With Hertel & Brown guilty pleas, feds tie 'decreasing insurance reimbursements' to fraud (2025)

At plea hearings for licensed physical therapists Aaron W. Hertel, 46, and Michael R. Brown, 48, federal prosecutor says two used 'creative billing methods' to boost their physical therapy business.

Throughout the case against Hertel & Brown Physical & Aquatic Therapy, the U.S. Attorney's Office has alleged profits and wealth fueled a $22 million overbilling fraud at the Erie-based business.

One reason the owners sought more money became clearer as the two pleaded guilty in federal court in Erie on Monday and agreed to get six years in federal prison when they are sentenced in August.

Among the evidence against licensed physical therapists Aaron W. Hertel, 46, and William R. Brown, 48, are emails in which they said they needed to pursue "using creative billing methods to compensate for decreasing insurance reimbursements," according to a summary of the evidence the lead prosecutor presented at the plea hearings.

To get more money, Assistant U.S. Attorney Christian Trabold said, Hertel and Brown engaged in a scheme in which they and other employees — among other things — billed Medicare, Medicaid and private insurers for more treatment time than what was actually provided, billed for services that were not rendered and billed as if licensed physical therapists and licensed physical therapy assistants provided services when unlicensed technicians really did the work.

The fraud occurred from January 2007, when Hertel & Brown was founded, up to the time of the indictment, in November 2021, the U.S. Attorney's Office said.

Overview:

The use of unlicensed technicians was at the core of the fraud, according to the U.S. Attorney's Office. The law prohibits unlicensed technicians from performing physical therapy, but Hertel & Brown relied on unlicensed technicians to perform physical therapy to keep both patient volume and profits high, according to the evidence.

Another aspect of the fraud, according to the U.S. Attorney's Office, is that Hertel and Brown instructed the directors of what had been its satellite offices "to upcode" — to bill for more expensive treatments than what was actually provided.

Restitution part of sentences under plea deals

The evidence Trabold summarized at the plea hearings for Hertel and Brown echoed the evidence he presented at the plea hearings for the other 18 defendants who also pleaded guilty in the 21-defendant case. All 21 — — were indicted in November 2021.

The 18 include Hertel & Brown as a corporation, which pleaded guilty on Monday with Aaron Hertel as its representative. U.S. District Judge Susan Paradise Baxter, who accepted the guilty pleas, set sentencing for Hertel and Brown and the corporation for Aug. 28.

Pleas and trial:

All 18 defendants pleaded guilty to a felony count of conspiracy to commit wire fraud and health care fraud. The U.S. Attorney's Office dropped a felony count of health care fraud.

Hertel & Brown as a corporation faces a fine and probation. As part of the plea deals for Hertel and Brown, they and the U.S. Attorney's Office agreed to a recommended sentence of six years in federal prison and three years of supervised release.

Hertel and Brown and all the other defendants are free on unsecured bonds of $10,000.

The U.S. Attorney's Office will seek restitution in an amount to be determined, according to the plea agreements. Hertel & Brown and Hertel and Brown as individuals agreed to forfeit property in Fairview Township, which had been the site of a satellite office, and Hertel and Brown agreed to forfeit a condominium they own across from a beach in Sarasota, Florida. The two can keep their houses in Erie County, which the U.S. Attorney's Office had alleged were subject to forfeiture.

Going up the ladder:

Hertel & Brown has remained in business during the prosecution, but it is down to one office from five. Its main office had been in the West Erie Plaza in Millcreek Township, but its lone office is now in a plaza on West 12th Street, just east of Pittsburgh Avenue in Erie.

3 of 21 defendants maintain innocence, head to trial

The guilty pleas of Hertel and Brown and the other defendants considerably shrank the Hertel & Brown case — the largest-ever prosecution of white-collar crime in Erie. A trial is still set to occur, as three defendants are maintaining their innocence — a point that Baxter has emphasized repeatedly in pretrial hearings. Jury selection starts on Tuesday.

The three remaining defendants are Julie A. Johnson, 43, a licensed physical therapist listed seventh in importance in the indictment, out of 21 defendants; Abigayle J. Fachetti, 33, a licensed physical therapy assistant listed 17th; and Marissa S. Hull, 33, a licensed physical therapy assistant listed 19th.

Many of the defendants who have pleaded guilty are expected to testify at trial, based on what Trabold has said in court, though the specific witnesses have not yet been made public.

Uncertain is whether Aaron Hertel and Michael Brown will take the stand and testify about their "creative billing methods" and other evidence.

ContactEd Palattella at epalattella@timesnews.com or 814-870-1813. Follow him on X@ETNpalattella.

(This story has been updated because an earlier version included an inaccuracy.)