An operator behind Atrium Health and Senior Living and a former top executive were indicted Wednesday on an extensive list of healthcare fraud, tax fraud and money laundering offenses, the Department of Justice announced Thursday.

The alleged crimes happened from January 2015 through September 2018, spearheaded by CEO Kevin Breslin and KBWB Operations, doing business as Atrium, at 24 skilled nursing and nine assisted living locations in Wisconsin.

Federal officials painted a complex fraud scheme in which they contend Breslin and Atrium diverted funds from the Wisconsin facilities to make guaranteed payments to Atrium owners, as well as guaranteed payments to investors who were using the proceeds to finance the construction of new nursing homes in New Jersey.

The indictment alleges that in that period, KBWB Operations billed Medicare for more than $189 million and received more than $49 million in payments. It also alleges that the company billed Medicaid for more than $218 million and received more than $93 million in payments. 

But much of that revenue never went toward patient care at Atrium facilities, federal law enforcement officials said after announcing the indictment by a federal grand jury in the Western District of Wisconsin.

“When the defendants obtained money from Medicare and Medicaid, they certified that they would follow all required quality of care standards, but they did not do so,” the Justice Department said statement said. “The diversion of funds caused inadequate care of residents, including a shortage of clean diapers, inadequate wound care supplies, inadequate cleaning supplies, and a lack of durable medical equipment and respiratory supplies.”

Vendor, staff obligations unmet

According to prosecutors, the diversion of funds also caused nonpayment to vendors, leading to the end of services such as physical therapy, fire alarm monitoring and phone and internet services. Necessary repairs and maintenance of the physical plant facilities also went unattended, officials said.

In 2018, food service vendor U.S. Foods Inc., sued various corporations run by Breslin for more than $2.2 million in alleged unpaid bills, saying in a federal court filing that it had stopped food deliveries to his facilities due to nonpayment.

It is unclear when the federal investigation into a potential fraud scheme began, but the U.S. Foods filing came at the end of the period when federal officials say the scheme was in full swing.

The precise number of facilities Atrium might still own and operate was unclear Thursday night.

In late 2018, McKnight’s Long-Term Care News reported that 33 Atrium facilities, mostly in Wisconsin, had gone into receivership. At least two had been set to transfer to new operators at the time of a 2019 FBI raid on those facilities.

Also unclear Thursday was whether Breslin remained in a leadership position at Atrium or any other skilled nursing company. A largely dormant LinkedIn page lists a Kevin Breslin as an executive vice president at CareOne, a New Jersey company with skilled nursing and assisted living facilities in New Jersey, Massachusetts, Connecticut and Pennsylvania. He also was listed as an owner of several skilled nursing facilities in multiple databases.

Other fraud charges

The indictment also alleges that Breslin and Atrium withheld insurance premiums and 401(k) savings from employees’ paychecks but failed to pay those monies over to the third-party administrators, preventing claims from being paid out and retirement investments from being made.

The indictment also alleges that Breslin and Atrium evaded payment to the Wisconsin Department of Revenue and the Internal Revenue Service of state and federal income taxes and employment taxes withheld from employees’ paychecks.

Breslin faces penalties of up to five years in federal prison on the conspiracy to commit tax fraud charge, and 20 years on each healthcare fraud, wire fraud, mail fraud, and conspiracy to commit money laundering charge. The conspiracy to commit tax fraud charge and each of the healthcare, wire and mail fraud charges carry a $250,000 fine; the money laundering charge carries a $500,000 fine.

A full list of affected facilities is included in the Department of Justice press release.