Update: Feds allege Erie-based Hertel & Brown physical therapy committed $22M billing fraud

Hertel & Brown Physical & Aquatic Therapy, known to the public for its large staff and multiple offices throughout the Erie area, was known for something else behind the scenes, according to a federal grand jury.

An indictment issued Tuesday alleges that Hertel & Brown engaged in "creative billing practices" by submitting at least $22 million in false bills for 14 years, starting shortly after Hertel & Brown opened its first office in Erie in January 2007.

Led by owners and founders Aaron W. Hertel, of North East, and Michael R. Brown, of Millcreek Township, the practice, the indictment alleges, routinely defrauded insurance companies, Medicare, Medicaid and others by billing them for services as if they were performed by licensed physical therapists when they were actually performed by unlicensed technicians.

Pennsylvania law requires that only physical therapists or physical therapy assistants perform certain activities, and the law prohibits "supportive personnel" from performing those same activities, according to the indictment. Supportive personnel includes unlicensed technicians, and health care programs do not reimburse for services that unlicensed technicians provide, according to the indictment.

The indictment alleges Hertel & Brown and its employees covered up who actually treated the patients by removing the name of the actual person providing treatment from the treatment record, according to the indictment.

The indictment also alleges that the practice, among other things, billed treatment time for licensed therapists when those therapists were on vacation and not working at the time. The indictment includes 19 examples of when investigators said the practice billed on behalf of vacationing physical therapists.

In one instance, the indictment alleges, Hertel & Brown in February 2018 submitted 18 billing claims using the name and credentials of Michael Brown when he was on vacation in the Dominican Republic. And in another instance, the indictment alleges, the practice in August 2018 submitted 12 billing claims using the name and credentials of Aaron Hertel when he was on vacation.

Overall, the indictment alleges that Hertel & Brown focused on bringing in more business, and that Hertel and Brown and others in the practice "regularly emphasized patient volume and provided bonuses and compensation to employees that were dependent on patient volume."

In addition, the indictment alleges, Hertel and Brown and their practice "encouraged, espoused, advocated and implemented" what Hertel and Brown "described as creative billing practices."

18 employees also indicted

The 30-page indictment, returned in U.S. District Court in Erie, names a total of 21 defendants: Hertel & Brown as a business, Hertel and Brown individually and 18 employees. They are all accused of two felony counts: health care fraud and conspiracy to commit wire fraud and health care fraud from January 2007 to this October.

Hertel and Brown and other other defendants are accused of engaging in the fraud and its locations throughout the Erie area, including in Summit and Harborcreek townships and Fairview and at its main office, at the West Erie Plaza in Millcreek. Hertel & Brown remains open, the West Erie Plaza office said on Wednesday.

Hertel and Brown are the lead defendants in the case and face forfeiture allegations as well as the criminal charges, according to the indictment. The U.S. Attorney's Office, according to the indictment, is seeking forfeiture of Hertel's residence, on Station Road, in North East, and Brown's residence, on Fossilwood Court, in Millcreek.

Also subject to forfeiture, according to the indictment, is property that the practice owns at 3911 Avonia Road, the site of its Fairview office, as well as physical therapy equipment and office equipment. The government is alleging that the houses, property and equipment should be confiscated because Hertel and Brown and their practice acquired the property as a result of fraud.

'A brazen fraud scheme'

Federal authorities did not comment on what led to the investigation, and the indictment also offers no details on what spurred the probe. That information is expected to be presented in court.

"The indictment alleges that essentially since Hertel & Brown opened in 2007, the defendants perpetrated a systematic and brazen fraud scheme that bilked insurance companies and the government of millions through blatantly false billings,” Acting U.S. Attorney Stephen Kaufman, of the Pittsburgh-based Western District of Pennsylvania, said in a statement.

The head of the FBI office in Pittsburgh, Special Agent in Charge Mike Nordwall, said in a statement that "those charged were in the business to make a quick buck and in turn violated the very basic ethical and moral standards medical professionals are held to.

“Taking short cuts, illegal and improper billings and elaborate health care fraud schemes all increase the cost of medical care," Nordwall said.

U.S. District Court for the Western District of Pennsylvania includes the Erie Division, where the Hertel & Brown case will be prosecuted at the federal courthouse on Perry Square in Erie. U.S. District Judge Susan Paradise Baxter, based in Erie, is assigned the case. The prosecutor is Assistant U.S. Attorney Christian Trabold, the head of the U.S. Attorney's Office in Erie, which reports to Pittsburgh.

The lawyer for Hertel, Charbel Latouf, of Erie, said his client will fight the charges.

"My client maintains his innocence and will vigorously defend against the allegations in the indictment," Latouf told the Erie Times-News.

None of the defendants are in custody, according to court records. The U.S. Attorney's Office requested that they be charged by summons, rather than arrested, and that they be allowed to remain free on unsecured bonds of $10,000, according to court records docketed on Wednesday. The first set of arraignments in the case is scheduled before U.S. Magistrate Judge Richard A. Lanzillo on Nov. 30, according to the records.

List of defendants

In addition to Hertel & Brown and Michael Brown and Aaron Hertel, these following defendants were charged, according to the indictment. They have Erie mailing addresses unless otherwise noted, according to the U.S. Attorney's Office.

Hertel and Brown, both licensed physical therapists, are listed at the top of the indictment, making them and their practice the lead defendants. The names of the other defendants are listed here as they appear in the indictment. Higher-level defendants are typically listed at the top of federal indictments.

• Sarah Elizabeth Bailey, a licensed physical therapist

• Jessica Jeanne Morphy, a licensed physical therapist

• Jacqueline Renee Exley, an unlicensed technician and then a licensed physical therapist

• Julie Ann Johnson, a licensed physical therapist

• Bobby Lee Rainey, a licensed physical therapist

• Steve Michael Bauer, an unlicensed technician and then a licensed physical therapist

• Austin John Dudenhoefer, an unlicensed technician and then a licensed physical therapist

• Philip Dale Sorensen Jr., an unlicensed technician and then a licensed physical therapist

• Patricia Susan Berchtold, Melbourne, Florida, a billing specialist who typically worked remotely from Florida

• Jeremy Richard Bowes, a licensed physical therapy assistant

• Jennifer Marie Larmon, Waterford, a licensed physical therapy assistant

• Travis Walter Litz, an unlicensed technician and then a licensed physical therapy assistant

• Erin Marie Riffe, Conneaut, Ohio, an unlicensed technician and then a licensed physical therapy assistant

• Abigayle Jane Fachetti, an unlicensed technician and then a licensed physical therapy assistant

• Lori Lynn Goss, Waterford , an unlicensed technician and then a licensed physical therapy assistant

• Marissa Sue Hull, Waterford, a licensed physical therapy assistant

• Justin Charles Burger, an unlicensed technician and then a licensed physical therapy assistant

• Carl William Lewis Jr., Lake City, an unlicensed technician and then a licensed physical therapy assistant

Federal authorities first confirmed the investigation of Hertel & Brown in February, when the FBI and other agencies searched Hertel & Brown's offices. The U.S. Attorney's Office at that time said the offices searched were at the West Erie Plaza and four other locations.

• 8270 Peach Street, Suite 400, Summit Township

• 4472 Buffalo Road, Harborcreek Township

• 3911 Avonia Road, Fairview

• 2 Farm Colony Drive, Warren

• The Warren office closed in May, according to the indictment

Federal probe: FBI, others search offices of Erie-based Hertel & Brown Physical & Aquatic Therapy

Other allegations

Hertel & Brown opened its first office, in January 2007, in the 1000 block of West Sixth Street in the plaza just east of Erie's Frontier Park, according to the indictment. The practice relocated that office to the West Erie Plaza, its main location, in February 2014, and opened its other offices later, according to the indictment.

The Hertel & Brown offices and the indicted employees also are accused of committing the fraud by the following means, according to the U.S. Attorney's Office and the indictment.

• Unlicensed technicians were permitted and required to log into the treatment documentation system, WebPT, as a licensed physical therapist to facilitate documenting treatment as if performed by a licensed therapist.

• Hertel & Brown and its licensed employees rarely if ever utilized group therapy codes when billing for treatment even when group billing codes were the only appropriate billing codes that could have been utilized.

• Hertel & Brown allowed physical therapy assistants and unlicensed personnel to treat patients with insurance that only reimbursed for treatment performed by a physical therapist.

• Hertel & Brown and some of its employees also manually changed the patient schedule after the fact to conceal that Medicare patients were scheduled at the same time as other patients. This was done to conceal that Medicare patients did not have one-on-one treatment with a physical therapist as billed by the practice and required by Medicare.

• Hertel & Brown and its licensed employees regularly recorded and billed for treatment time in excess of actual treatment time spent with patients. The indictment lists 21 instances in which Hertel & Brown and its employees are alleged to have submitted bills to insurers and others "claiming treatment time that was more than the entire possible treatment time that employees working at the specific location of Hertel & Brown on that date could have billed, even if the employees billed every minute the location was open without any reductions in billing time for breaks, paperwork completion or other similar non-treatment issues."

• The indictment alleges that one of the defendants, Jeremy Bowes, as part of the conspiracy "encouraged student interns to provide misleading and inaccurate statements to educational authorities who supervised students' internships about the work done and services performed by the interns at Hertel & Brown."

In claiming that the Hertel & Brown emphasized patient volume, the indictment also alleges that Hertel and Brown, as individuals, maintained relationships with referring physicians.

The indictment alleges that Hertel and Brown "directed an employee" to monitor the number of patients referred by physicians, and that Hertel and Brown "provided gifts and incentives to physicians with the highest patient referral rates to increase and sustain patient volume."

Hertel and Brown, according to the indictment, "stopped providing gifts and incentives to physicians whose referrals to Hertel & Brown had diminished."

The section of the indictment about the physician referrals offers a clue that investigators relied on information from employees to fashion the charges. The indictment alleges that the employee who was directed to track mon referrals is "known to the grand jury." The indictment does not name that person.

Contact Ed Palattella at epalattella@timesnews.com. Follow him on Twitter @ETNpalattella.

This article originally appeared on Erie Times-News: Hertel & Brown physical therapy, owners, others indicted on fraud charges