California’s Hospice Scam: Uncovering a $67 Million Healthcare Money Laundering Scheme

In one of the most elaborate healthcare fraud cases in recent California history, Mihran Panosyan and his associates have been convicted for defrauding Medicare of nearly $16 million through a vast hospice scam that also involved an intricate network of money laundering.

The case, prosecuted in federal court, not only underscores vulnerabilities in Medicare oversight but also offers a window into how illicit proceeds are moved, layered, and spent through a maze of sham entities, false identities, and forged documentation.

Panosyan's involvement, far from peripheral, was central to the laundering operation. He acted as the architect behind a scheme that involved dozens of fake hospices, fraudulent bank accounts, and manipulated personal identities—many of them belonging to foreign nationals who had long since left the United States. Federal investigators later traced over $4.6 million in fraud proceeds that had been funneled through these conduits before being spent on real estate, private education, and high-value personal expenditures.

The investigation revealed how Panosyan and his co-conspirators relied on forged documents to open bank accounts under assumed identities. These identities were typically linked to foreign nationals who were difficult to trace or verify through conventional compliance checks. From there, funds from false Medicare claims were funneled into accounts linked to sham hospices—each set up to appear legitimate on the surface.

Investigators described the money movement as a textbook case of financial layering.

“Funds from false Medicare claims flowed into accounts held in the names of purported foreign owners and sham hospices,” noted one federal official. The accounts, frequently backed by counterfeit documentation, facilitated substantial and frequent transactions that were meant to mimic legitimate business activity. The money was then cycled through additional shell companies before being extracted for personal use.

This cycle illustrates how modern financial crime exploits existing banking infrastructure. After layering, Panosyan and his collaborators introduced the funds back into the economy—via real estate investments, tuition payments, and other high-value transactions—making recovery efforts significantly more difficult.

“Once funds have passed through enough entities, they are introduced back into the economy through legitimate-seeming transactions,” stated one DOJ investigator. “The purchase of real estate and payment of tuition fit this mold, enabling offenders to enjoy the proceeds with reduced risk of asset seizure.”

Law enforcement agencies, including the FBI, the Department of Justice, and the Department of Health and Human Services Office of Inspector General (HHS-OIG), worked in concert to unravel the scheme. The ability to trace funds through layered transactions required financial forensics, data analytics, and the piercing of corporate veils to uncover beneficial ownership hidden behind a latticework of shell structures.

Key to the success of the laundering operation was identity manipulation. The conspirators used the names and credentials of foreign nationals—individuals with little digital or physical footprint remaining in the U.S.—to establish accounts and register companies. “Fraudulent identification documents were a core enabler,” noted one official. This allowed them to bypass standard Know Your Customer (KYC) procedures and to delay the detection of suspicious activity by banks and regulatory bodies.

These tactics mirror broader trends in healthcare fraud, which increasingly involve sophisticated laundering strategies. Structuring, layering, and integration—the three classic stages of money laundering—were all present in the Panosyan case. The use of corporate shells and fake identities remains a persistent problem for banks, particularly when onboarding clients in high-risk sectors like healthcare.

Legally, the fraud fell under multiple frameworks. The submission of fake hospice claims violated the False Claims Act (FCA), triggering an inter-agency investigation and prosecution. The financial aspects of the scheme, including money laundering and structuring, implicated numerous Bank Secrecy Act (BSA) violations. “The ease with which the conspirators moved millions highlights persistent gaps, especially regarding shell company accounts and foreign identities,” a FinCEN compliance source noted.

With Panosyan facing up to 20 years in federal prison, the government has moved to seize assets acquired through laundered funds, including real estate holdings believed to have been purchased in Los Angeles and surrounding areas. Asset forfeiture is likely to be central to the government’s efforts to recover stolen Medicare funds.

This case also reflects ongoing regulatory evolution. In the wake of the Corporate Transparency Act, financial institutions are expected to apply stricter beneficial ownership checks, particularly when onboarding clients in sectors susceptible to fraud. According to FinCEN guidance, firms must “apply a risk-based approach” to customers exhibiting high-risk profiles—including those involved in healthcare services billing Medicare or Medicaid.

In parallel, agencies like the Centers for Medicare & Medicaid Services (CMS) and HHS-OIG are intensifying their use of data analytics to identify suspicious billing behaviors. “We are cross-referencing provider data with real-time billing trends to flag anomalies early,” said an HHS official familiar with the case. This collaboration between health oversight and financial enforcement is increasingly vital as fraudsters grow more tech-savvy.

Yet challenges remain. Despite technological advancements and inter-agency coordination, criminal actors continue to exploit weak links in identity verification, shell company registration, and inter-jurisdictional enforcement. The Panosyan case underscores how money can be moved across states and international borders with relative ease when regulatory oversight is patchy.

Fraudulent use of third-party identities remains one of the most concerning trends. According to law enforcement officials, the ability of the Panosyan group to exploit inactive or unverified foreign nationals demonstrates how vulnerable current systems still are.

Compounding the problem is the emergence of digital assets and online financial tools, which can obscure audit trails even further.

U.S. regulatory bodies are ramping up pressure. The Health Care Fraud Strike Force Program has already charged thousands of defendants since its inception, with more than $30 billion in estimated losses. Financial institutions, too, are being called on to step up.

“Banks must conduct regular reviews of high-risk accounts and implement better controls on the formation and use of shell companies,” said one compliance expert.

The broader implication is clear: healthcare fraud is no longer a standalone issue. It is intimately tied to financial crime and requires a unified, cross-sectoral approach to enforcement and compliance.

As a final lesson, the Panosyan scheme demonstrates that even sophisticated regulatory systems can be undermined when compliance gaps are exploited. Financial institutions, healthcare regulators, and law enforcement must remain proactive—deploying advanced technologies, strengthening inter-agency cooperation, and refusing to treat due diligence as a formality.

“The message is clear,” said one federal prosecutor involved in the case. “Vigilance, information-sharing, and technology-driven oversight are the most effective defenses against complex financial crime schemes.”

The aftermath of the Los Angeles hospice scam is still unfolding, but it already serves as a powerful warning: where fraud meets money laundering, the cost to the public—and the integrity of financial systems—can be staggering.

By fLEXI tEAM