Insurance Fraud Lands Health Club Owners in Prison

Insurance Fraud Lands Health Club Owners in Prison

Insurance fraud occurs in many industries, and although it’s rare in the health club industry, insurance fraud was at the heart of three recent cases involving health club operators in the state of Pennsylvania.

Dr. Joseph Lerner, a chiropractor and owner of Horsham (PA) Fitness, was sentenced in January to 36 months in prison for defrauding eight insurance companies, including Independence Blue Cross, in a $3 million scheme. The office of U.S. Attorney Zane David Memeger for the Eastern District of Pennsylvania, Philadelphia, said that Lerner billed the insurance companies for chiropractic treatments that Lerner did not provide or supervise between 2007 and March 2010.

“Lerner lied to people who came to join his gym,” according to the sentencing memo, “telling them that they could obtain massages and personal training for the very low price of only a co-payment, usually $10, by having their health insurance company pay for those massages and personal training sessions, when he knew that such sessions were not reimbursable under the gym members’ health insurance policies.”

Memeger, along with Assistant U.S. Attorneys Mary Crawley and Laurie Magid, also submitted in the sentencing memo that Lerner, knowing that no treatments had been provided, prepared the fraudulent bills, including fictitious procedure codes and false representations of patient symptoms and clinical findings. The payments from the eight insurance companies totaled about $1.9 million. In his plea agreement, Lerner agreed to forfeit $432,834.12.

“Insurers saw that there were unusual patterns of billing by Dr. Lerner, so they brought it to our attention, and then we investigated further,” Magid says.

The Eastern District of Pennsylvania office also handled a case involving another chiropractor, Raymond Brozek, and Michael Karp and Mark Levin, owners of Hatfield (PA) Athletic Club and Rehab One, a chiropractic and rehabilitation facility located inside the club.

Levin and Karp hired Brozek to work from 2004 to 2006 and directed members to Brozek, who then created fraudulent bills that were submitted for treatments that Brozek did not perform or were not medically necessary.

In addition to Rehab One, which no longer is in operation at Hatfield Athletic Club, Brozek also saw patients in the basement of Levin’s home at a gym known as Rehab Two and at the homes of Levin’s friends, according to court documents. The fraudulent bills to Independence Blue Cross totaled $1.9 million, resulting in payments from the insurance company totaling almost $400,000.

Last year, Levin, Karp and Brozek each pleaded guilty to one count of health care fraud. Levin received a 12-month prison sentence, and Karp received a six-month prison sentence. Brozek avoided prison time and received a sentence that includes three years’ probation after a motion of leniency was filed based on “substantial” assistance from Brozek that led to charges against Levin and Karp.

“It didn’t do as well as I thought … and I guess I lost my mental control and tried to make up for it, and I did that by cheating,” Levin said at sentencing, according to Philadelphia newspapers. Levin added that he did not take the money for himself and instead put it back into the club.

The state of Pennsylvania was once again hit with an insurance fraud probe in late January. Investigators from the Northeast Pennsylvania Insurance Fraud Task Force raided the Giacalone Chiropractic and Fitness Center’s two locations in Pocono Summit, PA, and Canadensis, PA. A team of 20 officers in each location carried out computers, records and other items that could be used as evidence, according to local media outlets.

Myles Walsh, the task force’s director, said that the father-daughter business operated by Joseph and Maria Giacalone has been under investigation for the past five years, and the case could involve fraudulent insurance bills of more than several million dollars.

“This investigation began after an individual contacted us about inconsistencies in Giacalone’s insurance billing statements,” Walsh told media outlets in January. “We’ve found too many billing inconsistencies for all this to be accidental and not intentional. They’ve billed insurance companies 30, 36-hour days. Obviously, there’s only 24 hours in a day.”

A representative from the task force said last month that the case is still under active investigation. As of press time, no charges had been filed against the Giacalones, who did not respond to e-mailed requests for comments from Club Industry.


Ken Reinig, senior vice president of Association Insurance Group (AIG), Lakewood, CO, says cases such as these are rare in the health club industry. AIG insures more than 3,500 health clubs and has been specializing in the industry for more than 20 years, yet when asked about the three recent cases, Reinig says the Lerner case was the only one with which he was aware.

“Although it certainly is horrific when it happens, I don’t think it is that big of a problem [in the industry],” says Reinig, who adds that criminal acts are not covered by insurance. “You are going to find insurance fraud in virtually every industry that involves medical billing. I’m surprised we don’t see more of this.”

Last June, Lerner pleaded guilty to one count of insurance and mail fraud. In an attempt to lessen his impending prison sentence, Lerner asked friends, colleagues and patients to attend a hearing to support him and to write letters to the presiding judge urging leniency.

“I have cooperated with authorities at every instance, and am regretful and remorseful that I hurt those around me,” Lerner wrote in the letter to friends dated Sept. 2, 2010. “You may have to think deeply for a while [still have a sense of humor] but if you can recall and relate a good experience about me as a father, helper, healer, a good clinical outcome, value to the community, a reason the world is better off with me ‘out’ instead of ‘in,’ and ask for leniency in sentencing, I would be forever grateful.”

Lerner provided his friends with guidelines for how to construct the letter to the judge. Those guidelines included checking for typos and writing the letter on letterhead stationery. Written in italics, all caps and boldface, he also added: “Better to not mention massage or insurance.”

The U.S. attorneys said that Lerner submitted to the judge 54 letters from the community and from Lerner’s patients. That information was included in a supplemental sentencing memo filed last November.

“It’s an understatement to say that it was inappropriate,” Magid says. “It was clearly inappropriate on his part to try and basically make these people part of his scheme by asking them to provide letters of support, but not the important information to the judge that they may have unwittingly been made part of his scheme by being told that they could get extremely low-cost personal training by billing it to insurance.”

Lerner is serving his sentence at the Federal Correctional Institution in Fort Dix, NJ, and his projected release date is Oct. 2, 2013. Karp also is at Fort Dix, and his projected release date is May 28, 2011. Levin is serving his sentence at the Federal Medical Center in Devens, MA, and his projected release date is Dec. 14, 2011.

Magid says these cases, and Lerner’s case in particular, can provide a valuable lesson to club operators.

“I think the lesson is that even if you are running a gym, if you are a health care provider, you hold a position of trust and are expected to properly bill and follow the law,” Magid says. “And the expectations of you are even a little bit higher than someone who does not hold that position of trust.”

Lerner, Magid adds, violated that trust.

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