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Brown Files Criminal Charges Against Six for Hospice Scam that Defrauded $9 Million from Medicare and Medi-Cal

Tuesday, May 5, 2009
Contact: (415) 703-5837

Los Angeles – Continuing his fight to combat Medicare and Medi-Cal fraud, Attorney General Edmund G. Brown Jr. last night filed criminal charges against six individuals who paid healthy seniors to be admitted to a hospice for the terminally ill and then billed state and federal health care programs for “phantom procedures” never performed.

The six defendants – including a mother and her two children – were physicians and staff at “We Care” hospice in Sherman Oaks. One defendant was arrested today. Another four will surrender to authorities later this month. One remains at large.

“We Care obviously didn’t care about doing the right thing or helping sick people,” Brown said. “The owners, physicians, and staff of We Care paid healthy seniors to be admitted to hospice and then billed Medicare and Medi-Cal for phantom procedures. In total, they bilked the public out of $9 million and used the funds to enrich themselves and pay for expensive homes and luxury cars.”

Brown’s Office and the U.S. Department of Health and Human Services launched a joint investigation in 2008 after an audit found that a suspiciously large number of patients admitted to We Care were in good health and the mortality rate was low for a hospice.

Typically, 80% of patients die during their first six months in hospice. At We Care, only 11% of the 362 Medicare beneficiaries and 4% of the 143 Medi-Cal beneficiaries died between 2004 and 2007.

The joint investigation ultimately revealed that the staff of We Care paid “cappers” a finder’s fee for identifying and enrolling relatively healthy Medicare and Medi-Cal beneficiaries into hospice care. Subsequently, the staff billed the government for procedures and services that were not performed or medically necessary – including mental health evaluations and the administration of oxygen. This amounted to $9 million in fraudulent billings.

The defendants operated the scheme between 2004 and 2007, until the hospice’s license was revoked and the facility was closed.

The following defendants were charged in Los Angeles Superior Court:

• Milagros Delmendo, 58, of Northridge, on four counts of grand theft, presenting false Medi-Cal claims, making fraudulent claims to the government, and paying unlawful remuneration. Ms. Delmendo was arrested today by Special Agents from the Attorney General’s Office and the U.S. Department of Health and Human Services and booked in the Los Angeles County Jail. Ms. Delmendo was the owner of We Care.

• Kristina Delmendo Deguzman, 31, of Northridge on three counts of grand theft, presenting false Medi-Cal claims, and making fraudulent claims to the government. She will surrender to authorities Wednesday.

• Mark Delmendo, 28, of Studio City, on three counts of grand theft, presenting false Medi-Cal claims, and making fraudulent claims to the government. A warrant has been issued for his arrest.

• Nolan Jones, M.D., 60, of Los Angeles, on three counts of grand theft, presenting false Medi-Cal claims, and making fraudulent claims to the government. He has agreed to surrender to authorities.

• Anselmo Alliegro, M.D., 78, of Dundalk, Maryland, on three counts of grand theft, presenting false Medi-Cal claims, and making fraudulent claims to the government. He will surrender to authorities later this month.

• Ramon Parayno, 46, of Studio City, on two counts of grand theft and paying unlawful remuneration. He has agreed to surrender to authorities.

Here’s how the scheme worked:

The owner of We Care, Milagros Delmendo, paid Ramon Parayno $500 for each beneficiary admitted, and an additional $500 for each month the patient remained under care. Parayno would split his fee 50/50 with the beneficiary. At one point in 2005, Parayno made in excess of $25,000 in a month.

Once enrolled, physicians Nolan Jones and Anselmo Alliegro falsely diagnosed patients as suffering from a terminal disease, such as end-stage Chronic Obstructive Pulmonary Disease (COPD).

The investigators also found that nursing staff had been directed by Ms. Delmendo and her children -- employees Mark Delmendo and Kristina Delmendo Deguzman -- to falsely note in medical charts that their patients suffered from “shortness of breath,” “generalized weakness,” or “moderate to severe pain.”

Patients with end-stage COPD are not able to walk and require oxygen. The majority of patients diagnosed with COPD at We Care, however, were observed without oxygen or the assistance of a wheelchair. Many of the primary care physicians interviewed by investigators stated that their patients were not terminally ill and should not have received hospice care.

In one case, We Care billed Medicare $39,031 for hospice care for a patient whose medical problems only included arthritis and high blood pressure.

The Delmendo family used the proceeds of the scheme to purchase expensive cars, designer clothing, and luxury homes, including one purchased in cash for $1.7 million.

If convicted on all counts, the defendants could receive up to nine years in prison. To report fraud or abuse, call the Attorney General’s Office (Bureau of Medi-Cal Fraud and Elder Abuse) at (800) 722-0432.

The complaint and affidavit are available upon request.

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