Medicare Fraud: Defying Justice

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!"

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.

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.