Six Years Successfully Stealing from Medicare

Convicted after Stealing Almost $20 Million From Medicare

One of the greatest thefts of all time is that by health care providers against Medicare and Medicaid. For six years defendant Michael J. Galatis stole from the U.S. Government with impunity. His thefts were successful and unpunished until, after taking $20 million in payments unearned, the U.S. Attorney finally prosecuted Galatis.

In United States Of America v. Michael J. Galatis, United States Court of Appeals, First Circuit, 2017 WL 727548, — F.3d —-, No. 15-1322 (2/24/17) the First Circuit deal with his appeal of multiple convictions for fraud.

FACTS

Michael Galatis was convicted by a jury of conspiracy to commit healthcare fraud; healthcare fraud, and money laundering. The fraudulent activity took place from about January 1, 2006 to about October 2, 2012 and it involved billing Medicare for $27.6 million in false claims, about $19.9 million of which the government paid out to Galatis’ company, At Home VNA (“AHVNA”).

The government, without shame of paying out $19.9 million, to a criminal because they saved almost $8 million he billed allowing him to continue his criminal activities with impunity. What took them so long was not mentioned in the appellate decision.

Galatis argues that the district court committed reversible error by

  • allowing Galatis’ associate to testify that the associate had pled guilty to one count of healthcare fraud arising from the same scheme, without sua sponte giving a limiting instruction;
  • permitting certain lay and expert witness testimony, which Galatis characterizes as concerning the meaning of terms in the applicable Medicare regulations; and
  • denying Galatis’ preferred jury instruction as to the meaning of a particular certification requirement in the relevant Medicare provisions.

The statute allows a provider to serve the needy public with home health services if the individual who is the beneficiary of the services is “confined to the home”; “under the care of a physician who establishes the plan of care”; in need of at least one of a number of enumerated “skilled services as certified by a physician”; “under a plan of care” as specified under the relevant regulation; and receiving services “furnished by, or under arrangements made by, a participating [home health agency].”  Forms must be submitted to the US including a Form 485 Health Certification and Plan of Care (“Form 485”), where a physician certifies under pain of “fine, imprisonment, or civil penalty under applicable Federal laws,” that the beneficiary meets the requirements for Medicare coverage of home health services from a physician who certifies in a separate addendum that a “face-to-face patient encounter” has occurred.

Michael Galatis set up and owned MJG Management, a home health agency, which operated under the name At Home VNA. The prosecution presented evidence from AHVNA nurses and AHVNA’s Medical Director that AHVNA had recruited individual patients by sending nurses to host “wellness clinics” at assisted living centers and public housing facilities, where the nurses provided services like flu shots, and in doing so collected insurance information and “convinc[ed residents] to sign on with [AHVNA].” Nurses would also sometimes recruit patients door-to-door.

These nurses also testified that Galatis and/or Janice Troisi, his former colleague and codefendant, instructed the nurses to fill out OASIS Forms inaccurately, telling the nurses never to score a patient as a “zero” in the “activities of daily living” category; and to write their nurses’ notes using words that made the care provided appear like skilled nursing services, even when it was not, and words that emphasized the patients’ need for care.

Dr. Spencer Wilking, AHVNA’s Medical Director, was responsible for signing the Form 485s submitted to HHS. Dr. Wilking testified that in the first year after he joined AHVNA, around 2006, he conducted visits with patients before completing these forms. But beginning in 2007, as the business expanded, Dr. Wilking began signing the forms without conducting the necessary visits or any other review. By 2011, Dr. Wilking was signing approximately one hundred and fifty Form 485 certifications at each weekly AHVNA staff meeting. That it was physically impossible to have face to face meetings with one hundred fifty patients a week, did not raise suspicions in the government entity paying the submitted billing.

Dr. Wilking was paid a monthly consulting fee – Initially $2,500 per month, and then $3,500 per month as AHVNA’s patient population increased – for his services to AHVNA. Dr. Wilking testified he “chose to ignore” his own concerns and continued to sign the Form 485 certifications “because [he] was being paid quite a lot of money to do so.” Before Galatis’ trial, Dr. Wilking was separately indicted and pled guilty to one count of Medicare fraud arising from his conduct at AHVNA.

Galatis did not dispute the sufficiency of the evidence supporting his convictions, but made three claims that the district court committed reversible error at trial. He argues that the district court should have given sua sponte a limiting instruction as to Dr. Wilking’s testimony regarding Dr. Wilking’s guilty plea. He argues that the court wrongly permitted testimony interpreting the legal meaning of the applicable Medicare regulations. And he argued that the district court erroneously rejected his preferred jury charge regarding the face-to-face encounter regulation.

ANALYSIS

Galatis argues that the district court erred by not giving a limiting instruction after admitting evidence of Dr. Wilking’s guilty plea and that this purported error and questions from the government permitted the jury impermissibly to use Dr. Wilking’s plea as substantive evidence of Galatis’ guilt.

The prosecution moved to admit a copy of Dr. Wilking’s plea agreement into evidence. The district court initially stated that it would not admit a copy of the plea agreement itself, but after defense counsel affirmatively stated that he had “no objection” to the document’s admission, the court allowed the plea agreement into evidence.

When asked by the prosecutor about who else was involved in the fraud, Dr. Wilking stated that Galatis and Troisi had participated in the fraud and that Galatis “was the director … and the planner and the executor of the fraud.”

Galatis could not demonstrate that the absence of a limiting instruction affected his substantial rights and seriously impaired the fairness, integrity, or public reputation of judicial proceedings.

The First Circuit concluded that the lack of a limiting instruction as to Dr. Wilking’s guilty plea did not affect the jury’s verdict.

Generally, it is up to the judge to instruct the jury on the meaning of the law, including law set forth in statutes and regulations. The First Circuit also concluded that the trial court did so in the final instructions and limited the witness testimony.

The judge properly allowed lay witnesses – an AHNVA patient, two primary care providers, and three AHVNA nurses – to testify as to their understandings of certain Medicare terms such as “skilled nursing services” and “homebound” in describing what they had done and why, information clearly in the understanding of a lay witness.

Stephanie Fox, a Medicare-fraud investigator, testified as an expert.  Fox never transgressed proper limitations on her testimony set by the trial judge.

Fox never purported to offer an interpretive gloss on the legal meaning of the regulations. Her explanation of “skilled nursing services” hewed closely to the letter of the regulations themselves. Her testimony about the relationship between physicians and patients – and about the hierarchy among the statute, regulations, and policy manual – was based on her professional experience as a Medicare investigator, not on legal expertise. Her testimony aided the jury in understanding the regulatory framework without displacing the district court’s role in instructing the jury as to that framework’s legal significance.

An important theory of the defense was that Galatis had made a good-faith, though unsuccessful, attempt at compliance with the Medicare provisions. Since the evidence established the opposite the argument failed.

ZALMA OPINION

This is a perfect example of how to steal successfully from the U.S. — don’t be greedy. Had Galatis kept his theft small, had Dr. Wilking only signed 10 certificates a week instead of the impossible 150, the crime would have gone on forever. It is time the U.S. government install software like that which American Express uses to tell me I spent money on line or that I spent more than $1,000, to advise Medicare that one doctor is submitting certificates in a number physically impossible so that criminals like Galatis are caught in the first year of the crime instead of after $20 million stolen over six years.

ZALMA-INS-CONSULT                      © 2017 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 49 years in the insurance business.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.

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