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Medicare Fraud: Defying Justice

Sweeping arrests are a show of force designed to send a message.

Federal agents rose before dawn on a muggy morning last summer, donning bulletproof vests as they prepared to surprise and arrest an established Miami physician. Armed with guns and heavy flashlights, they scaled a high stucco wall to enter the grounds of his sprawling two-story home, fanned out around the pool and house and waited; then several agents pounded on the door, shouting, "This is the FBI!"

Medicare is losing billions in fraud at the same time that an ever-increasing number of aging boomers will put intense pressure on the system.

The 56-year old doctor, Jorge J. Dieppa, was wanted on charges of taking bribes to provide hundreds of patient referrals to home health care agencies that then submitted about $19 million in phony claims to Medicare. The program paid almost $12 million to his alleged ring of scammers: six nurses, two patient recruiters and a Medicare beneficiary who received kickbacks.

Nothing out of the ordinary for Miami, the nation's capital of Medicare fraud, where medical equipment, physical therapy and other scams overseen by doctors, nurses and health company CEOs have been rampant for the past decade.

But outside Miami, dozens of other people also were charged with Medicare crimes that same summer day — in Brooklyn, N.Y.; Baton Rouge, La.; Detroit; and Houston — all part of the largest health care fraud takedown in the nation's history. More than 350 law enforcement officers arrested 94 suspects accused of trying to bilk Medicare of $251 million by billing the program for medical services and equipment that were either unnecessary or never provided.

News cameras caught the suspects as officials marched them off to jail. Some hung their heads or tried to cover their faces with jackets. One woman spit defiantly at the camera. Among other crimes, they were accused of charging Medicare for physical and occupational therapy never performed and HIV infusions — a treatment outdated for the last decade — that patients never received. Court documents revealed 3,700 claims for one woman during a six-year period.

For the Obama administration, the sweeping arrests were a "shock and awe" show of force designed to send a message that it means business about Medicare fraud. The day of the arrests, the administration held its first health-care fraud prevention summit in Miami, where U.S. Attorney General Eric Holder declared the government's goal is to "hammer people" who steal from the $500 billion program for older and disabled Americans. But that's a tough job. Medicare is now a magnet, not only for unscrupulous health care workers, but also for violent felons and mobsters, who consider cheating the system safer, easier and more lucrative than drug dealing.

And the estimated cost of their fraud each year? $60 billion.

The Justice Department, which launched the first Medicare fraud strike force with the U.S. Attorney's Office in Miami in March 2007, has expanded that law enforcement program to six other cities: Los Angeles, Houston, Detroit, Brooklyn, Baton Rouge and Tampa, Fla. The results so far include indictments of more than 800 defendants who submitted nearly $2 billion in allegedly bogus bills to Medicare.

The ultimate plan is to establish 20 strike forces — made up of hundreds of FBI agents and agents from the U.S. Department of Health and Human Services — that will be deployed around the country. "Our intention is to find people and put them in jail," Holder said flatly. After years of infecting South Florida's health care industry and then spreading out to other regions, Medicare fraud is finally a real priority in Washington.

Why this new urgency? Medicare is losing billions in fraud at the same time that an ever-increasing number of aging boomers will put intense pressure on the system. For this reason, the new health care reform law included tougher penalties for scammers and added $350 million to combat health care fraud over the next decade. The new law requires officials to use savings from Medicare — including stanching the flow of money lost to fraud — to strengthen the program and help pay for new Medicare benefits such as free screenings.

This fall, Medicare officials unveiled more new weapons to combat fraud, including proposals that call for suspending payments to a provider — doctor, clinic, health care company — if there has been a "credible allegation" of fraud, including tips from consumers. Other changes include visiting more medical facilities to ensure they are legitimate and rating them according to their risk for engaging in fraud. Employees at companies ranked as highest risk — including private home-health agencies and suppliers of medical equipment — would undergo fingerprinting and criminal background checks.

Pay and chase

Top officials at Health and Human Services also plan to use more sophisticated technology — including computer data mining — to root out false claims before they are paid. For decades, the Centers for Medicare & Medicaid Services has paid claims quickly without verifying them because, though it handles millions of claims each week, it is legally required to pay those bills within 14 days.

In interviews, officials acknowledged that Medicare's longtime model of "pay and chase" has been largely a failure, saying the government recovers only a fraction of the money paid out to those who cheat the system. "I would say that that world is coming to an end," said HHS Secretary Kathleen Sebelius, adding that in areas where fraud is rife, "it's no longer going to be assumed" that everybody is on the up-and-up.

"That's a very different way of doing business than assuming everything is OK and then looking back and finding out that it really isn't," she said.

Sebelius also said Medicare will look more closely at providers, facilities and bills in Miami and other trouble spots. But at the same time, she said, Medicare needs to "strike a balance" to maintain relations with legitimate health care workers and companies.

"The vast majority of providers in the Medicare system are delivering essential services," she said, adding that many have to be paid in a timely fashion or they will stop providing patient services.

Both Sebelius and Holder touted their joint task force at the fraud summit in Miami. The collaborative effort between Justice and HHS has made fighting health care fraud a "Cabinet-level priority," Holder said. Still, Medicare's anti-crime work has made headlines recently, not only because officials have arrested and convicted a number of scammers, but also because the cases have revealed the huge amounts of money Medicare has paid for phony claims it failed to detect. On the surface, at least, it seems the system is missing some easy targets: A few weeks after the five-city bust, officials in Miami said that Medicare paid thousands in bogus claims for penis pumps to treat erectile dysfunction in women.

The walls have ears

Some of the cases are more sophisticated. In Brooklyn, eight defendants were charged with running a $72 million scam through a medical clinic that submitted phony claims for physical and occupational therapy for older Russian immigrants. Patients, including undercover agents, were paid for their Medicare numbers. Secret recordings captured hundreds of illicit payments to Medicare beneficiaries — doled out in a back room, according to the charges. The "kickback" room at Brooklyn's Bay Medical clinic displayed an old Soviet-style anti-snitching poster, showing a woman with a finger to her lips and a message in Russian: "Don't gossip! These days, the walls have ears."

Many experts applaud the new law enforcement efforts but contend those efforts alone can't stop the losses. To do that, Medicare has to change the way it does business. "Preventing fraudulent Medicare claims from being paid is far more effective than relying on any law enforcement model," said Kirk Ogrosky, the former deputy health-care fraud chief at the Justice Department who coordinated the strike forces. "Medicare has been a target for criminals because, historically, defrauding Medicare has been lucrative and easy," said Ogrosky, now a partner at the law firm of Arnold & Porter in Washington.

Indeed, just last month federal agents announced another record bust — the largest fraud scheme by a single crime ring. One Armenian American crime syndicate is charged with stealing the identities of doctors and thousands of patients and creating 118 phony clinics in 25 states to bill Medicare for more than $100 million.

Jay Weaver is an award-winning writer for the Miami Herald who covers Medicare.

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