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Health Care Fraud Takes Many Forms

From an artificial leg for a patient fully capable of walking on her own to doling out cash kickbacks to the homeless and billing Medicare for home health care, health care fraud takes many forms.

Wheelchair
Wheelchair

The conservative annual estimate of health care fraud in the U.S. is $80 billion, with some estimates twice that amount.

In fiscal 2011, $4.1 billion in fraudulent claims was recovered by authorities, according to the departments of Justice and Health and Human Services (HHS).

Still, officials say, the battle against health care fraud is never ending.

“Every day there’s a new scheme that’s popping up, and so we’re refocusing our attention in certain areas as we learn about them,” said Gary Cantrell, inspector general for investigations at Health and Human Services.

Since 2009, the fight against health care fraud has been led by the Health Care Fraud Prevention and Enforcement Action Team (HEAT), made up of nine joint strike forces across the country. Each HEAT team combines federal, state and local investigators collaborating to combat Medicare fraud.

CNBC’s Investigations Inc. team spent six months with agents from the New York office of HHS’ inspector general’s office taking part in the HEAT initiative in some of the nation’s hot spots for health care fraud.

“In the past, it was probably, we were dealing with one provider, one physician. Now we’re dealing with organized crime, people that have no health care experience whatsoever," said Tom O’Donnell, special agent in charge of the HHS inspector general’s office in New York. “They’re just in it to defraud the system. Greed, I think is the common denominator.”

In a pre-dawn raid in New York, investigators arrested Elaine and Gilbert Kim, accused of billing Medicare $11.7 million in fraudulent claims through their URI Medical clinic and others in New York’s Queens borough.

The Kims, authorities allege, were part of an elaborate scheme, involving Gilbert Kim’s father, a physician, defendant Peter Lu, also a physician, and defendant John Knox, a chiropractor.

"In the past ... we were dealing with one provider, one physician. Now we’re dealing with organized crime, people that have no health care experience whatsoever. They’re just in it to defraud the system. Greed, I think is the common denominator." -HHS OIG, New York, Tom O'Donnell

All the defendants in the case against URI Medical and its associated providers have pleaded not guilty. No trial date has been set.

The defendants billed Medicare for physical therapy, electric stimulation treatment, chiropractic services and laser surgeries but were also offering patients “massages, facials, lunches and dancing classes,” according to the indictment, “to induce those beneficiaries to allow their Medicare numbers to be billed for medical services that were never provided and were not medically necessary.”

“They were billing for unnecessary services and services not rendered,” O’Donnell said. “When you provide massages and facials, that’s not Medicare covered, yet they were billing for physical therapy, electrical stimulation, and every patient virtually had the same diagnosis, which was lower leg arthritis.”

Gilbert Kim’s attorney, Lee Siegel, told reporters that massages given to patients at URI Medical were legitimate treatment.

In reference to the dance lessons, lunches and activities in the community center located in the basement of the clinic, it’s separate and run by charities, according to Siegel.

“At times there are people that are patients that go upstairs for treatment and there are people who don’t. They come here for whatever services they get here as far as the senior center and the other organizations but nothing here is operated by the medical center itself," Siegel said.

Within days of the authorities’ raid on URI Medical, it was back open. However, in recent weeks the clinic has since closed down.

While URI Medical involved allegedly fraudulent claims for services, other cases target the lucrative business of durable medical equipment, such as wheelchairs and prosthetic limbs.

In another pre-dawn raid months later, the HHS agents, ready with semi-automatic rifles, bullet proof vests and handguns, targeted a suspected armed criminal.

The suspect, Mario Rivera, surrendered without a struggle. He is accused in an indictment of acting as an “independent sales coordinator” that brought medical equipment orders for Medicare beneficiaries to three suppliers.

Over the course of three years, investigators said, eight defendants accused in the scheme managed to bilk Medicare for nearly $2 million, representing claims paid by Medicare for equipment “including power wheelchairs, power pressure reducing mattresses, and knee orthosis.”

The defendants are accused of creating and signing falsified documents including prescriptions, progress notes and certificates verifying a medical need for equipment.

On March 14, a federal court approved continuances of 30 to 45 days for plea negotiations. Rivera is in negotiations for a plea agreement, according to court documents.

“These fraudsters are taking advantage of lists that they are either buying on the Internet or trading in local markets, and just billing for claims that were never provided, operating a false front operation and getting out and moving on as quickly as possible,” Cantrell said.

Perhaps one of the most exploited areas of the Medicare and Medicaid system is Home Health Care, where Medicare’s total spending increased 129 percent between 2000 and 2010.

In a report to Congress in March, the Medicare Payment Advisory Commission said high payments in the home health care arena “may also encourage the entry of marginal or fraudulent providers who are disproportionately motivated by the financial returns offered by excessive payments.”

In February, authorities uncovered what they say is the largest health care fraud scheme in U.S. history, according to Deputy Attorney General James Cole. Dr. Jacques Roy and six others in association with Medistat Group Associates were arrested in Dallas on charges of participating in a nearly $375 million health care fraud scheme.

“Between January 2006 and November 2011, Medistat certified more Medicare beneficiaries for home health services and had more patients than any other medical practice in the United States,” according to the indictment.

Among the allegations: Accepting cash payments in exchange for ensuring documents containing the signature of Roy or another Medistat physician, giving Medicare beneficiaries cash and groceries to get them to sign up for home health care services and paying recruiters $50 for bringing homeless beneficiaries to a defendant’s car for treatment while parked outside the homeless shelter.

Roy and his co-defendants have all plead not guilty on all counts.

For Roy and his co-defendants, defrauding the Medicare and Medicaid system was big business, investigators said.

“Dr. Roy was an outlier among his peers,” Cantrell said. “There’s no one else in the country billing at the rates he was billing for this type of service.”

Among property forfeited at the time of their arrest were 20 real estate holdings, six automobiles, two sailboats and an undisclosed amount of funds spread among at least 21 bank accounts.

In total, investigators said, Roy or another Medistat physician certified more than 11,000 unique Medicare beneficiaries for home health services provided by over 500 agencies.

Roy is being detained as a flight risk. His trial is scheduled to begin May 7, but the government has asked that the case be delayed until after June 12 because of its complexity.

Hospital beds
Hospital beds

Under the Centers for Medicare and Medicaid Systems, home health services are billed under Part A, physician services are billed under Part B and equipment claims are billed under yet a different part of the program. In past years, Cantrell says, keeping track of those payments was done in separate places, which made the task of keeping up with the fraudsters that much harder.

“These fraudsters are taking advantage of lists that they are either buying on the Internet or trading in local markets, and just billing for claims that were never provided, operating a false front operation and getting out and moving on as quickly as possible,” Cantrell said.

Though it took years to recognize billing patterns certified by Roy and Medistat Group’s associated home health care agencies, authorities say, they are making strides in their ability to use the data effectively.

“If there’s a home health provider that looks suspicious, we can look at all those referring physicians who certified that patients needed home health, we can look across those patients and see what other claims have been billed for them and look at the scope of the scheme in ways that we couldn’t before,” Cantrell said.

Contact Investigations Inc.: Health Care Hustle

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