Arizona Wound Graft Owners Sentenced for $1.2B Medicare Fraud Scheme

Two Arizona-based wound graft company owners were sentenced in federal court for orchestrating a Medicare fraud scheme exceeding $1.2 billion in false claims. Alexandra Gehrke received a 15.5-year prison sentence, while her husband Jeffrey King was sentenced to 14 years, after pleading guilty to conspiracy to commit healthcare fraud and wire fraud. Their operation, active from late 2022 through mid-2024, targeted elderly and terminally ill Medicare beneficiaries, particularly those in hospice care, by providing medically unnecessary wound grafts bought through illegal kickbacks. Gehrke controlled multiple wound care companies that employed untrained sales representatives to identify Medicare patients with wounds, regardless of the wounds' medical necessity or severity. The companies ordered expensive bioengineered skin grafts from human placental tissue, often opting for the largest sizes even when inappropriate. Nurse practitioners tasked with applying the grafts were directed to follow sales orders rather than their medical judgment, leading to excessive or unfounded treatments including grafts on nonexistent wounds or terminal patients receiving palliative care. In some instances, patients died shortly after receiving these treatments. Over 18 months, the fraudulent claims to Medicare and other federal programs totaled more than $960 million, with insurers disbursing over $614 million before detection. The DOJ's investigation revealed that the couple funded a lavish lifestyle using proceeds from the scheme, including luxury vehicles, precious metals, and a multimillion-dollar home. Gehrke and King were apprehended in June 2024 at Phoenix Sky Harbor Airport, attempting to flee to London. Evidence found during the investigation indicated premeditated efforts to evade law enforcement, including materials on erasing digital footprints. This case is part of a broad federal enforcement initiative against healthcare fraud that spans multiple administrations and involves hundreds of defendants nationwide. The overall scope of related prosecutions linked to this case approaches $30 billion in alleged false claims, underscoring ongoing federal emphasis on combating healthcare fraud within Medicare and other federal healthcare programs. The case illustrates vulnerabilities in Medicare wound care services, highlighting risks associated with inadequate oversight of billing practices and medical necessity assessments.