Three Convicted for Fraudulently Billing Over $8 Million to Medicare and Medicaid Through Opioid Addiction Treatment Clinics in Kentucky

A federal jury convicted a Kentucky doctor, a Texas businessman, and a Kentucky woman yesterday for their roles operating a scheme out of a series of addiction treatment facilities in Kentucky that fraudulently billed Medicare and Kentucky Medicaid for over $8 million.

According to court documents and evidence presented at trial, Dr. José Alzadon, 61, of Paintsville, Kentucky; Michael Bregenzer, 52, of Richmond, Texas; and Barbie Vanhoose, 62, of West Van Lear, Kentucky, orchestrated their health care fraud scheme through Kentucky Addiction Centers (KAC), which operated in Winchester, Paducah, Paintsville, and London, Kentucky. As part of his role as KAC’s medical director, Alzadon prescribed Suboxone, a controlled substance that can be used to treat opioid addiction when properly prescribed under regulations issued by the Drug Enforcement Administration (DEA). Bregenzer served as KAC’s CEO and Vanhoose as KAC’s billing manager.

Together, Alzadon, Bregenzer, and Vanhoose ran a scheme that falsely billed taxpayer-funded health programs like Medicare and Medicaid for medical services that were not performed or were falsely represented as more complex than the services provided. They also conspired to falsely bill for services in the name of Alzadon’s elderly father, using Alzadon’s father’s identity to bypass insurance credentialing issues that Alzadon had, and to use Alzadon’s father’s DEA prescribing credentials to prescribe Suboxone, even though Alzadon’s father had not seen the patients for whom he was supposedly issuing prescriptions.

Alzadon, Bregenzer, and Vanhoose were each convicted of one count of conspiracy to commit health care fraud, eight counts of health care fraud, and one count of conspiracy to distribute controlled substances using the DEA registration number of another person. They face a maximum penalty of ten years in prison on each health care fraud conspiracy and substantive health care fraud count and four years in prison on the conspiracy to distribute controlled substances count. Alzadon and Vanhoose were also each convicted of two counts of aggravated identity theft and face a consecutive mandatory minimum of two years in prison. Alzadon and Bregenzer are scheduled to be sentenced on June 25 and Vanhoose is scheduled to be sentenced on June 26. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Matthew R. Galeotti, head of the Justice Department’s Criminal Division; Special Agent in Charge Jim Scott of the DEA Louisville Division; Special Agent in Charge Michael E. Stansbury of the FBI Louisville Field Office; Special Agent in Charge Kelly Blackmon of the Department of Health and Human Service Office of the Inspector General (HHS-OIG); Regional Director Joe Rivers of the Department of Labor Employee Benefits Security Administration (DOL-EBSA); and Kentucky Attorney General Russell Coleman made the announcement.

The DEA, FBI, HHS-OIG, DOL-EBSA, and the Kentucky Medicaid Fraud Control Unit investigated this case.

Trial Attorneys Dermot Lynch, Sarah Edwards, and Samad Pardesi of the Criminal Division’s Fraud Section are prosecuting the case.

The Fraud Section leads the Criminal Division’s efforts to combat health care fraud through the Health Care Fraud Strike Force Program. Since March 2007, this program, currently comprised of nine strike forces operating in 27 federal districts, has charged more than 5,800 defendants who collectively have billed federal health care programs and private insurers more than $30 billion. In addition, the Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to hold providers accountable for their involvement in health care fraud schemes. More information can be found at www.justice.gov/criminal-fraud/health-care-fraud-unit.