Fraudulent Billing at Kentucky Addiction centers Leads to Multiple Convictions

A federal jury delivered a guilty verdict in late March 2025 against Dr. José Alzadon, Michael Bregenzer, and Barbie Vanhoose for their involvement in a wide-ranging healthcare fraud scheme. The scheme, operated through a network of addiction treatment facilities known as Kentucky Addiction Centers (KAC), fraudulently billed Medicare and Kentucky Medicaid for over $8 million.

The case highlights the vulnerabilities within the U.S. healthcare system and the aggressive measures being taken to combat fraud, waste, and abuse.

The Players and Their Roles

The individuals convicted played distinct roles in the orchestration of the fraudulent scheme:

• Dr.José Alzadon, 61, of Paintsville, Kentucky: Served as KAC’s medical director, responsible for prescribing Suboxone.
• Michael Bregenzer, 52, of richmond, Texas: Held the position of KAC’s CEO.
• Barbie Vanhoose, 62, of West Van Lear, Kentucky: Functioned as KAC’s billing manager.

Court documents revealed that Alzadon, Bregenzer, and Vanhoose collaborated to defraud taxpayer-funded health programs.They submitted false claims for services that were either not performed or misrepresented to appear more complex than they actually were.

Details of the Scheme

The scheme involved several layers of fraudulent activity:

• False Billing: Billing Medicare and Medicaid for services not rendered or upcoded to higher reimbursement rates.
• Identity Theft: Using Dr. Alzadon’s elderly father’s identity to bypass insurance credentialing issues and to fraudulently prescribe Suboxone.
• Unlawful Suboxone Prescriptions: Prescribing Suboxone using Alzadon’s father’s DEA credentials even when his father hadn’t seen the patients.

“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.”

The Charges and Potential Penalties

Alzadon, Bregenzer, and Vanhoose each faced serious charges and potential penalties:

• One count of conspiracy to commit health care fraud
• Eight counts of health care fraud
• One count of conspiracy to distribute controlled substances using the DEA registration number of another person

The penalties associated with these charges are substantial. 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, which carries a consecutive mandatory minimum of two years in prison.

Sentencing for alzadon and Bregenzer is scheduled for June 25, while Vanhoose is scheduled to be sentenced on June 26. A federal district court judge will determine the final sentences, taking into consideration U.S. Sentencing Guidelines and other statutory factors.

The Opioid Crisis and Suboxone

Suboxone,the drug at the center of this fraudulent scheme,is a medication used to treat opioid addiction. While it can be a life-saving treatment when prescribed and administered properly, it is also a controlled substance with the potential for abuse.

The opioid crisis continues to grip the United States, with devastating consequences for individuals, families, and communities.According to the Centers for Disease Control and Prevention (CDC), over 100,000 Americans died from drug overdoses in 2023, with opioids being a major contributor. This case underscores the need for responsible prescribing practices and rigorous oversight of addiction treatment facilities.

Healthcare Fraud and Its Impact

Healthcare fraud is a pervasive problem in the united states, costing taxpayers billions of dollars each year. These fraudulent schemes not only drain valuable resources from the healthcare system but also compromise patient care and erode public trust.

The financial impact is substantial. A recent report by the National Health care Anti-Fraud Association (NHCAA) estimates that healthcare fraud costs the U.S. approximately 3% of total healthcare expenditures annually, which translates to tens of billions of dollars.

The Kentucky Attorney General’s office of Medicaid fraud and Abuse Control is actively involved in combating such fraud. According to their data, they receive a significant portion of their funding from the U.S. Department of Health and Human Services, demonstrating the federal commitment to fighting healthcare fraud.

Recent Developments and Practical Applications

This conviction is part of a larger effort to combat healthcare fraud across the United States. The Department of Justice’s Health Care Fraud Strike Force Program has been instrumental in targeting and prosecuting individuals and organizations involved in these schemes.

Since March 2007, this program has charged more than 5,800 defendants who collectively have billed federal health care programs and private insurers more than $30 billion. The Centers for Medicare & Medicaid Services (CMS), in conjunction with HHS-OIG, are also implementing measures to hold providers accountable for their involvement in fraudulent activities.

The Kentucky case serves as a stark reminder of the potential for abuse within the healthcare system. It highlights the need for increased vigilance, improved oversight, and stiffer penalties for those who engage in fraudulent practices.