(This story has been updated to add new information.)
Two owners of Hertel & Brown Physical & Aquatic Therapy have been sentenced to six years in federal prison and fined up to $250,000 each for masterminding a multimillion-dollar health care fraud scheme. In the scheme, the well-known Erie-based clinic overbilled Medicare, Medicaid and private insurance companies for 14 years.
Defendants Aaron W. Hertel (47) and Michael R. Brown (49) must also pay restitution in an amount to be determined. They will all report to prison on a date set by the Federal Bureau of Prisons.
U.S. District Judge Susan Paradise Baxter had sharp criticism of Hertel and Brown when they sentenced them Feb. 27 in federal court in Erie.
She said the two men undermined public confidence in the health care system by charging insurance companies exorbitant fees to boost Hertel & Brown’s revenue and provide more for themselves.
Aaron W. Hertel was sentenced to six years’ probation and fined $250,000 after pleading guilty to running a health care fraud scheme at his company, Hertel & Brown Physical & Aquatic Therapy.
“This is a violation of the public trust,” Baxter said.
Defendant apologizes to family and community
Hertel and Brown issued statements apologizing to Baxter at separate sentencing hearings in a courtroom gallery packed with their friends and relatives.
Other defendants: Who was sentenced in the Hertel & Brown fraud case? The long case is coming to an end
Hertel said he “expresses sincere remorse for the hurt and pain his actions have caused.” He said he was sorry to the Hertel & Brown employees and his family, “who have suffered undeserved consequences.”
Brown expressed remorse to his family and Hertel & Brown employees.
“I regret my actions and the circumstances that brought me here today,” Brown said.
He said he realized that time behind bars would allow him to stay connected with his family and children during “the most important moments of his life” and that his conviction meant he could be banned from physiotherapy once he was released. Those convicted in the Hertel and Brown cases face suspension or revocation of their state-issued licenses.
“I don’t know if physical therapy is in my future,” Brown told Baxter, but he said that whatever he does after prison, “providing services to those in need will be at the core of it.” “
Hertel, Brown sentenced after plea deals
Baxter’s sentencing came under the terms of a plea agreement reached between the U.S. Attorney’s Office and the defense when Hertel and Brown, Inc., and Hertel and Brown individually, pleaded guilty a year ago to felony counts of conspiracy to commit wire fraud and health care fraud.
The plea agreement called for six years each in prison for Hertel and Brown, plus restitution and possible fines, with Baxter opting to impose the maximum amount. She will determine the restitution amount after a restitution hearing on April 21.
Baxter also sentenced Hertel and Brown to three years of supervised release. The six-year prison sentence is a significant reduction for Hertel and Brown.
Hertel and Brown’s advisory sentencing guidelines called for a prison sentence of 15 years to eight months to 19 years and seven months. This guide explains how fraud costs insurance companies millions of dollars.
Baxter followed another part of the plea agreement, ordering Hertel and Brown to give up ownership of a condominium they owned in Sarasota, Florida. They also must relinquish ownership of the former satellite office on Avonia Road in Fairview Township. Hertel & Brown’s flagship office is located in leased space on West Erie Plaza in Millcreek Township.
Hertel and Brown were allowed to keep their personal homes. The U.S. Attorney’s Office initially sought forfeiture of the properties. Hertel lives in Northeast and Brown lives in Mill Creek.
Hertel & Brown co-owner and founder Michael R. Brown was sentenced to six years in federal prison and fined $250,000 for his role in a federal health care fraud case against his business.
Baxter sentenced Hertel & Brown to one year’s probation at an earlier hearing on February 27, with restitution based on the outcome of a hearing in April. The clinic has closed.
Owner, company and 18 employees indicted
The case against Hertel & Brown began with an indictment filed in November 2021 against the company, Hertel and Brown personally, and 18 employees. The U.S. Attorney’s Office said the defendants defrauded Medicare, Medicaid and private insurance companies of $22 million in the 14 years since Hertel & Brown’s was founded.
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Eighteen of the 21 defendants, including Hertel and Brown and Hertel and Brown individually, pleaded guilty to felony conspiracy to commit wire fraud and health care fraud.
Eleven other defendants were given suspended sentences and ordered to pay restitution before Hertel and the company’s sentencing, which will take place at the end of March. Another defendant was convicted of health care fraud at a trial in April, and two other defendants were acquitted at the same trial.
Among the evidence is that Hertel & Brown used low-wage, unlicensed technicians to treat patients and billed Medicare, Medicaid and private insurance companies as if licensed physical therapists and physical therapy assistants had performed the work. Evidence shows that Hertel and Brown used the excess billing proceeds to pay themselves $800,000 to $1 million per year.
Judge says Hertel & Brown employees mistakenly trusted owners
In handing down the sentence, Baxter noted the size and scope of Hertel and Brown’s case, which is the largest white-collar crime prosecution in Erie’s history.
She said the case “occupied a large part of the court docket and social attention for a considerable period of time.”
She said the community’s concern is not because of gossip but because of the public’s interest in the integrity of the Medicare, Medicaid and private insurance reimbursement systems.
Baxter said the criminal activities of Hertel and Brown and Hertel and Brown as individuals “undermine confidence not only in individual providers but in the system that patients and families rely on.”
Baxter also accused Hertel and Brown of being behind the fraud that resulted in 15 of the 18 employees who were indicted and pleaded guilty or were convicted at trial. Baxter said the employees earned significantly less than Hertel and Brown and trusted their guidance on billing practices.
Baxter said all employees “had one thing in common” and “they all believed — albeit wrongly — that Hertel and Brown Physical & Aquatic Therapy was a tool for good, not a money-making machine for its owners.
“Unfortunately, they believed that Mr. Hertel and Mr. Brown were each their mentors and that the instructions given to them were for the benefit of the team, for their own professional development and, most importantly, for the sake of practice.”
Prosecutors say fraud was ‘daily decision’
Assistant U.S. Attorney Christian Trabold, the lead prosecutor in the case, stressed to Baxter that Hertel and Brown committed “purposeful conduct” while leading the overbilling scheme.
Trabold said many crimes are caused by alcohol, drugs and impulsive behavior. The fraud in the Hertel & Brown case was calculated.
“This was not a spur-of-the-moment thing,” Trabold told Baxter. “Escape from the rules to improve your lifestyle is a daily decision.
“At any time, they could have stopped this.”
Please contact Ed Palattella at epalattella@usatodayco.com or 814-870-1813.
This article originally appeared in Erie Times News: Hertel & Brown owner jailed, fined up to $250,000