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Texas mayor and three others charged with health care fraud

BY MARY M. BEARDEN and ALLISON SHELTON, Brown & Fortunato, P.C.

On January 9, 2018, the Mayor of Rio Bravo, Dr. Francisco Pena, was indicted, along with Rodney Mesquias of San Antonio, Henry McInnis of Harlingen, and Jose Garza of Harlingen. The 11-count indictment included charges of health care fraud, conspiracy to commit money laundering, and conspiracy to commit health care fraud. Mayor Pena was also charged with obstruction of criminal investigations and making false statements, and Mesquias and McInnis were charged with obstruction of justice.

Mesquias owned and controlled the Merida Group, headquartered in Harlingen, Texas, as well as several affiliated entities including: Bee Caring Hospice Healthcare, Inc. and BRM Home Health, PLLC, both located in Harlingen; Merida Health Care Group of San Antonio, LLC and Bee Caring Hospice, LLC, located in San Antonio; Professional Hospice Care, in Laredo; Illumina, LLC and Virtue Home Health, Inc., in Corpus Christi; Well-Care Home Health, Inc., in Houston; and Excellent Homecare Provider Services, located in Sugarland. McInnis, the CEO of Merida Group, and Garza, Operations Manager, helped control, manage, and oversee the various entities. Mayor Pena, a licensed Texas physician, served as a medical director for the Merida Group’s entities operating in and around Laredo, Texas.

According to the indictment, from 2009 to 2018, Mesquias, McInnis, Garza, and Pena submitted more than $150 million in claims to Medicare for medically unnecessary hospice and home health services, which resulted in payments of over $120 million to the Merida Group and its affiliated entities. Mesquias, McInnis, and Garza paid kickbacks and bribes to Mayor Pena and other medical directors of the Merida Group’s entities in exchange for patient referrals and for certifying Medicare beneficiaries for home health and hospice care whose medical conditions did not warrant such services. Patients were given free medication and other remuneration in exchange for electing to receive services from the Merida Group’s entities. And, although hospice services are intended for patients whose life expectancy is six months or less, the four men kept patients on hospice services for multiple years in order to increase revenue. Moreover, the indictment alleges that Mayor Pena told a cooperating witness that “the way you make money is by keeping [hospice patients] alive as long as possible.”

The indictment also states that Mayor Pena gave a false statement to the FBI and obstructed the investigation. Two confidential sources (CS) allegedly met with Mayor Pena on two occasions in August of 2017 and paid him a total of $5,000 in kickbacks for his hospice patient referrals. The FBI questioned Mayor Pena during its investigation, and he denied ever accepting kickbacks in exchange for patient referrals or ever taking measures to extend patients’ lives. Two days after the FBI interview, Pena then allegedly contacted one CS and told the CS that steps would need to be taken to conceal the kickbacks. Additionally, he instructed the CS that if contacted by the FBI, the CS should provide false information to conceal the illegal kickback payments.

Further, Mesquias allegedly concealed the identities of the true beneficial owners of the Merida Group’s affiliated entities by using nominees, and money was laundered by giving profit distributions to the nominees. The scheme’s profits were used to purchase prime real estate, luxury vehicles, exotic vacations, fine jewelry, luxury clothing, and premium season tickets for the San Antonio Spurs, as well as re-investing the profits into Merida group affiliated entities. The indictment also alleges that Mesquias and McInnis obstructed justice by instructing their co-conspirators to manufacture false and fictitious records, and producing the false records in response to the federal grand jury’s subpoena to the Merida Group for patient records.

The case is being investigated by both federal and state agencies, including the U.S. Department of Health and Human Services – Office of Inspector General McAllen Field Office, the FBI’s San Antonio Division, and the Texas Health and Human Services Commission. Trial Attorney Kevin Lowell of the U.S. Department of Justice, Criminal Division Fraud Section, and Assistant U.S. Attorney Andrew Swartz of the Southern District of Texas are prosecuting the case. Currently, the government estimates the trial will take three weeks, due to the conspiracy’s lengthy time period and wide geographic area, the large number of potential witnesses, voluminous Medicare claims documentation, and the time necessary to review the recordings and transcripts involving confidential sources and cooperating witnesses.

This case is another reminder that the government actively pursues improper arrangements between providers and referral sources in Texas. Providers should routinely have their legal advisors review contracts and other arrangements involving persons or entities that receive or send referrals to the provider.