conspiracy to defraud Medicare and the Georgia Medicaid.”

The court concluded that the record indicated that Houser knew of his obligation to pay payroll taxes, but voluntarily and intentionally chose to spend available funds on the acquisition of personal goods and investment properties as opposed to satisfying his legal obligations. Moreover, the court agreed, based on the record, the government met its burden of proof that Houser wilfully failed to timely file his 2004 tax return and he did not file his 2005 tax return.

The case number is 12-14302.

Attorneys: Glenn D. Baker, U.S. Attorney's Office, for United States. Amy Levin Weil (The Weil Firm) for George D. Houser.

Companies: United States

MainStory: TopStory FraudNews MedicaidPaymentNews PartANews PartBNews LTCHNews AlabamaNews FloridaNews GeorgiaNews

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