Reuters shows how shell companies hide Medicare fraud in plain sight
Filed under: Government, Health care reform, Health data, Health journalism, Hot Health Headline, Public records
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.
Feds indict doc whose abuses were detailed in 2010 WSJ series
Filed under: Government, Health data, Health journalism, Public records
In The Wall Street Journal, John Carreyrou reports that a physician the paper spotlighted in a data-driven series on Medicare abuses has now been “indicted by a federal grand jury … for allegedly submitting more than $13 million of false claims.”
The article marks the first time the Journal has been able to print the physician’s name (Emma Poroger), even though they’ve been aware of it for more than a year.
The Journal identified Dr. Poroger, a doctor of osteopathy, as having suspicious billing patterns by mining the Medicare claims database, a computerized record of every bill submitted to the program. But her name was withheld in the October 2010 front-page article because Medicare keeps information pertaining to individual doctors confidential under a three-decade-old court injunction.
That injunction stems from a 1979 lawsuit filed by the American Medical Association, the doctors’ trade group, to keep secret how much money physicians receive from Medicare. At the time, the court said doctors’ privacy trumped the public’s interest in knowing how tax dollars are spent.
The Journal’s publisher, Dow Jones & Co., filed court papers this year seeking to overturn the injunction. In September, a federal judge in Florida ruled that Dow Jones’s case could proceed.
Carreyrou also called out a few other physicians featured anonymously in the series whose names had also been made public in various official proceedings.
Related
- Effort to make Medicare data public advances
- WSJ exposes flaws of Medicare’s pay now, investigate later culture
- WSJ explains why Medicare data is hidden
Texas psych clinics take Medicare’s millions without oversight
Filed under: Health care reform, Health data, Health policy, Hospitals, Hot Health Headline
The Houston Chronicle’s Terri Langford reports that for-profit outpatient psychiatric clinics in the state, most located around Houston, are collecting millions in Medicare dollars yet “require no license to operate in Texas.”
She writes that, despite access to significant federal funds, the clinics are subject to little oversight from any level of government, especially when it comes to patient care.
…other than a one time inspection conducted by Medicare when clinics start operating - these programs have no detailed standards or “conditions of participation,” that must be met before filing claims and collecting taxpayer money.
…
The U.S. Department of Health and Human Services flagged the problem earlier this year, saying “no regulatory basis exists to ensure basic levels of quality and safety” for CMHC care.
The loopholes, including the lack of an established means to kick poorly performing centers out of the medicare system, apply nationwide, but their exploitation remains localized.
Records show that in 2009, Medicare paid $287 million on these programs nationwide, 74 percent of them located in the three states that have no state licensing requirements: Florida, Louisiana and Texas.
Reporters uncover Calif. chain’s systematic upcoding
Filed under: Government, Health data, Health journalism, Hospitals, Hot Health Headline, Public records
In a follow-up to their lengthy California Watch investigation into sketchy billing practices at the state’s Prime Healthcare chain, Christina Jewett and Stephen Doig looked at newly released data and found that “Prime Healthcare Services bills Medicare for a variety of unusual ailments – among them a brain disease and a condition causing eyes to bleed – that can generate lucrative payments to the chain.”
For this piece, the reporters reviewed hundreds of pages from five related court cases and talked to a number of former Prime employees who protested the hospital’s billing practices — many of which they say were mandated directly by the company’s owner. Doig and Jewett then returned to the data and found that, as the 14-hospital chain’s leadership pushed providers to bill for a certain lucrative condition, instances of that condition just happened to rise in Prime hospitals.
Jewett and Doig even analyzed medical codes to estimate how much the alleged upcoding could have earned Prime hospitals.
It is not possible to pinpoint how much additional revenue Prime earned when documenting the unusual conditions, because each patient may have numerous diagnoses. But it is clear that conditions reported in outsized rates at Prime hospitals can bring in an additional $3,000 to $7,000, compared with similar but less serious conditions.
Taken together, the report stands out for its deft integration data, court records and interviews into a cohesive investigation.
Medicare providers get reinstated when feds fail to attend hearings
Filed under: Health care reform, Health data, Health journalism, Health policy, Public records
Using data obtained through a public records request, Associated Press reporter Kelli Kennedy (@kkennedyap) reviewed federal Medicare fraud reports from between 2006 and 2009 and found that “Regulators fighting an estimated $60 billion to $90 billion a year in Medicare fraud frequently suspend Medicare providers, then quickly reinstate them after appeals hearings that government employees don’t even attend.”
Officials revoked the licenses of 3,702 medical equipment companies in the fraud hot spots of South Florida, Los Angeles, Baton Rouge, La., Houston, Brooklyn, N.Y., and Detroit between 2006 and 2009, according to data provided to the AP under a public records request. Those areas represent the highest concentrations of Medicare fraud in the country, according to federal authorities who have set up task forces there.
Of the providers who lost their licenses in those cities, about 37 percent, or 1,371, were eventually back in business, sometimes within days and often within months.
Furthermore, she writes, officials have not taken advantage of security bonds put in place two years ago to provide redress should a fraudulent provider vanish from the map. “Officials blame the delay on personnel changes,” she writes.
The gaps in the system grow out of poor communication between one set of contractors paid to inspect Medicare providers and alert officials to suspicious activity; a separate set of contractors that handles payments; and the agency that runs Medicare.
Kennedy’s report dives deep into the Medicare fraud reinstatement program, and reporters looking to better understand the system would be well served to read the full investigation.
WSJ exposes flaws of Medicare’s pay now, investigate later culture
In the latest story to take advantage of their paper’s Medicare data trove, The Wall Street Journal’s Mark Schoofs and Maurice Tamman use egregious cases of physicians abusing Medicare’s physical therapy reimbursements to demonstrate the weakness of Medicare’s “pay first, look into fraud later” approach.
They show that, given the data the federal government has access to, detecting fraud should be a speedier, more effective process. CMS has its reasons for slow fraud detection, but Schoofs and Tamman clearly aren’t buying them all.
There are plenty of reasons why Medicare often fails to stop questionable payments up front. To protect law-abiding doctors and hospitals — the vast majority — Medicare is required to pay nearly everybody within 30 days. Medicare says it is reluctant to suspend payments to providers who may have made honest mistakes, out of concern that beneficiaries might go without needed treatment.
The reporters identify what they say is “a central problem” – Medicare isn’t taking advantage of its claims database, a computerized record of every claim submitted and every dollar paid out.
The Wall Street Journal originally identified Dr. Wayne and the other medical providers discussed in this article through a Medicare database that is much more limited than the one available to fraud investigators. The database, obtained in conjunction with the nonprofit Center for Public Integrity, contains records only through 2008, and includes the claims of just 5% of randomly selected Medicare beneficiaries.
Peter Budetti, the head of the new Center for Program Integrity at the Centers for Medicare & Medicaid Services, says the system is working toward fraud prevention and that “he’d like to emulate the credit-card industry, which has developed software to flag suspicious charges before paying them.”
Anti-fraud guide may be useful to reporters
A just-issued 31-page guide for new physicians from HHS’ Office of the Inspector General teaches doctors how (and why) to avoid defrauding their patients and the federal government. As their public-facing antifraud campaign ramps up, the office is responding to a need for better education of medical students. It makes sense, as physicians are generally the gatekeepers for medical spending. The government doesn’t often restrict their actions on the front end, which means physicians need to know the rules before they act.
The guide is fairly engaging reading, as OIG reports go, and it may serve as a primer to reporters looking into Medicare and Medicaid fraud. It covers doctors’ relationships with payers, other providers and vendors, as well as a summary of the five primary anti-fraud statutes.
False Claims Act
Doctors shouldn’t submit claims they know are wrong, or they’ll get socked with an $11,000 fine for every little item billed falsely, in addition to repaying the cost of the item several times over. This includes upcoding, or billing for a more severe (and expensive) illness than the patient really had, or billing for an item already included in a larger overall reimbursement.
Anti-Kickback Statute
Don’t pay for patient referrals or anything else that generates business. And yes, all forms of payola are covered, not just cash.
This also extends to getting paid, whether it be by pharmaceutical companies or the college buddy who’s getting all the referrals.
Note: Doctors can waive patient copays in specific situations (they’re uninsured, can’t afford it or the doctor can’t collect), but physicians can’t do it systematically as a way to gain patients.
Physician Self-Referral Law (aka the “Stark law”)
With a couple of gigantic exceptions, doctors can’t refer patients to imaging centers that they or family members own. The rules also apply to physical therapy, prosthetics, home health services and hospital services, among other things.
Physicians can invest in health care business ventures, but they should look out for possible conflicts of interest, especially if they’re getting the sort of preferential treatment not afforded to ordinary investors.
Red flag: If the money you’re getting paid is out of proportion to the work you’re doing, then something shady is probably going on. Especially if it in any way influences the treatment your patients get.
Remember, nearly all gifts and payments from drug and device companies will be disclosed starting in 2013.
Exclusion Authorities
Doctors shouldn’t deal with folks who have already been convicted of Medicare or Medicaid fraud, patient abuse or neglect, or any related offenses. If you don’t want to get on their black list, don’t violate the other four key fraud laws.
Civil Monetary Penalties Law
CMS can seek civil monetary penalties (and black listing) if doctors violate any of the above, or provide them with false information. Physicians also need to provide adequate screening to emergency patients.
Finally, the guide ends with instructions for doctors on how to report themselves, emphasizing that doing so “allows providers to work with the Government to avoid the costs and disruptions entailed in a Government-directed investigation.”
Fraud-busting contractors slow to refer cases
Despite recent high-profile busts, the private contractors hired by Medicare to sniff out fraud cases and refer them to law enforcement seem to be lagging, according to recent government reports. The Associated Press’ Ricardo Alonso-Zaldivar reported on investigations that found that contractors took an average of 178 to refer fraud cases, and that the government was only able to recover a small fraction of the money identified as lost to fraudsters (OIG report | Testimony).
As this letter summarizing the congressional investigation shows, Iowa Sen. Chuck Grassley is on the case. He’s looking to figure out how much the fraud hunters are paid ($102 million in 2005) and how that balances with their benefit to taxpayers ($55 million recovered by the feds in 2007). The numbers are tricky, Alonso-Zaldivar writes, because fraudulent claimants have a habit of closing up shop and disappearing as soon as they’re notified of the pending investigation. Thus, the fraudbusters can’t be blamed entirely for the collection failures, though their tardy referrals are at least partially responsible.
The contractors have widely different track records. One identified $266 million in overpayments in 2007, while another found just $2.5 million, the Health and Human Services inspector general said in May.
Earlier, the inspector general found gaping differences in the number of new cases the contractors generate for law enforcement. Some had hundreds of cases, while others were in the single digits. Most were doing a poor job at spotting new fraud trends, with “minimal results from proactive data analysis,” the inspector general concluded.
The Obama administration says it’s aware of the problem and is close to completing a reorganization of the contractors, to consolidate their work, define their jurisdictions more clearly, and help them coordinate better with claims processors and law enforcement.
The new “Zone Program Integrity Contractors” will cast a somewhat wider net, and be more closely monitored by federal health officials.
Related
- Investigating health care: Essential public records
- Duff Wilson: Investigating health care fraud
- Reporting on the business of health care
- Center for Public Integrity writer says listserv led to Medicare-fraud story
(Hat tip to Ricardo-Alonzo Zaldivar for providing a copy of the Grassley letter)
Feds: We’re doing well against health fraud
Filed under: Government, Hospitals, Hot Health Headline, Public records, Studies
Calling health care “a convoluted system that’s easy to game,” Kaiser Health News’ Andrew Villegas writes that despite recent federal proclamations of success in cracking down on Medicare fraud, CMS still needs a systematic claims review system instead of their current “ad-hoc” methods. For evidence, Villegas draws on an interview with Lou Saccoccio, executive director of the National Health Care Anti-Fraud Association.
What’s the one thing Saccoccio would like to see changed right away?
Let the the federal government share Medicare claims information with states and private insurers. “If you take all of that claims data that they have between Medicaid and Medicare and start analyzing it,” he said, “You [could] identify where problem areas are.”
The government does some of it now, he said, but strictly on an ad hoc basis. A change in that policy could allow real-time fraud identification to “stop that money before it goes out the door,” Saccoccio said.
The report mentioned above, a 72-page annual assessment of the government’s efforts to stop medical fraud conducted by the HHS Office of Inspector General, declares that about $2.5 billion came to the Medicare Trust Fund in 2009, most of it from anti-fraud work. That included $620 million from criminal fines, $482 million for “penalties and mulitple damages,” and more than a billion from “restitution/compensatory damages.” But my favorite part of the report isn’t the big ticket items, it’s the avalanche of anecdotes that comes afterward.
It’s a lot to sort through (pages 8 through 56, by my reckoning) so I’ve made the whole thing searchable here. Plug in your state or a specific pet topic (wheelchairs are particularly popular among the fraudulent claimers) and you’re likely to come up with at least one story of swashbuckling government fraud busting. Or at least what passes for “swashbuckling” in OIG-speak.
Fla. Medicare fraud flourished under lax oversight
Jay Weaver of the Miami Herald followed up on the Herald’s investigations into widespread Medicare fraud in South Florida. Weaver found that when 18 shuttered providers appealed to Medicare, they were reinstated only to turn around and further defraud the government of at least $5 million, much of which may never be recovered.
Last fall, the U.S. Department of Health and Human Services’ Office of Inspector General cited the 18 medical equipment suppliers in a critical report concluding that Medicare’s appeals system was flawed because it lacked strict rules of evidence. Medicare officials don’t disagree.
”It’s always troubling when you have 18 reinstated like that,” acknowledged Kimberly Brandt, Medicare’s anti-fraud director. “They may have gotten back in, but they didn’t get back in for a very long time. That doesn’t mean we couldn’t have been more vigilant.”
Weaver reports that, six months later, officials have yet to put rules in place to prevent suspected fraudulent equipment operators from regaining billing priviliges.
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