MEDI-CAL FRAUD FLOURISHING ON BLACK MARKET.

Byline: Jason Kandel Staff Writer

In a bustling black market trade, unscrupulous medical providers are buying Medi-Cal and Medicare patient identity numbers and using them to get reimbursed for millions of dollars in tests and other services that are never provided, authorities say.

Of $34 billion annually spent by the Medi-Cal program for health care for some 7 million poor Californians, state officials estimate that as much as 40 percent - or nearly $14 billion - is stolen in fraud.

The identity theft scam involves conspirators using stolen patient information purchased for as little as $100. They submit bills for up to $30,000 to cover tests, prescription medicine, wheelchairs and incontinence supplies - which are either never delivered or are received and resold on the black market.

``These numbers are passed from medical clinic to medical clinic, lab to lab until the medical beneficiary cards are maxed out,'' said Los Angeles County Sheriff's Sgt. Steve Opferman, who heads the Health Authority Law Enforcement task force. ``They suck it right out.

``That money's gone. It's huge. It's out of control. The health care system is just hemorrhaging.''

Patient names and identification numbers are sometimes acquired illegally by criminal middlemen who then sell them to unscrupulous medical providers. Other times, an unscrupulous firm will buy the identification numbers directly, officials said.

``At the heart of what the criminals are doing is preying on the economic desperation of the community,'' said Collin Wong-Martinusen, the director of the state Attorney General's Bureau of Medi-Cal Fraud and Elder Abuse.

``The greed and depravity of the people who are committing these crimes is only exceeded by their ingenuity and creativity.''

Crooks are drawn to the program, administered by the state's Health Services Department, because there's lots of money to be had, and it's an easy target, authorities said.

``It pays first and asks questions later,'' said Daniel Hancz, a pharmacist who works with Opferman on the HALT task force. ``Once you're a provider, it's pretty much an honor system. It's difficult to prevent.

``It's after the fact, unless there's a complaint, or unless some red flags go off.''

In one raid, authorities found carbon sheets of patient information and stacks of photocopied medical cards and driver's licenses, some obtained from Los Angeles-area hospitals.

During interrogations, investigators learned that workers in medical records offices and billing departments had copied the information for cash. In one case, a woman was paid in diet pills, a prosecutor said.

Unscrupulous pharmacies and clinics bill for ``ghost patients'' - people they've never seen, but whose identification numbers were either stolen, traded or sold by the patient himself or herself.

Investigators said searches have turned up medical charts in the process of being altered, some that are postdated or written up in a way that makes no sense.

Criminals also forge signatures for diagnoses and drugs, without providing supporting patient complaint histories.

``They're a wily bunch,'' said Teresa Schilling, a spokeswoman for state Attorney General Bill Lockyer. ``Like any criminal industry, it is full of people desperate to cheat. They will find any way they can to get through the system.

``When we close one door, they look for another one to open. It's always a challenge to keep up, but we're good at it, too.''

A recent case in Burbank highlights the issue.

Sofik Nazarian, 47, and Vrej Oganesian, 40, co-owners of The Best Pharmacy and Medical Supply on Glenoaks Boulevard, were arrested July 26 on suspicion of billing Medi-Cal for $375,000 in prescription drugs that were not delivered to patients.

The two were free on bond, pending an Aug. 16 court hearing to face grand theft charges. Reached at his store after his arrest, Oganesian declined to comment. Neither Nazarian nor her attorney could be reached.

According to court documents, the pair went into business in 1997 and enrolled in the Medi-Cal reimbursement program.

Officials audited the firm because of high billings and concluded the suspects had submitted false or fraudulent claims for medical supplies and pharmaceuticals that were not provided to patients, California Department of Justice Special Agent Naureen Zaidi wrote in court documents.

Six patients told investigators they had never heard of Best Pharmacy and never received medical supplies from it, although records showed the firm received reimbursement for them, according to court documents.

A physician whose name came up as the referring doctor for 18 patients under Best Pharmacy's provider number told investigators that he had seen several of the patients, but that some of the billings under the patients' names were fraudulent, court documents said.

Authorities do not know how the duo got the patient information.

``This stuff is so out of control,'' said prosecutor Albert MacKenzie, who's heading the Los Angeles County District Attorney's Fraud Interdiction Program. ``We have to have a more effective way of investigating and prosecuting these cases because the traditional methods of investigation and prosecuting these cases take years. By that time, the money's gone and the crooks are gone.''

The state Department of Health Services says it has been working harder to screen prospective Medi-Cal providers and does regular on-site inspections, but officials acknowledge it's an uphill battle.

In Los Angeles County alone, more than 39,400 clinics, pharmacies, medical supply companies, and hospitals are authorized to provide services under Medi-Cal, according to DHS statistics.

``It never ceases to amaze me what people do to defraud us,'' said Diana Ducay, the deputy director of the Audits and Investigations Department of the DHS. ``There's always a new scheme around the corner.''

Jason Kandel, [phone]

jason.kandel(at)dailynews.com