Reuters shows how shell companies hide Medicare fraud in plain sight

Reporting for Reuters, Brian Grow and Matthew Bigg used an analysis of public data to investigate the practice of using shell companies to defraud Medicare of millions while staying a step or two ahead of federal investigators.

While the specific damage inflicted by shell companies has not been tracked, “Last year, ‘improper payments’ resulted in $48 billion in losses to the Medicare program, nearly 10 percent of the $526 billion in payments the program made, according to a Government Accountability Office report last March.”

“Simply by reviewing the incorporation records of Medicare providers in two buildings” in Miami, they write, “reporters uncovered information that one government official said could prompt “a serious criminal investigation” of some of the companies.”

The fraud rings merge stolen doctor and patient data under the auspices of a shell company and then bill Medicare as rapidly as possible. Other shell companies are often layered on top to camouflage the fraud, law enforcement officials say.

Some of the shells purport to be billing companies; they form a buffer between the sham clinics and Medicare. Others pay kickbacks to doctors and patients who sign off on bogus medical claims or sell their Medicare ID numbers to enable the shell company to bill the government. Still other shells act as fronts to launder the profits.

The key to this kind of fraud, known as a “bust-out” scheme, is for each of the fake companies to bill as much as possible before authorities catch on. Shell companies become a tool that helps keep the crooks ahead of the cops.

The Armenian crime ring whose fraud made headlines last year used 118 shell companies in 25 states and bilked the feds out of at least $100 million. Varying incorporation rules make state-hopping and obfuscation “easy,” they write, especially since states don’t check to see if records are legit before they allow a company to incorporate. The reportes found that even a few simple safeguards would go a long way to detecting the boldest frauds.

In Florida, FBI agents say almost every Medicare fraud scheme involves shell companies. There, Reuters scrutinized incorporation documents for firms located in two buildings near the Miami International Airport. In a building with dimly lit corridors, a rickety elevator and almost no one in sight, a host of companies purport to provide services to Medicare recipients. But telltale signs of fraud abound.

Many of the 26 companies in the buildings had replaced corporate officers at least once in the last four years. Some had changed ownership, or their corporate executives represented more than one medical-related company. Law enforcement officials consider such activities to be red flags for fraud.

For its part, CMS told the reporters it simply didn’t have the resources necessary to conduct the widespread audits needed to catch fraud, though the $350 million allocated to such efforts under the 2010 health reform law should help.

Health journalists who will certainly want to review the “methodology” subheading at the end of the story.

See, follow AHCJ’s newest members

Please welcome AHCJ’s newest members. All new AHCJ members are welcome to stop by this post’s comment section to introduce themselves.

• Orly Avitzur, medical editor, Consumer Reports, Tarrytown, N.Y. (@OrlyA)
• Massimo Cecaro, national councillor, Italian Association of Medical Press, Macerato, Italy
• Sylvia Davis, senior editor, WebMD, Atlanta
• Ira Dinerman, independent journalist, Brooklyn, N.Y.
• Marissa Donovan, student, Syracuse, Rensselaer, N.Y. (@MarissaDonovan1)
• Helen Driediger, independent journalist, Bancroft, Ontario, Canada
• Micky Duxbury, independent journalist, Berkeley, Calif. (@mickydux)
• Lisa Eramo, independent journalist, Cranston, R.I. (@Lisa_Eramo)
• Sari Harrar, independent journalist, Quakertown, Pa.
• Laura Kebede, student, University of Missouri, Columbia, Mo. (@kebedefaith)
• Martin Kilgus, editor, SWR Public Radio, Stuttgart, Germany
• Beth Kitchin, assistant professor, University of Birmingham, Nutrition Sciences, Birmingham, Ala.
• Ricki Lewis, independent journalist, Scotia, N.Y. (@rickilewis)
• Teresa Mahoney, student, Columbia University, New York (@TheresaMahoney)
• Matt McMillen, independent journalist, Portland, Ore.
• Becky Oskin, independent journalist, Davis, Calif.
• Bonnie Schultz, independent journalist, Princeton, N.J.
• Lesley Simon, independent journalist, Westfield, N.J.
• Kavin Sundaram, student, University of Iowa, Cedar Falls, Iowa

If you haven’t joined yet, see what member benefits you’re missing out on: Access to more than 50 journals and databases, tip sheets and articles from your colleagues on how they’ve reported stories, conferences, workshops, online training, reporting guides and more. Join AHCJ today to get a wealth of support and tools to help you.

Journalists should learn about study design, evidence-based medicine

Earlier this month I saw on Twitter one of those collisions between journalism and wonkdom. Maybe “collision” isn’t the right word; maybe it was some kind of interspecies mating dance. Anyhow, the gist of it was that we, journalists, don’t know how to evaluate evidence and someone should step in and teach us.

So I stuck in my two cents (or, rather, my two tweets) pointing out that, yes, there is a need for training and, yes, there are places to get the training, including through AHCJ. (See more after the Twitter discussion.)

So, before I remind you about those resources, just a word on why we need them:

On the surface, it may seem that AHCJ houses two kinds of health journalists – those of us who report on the science side of things, and those of us who are more in a policy world. But some of us do both – and research/evidence/evaluating science are also becoming an increasing part of the underpinnings of policy beats. Value-based purchasing, comparative effectiveness, benefits of screening/prevention, quality measures, outcome research … these are all part of the health care reform story.

That doesn’t mean all of us must become  economists/biologists/epidemiologists/statisticians. Old fashioned reporting – including calling experts who can help us make sense of numbers  – is certainly part of the job. But it’s also good to have some sense of what the experts are talking about, what these numbers mean. Why a study on N=16 patients doesn’t really tell us that much. What do we mean by “endpoints,” “outcomes,” “progression?” What’s relative versus absolute risk? Etc.

So for those of you who haven’t  taken a cyber-stroll through the AHCJ website, take five minutes and check out tip sheets, resources and slim guides. Of particular relevance to this discussion is Gary Schwitzer’s slim guide, “Covering Medical Research.”  There’s also a tip sheet/PDF presentation by Schwitzer on “Understanding studies.” His Health News Watchdog blog is also useful.

Reporting on Health (at USC) also has a lot of useful resources, and this essay “Tricks of the Trade: Finding Nuggets in the River of Medical Studies” is a good entry point to understanding data. It’s by Lauran Neergard, a longtime Associated Press health and science writer.

In addition,  there’s a course called Medicine in the Media, sponsored by National Institute of Health’s Office of Medical Applications of Research.  It’s free, but you have to apply, and there’s not room for everyone.  I know of at least one recent summer (the only one I, personally, could have managed the timing!) it wasn’t given, and as of now, there’s nothing on the website about this year. But you can sign up for email notifications, so if you are interested, do that now because the deadline in past years has been early.

The Poynter Institute has some online modules, too. Lots of the focus is on new media and writing and story telling, but there is a math basics refresher for those of you who haven’t taken it since the SATs, some online Excel training, and a unit on reporting on nonprofits