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Unhealthy business.

Health care is the second largest industry in the United States-second only to education-and is growing every year. Last year approximately $620 billion was spent nationally on health care.

In 1987, 19 billion medical diagnostic tests were administered in the United States. That equals 80 tests for every man, woman, and child in the country. In an article in The New York Times (April 12, 1989), Joseph Califano, Jr., former secretary of the Department of Health, Education, and Welfare, stated that approximately 25 percent of the money Americans spend on health care is wasted on unnecessary medical services, screening procedures, and various other items.

It has been estimated that anywhere from 5 to 15 percent of every dollar spent on health care goes to cover fraud or abuse. Although individuals who commit fraud make up only a small percentage of the professionals and nonprofessionals involved in medicine, the dollar impacts are too great to ignore.

The prosecution of health care fraud is a fairly new endeavor. Most insurance companies did not have units dedicated to aggressively pursuing and prosecuting fraud until the mid-1980s. Prosecution of fraud also had to overcome some hurdles.

The medical profession has always enjoyed an excellent reputation. Early perpetrators o' fraud benefited from that reputation. Many people believed doctors were beyond reproach. This image had to be overcome by patients as well as the judicial system. I have sat in a judge's chambers and listened to a judge reason why he could not send a person of such stature to prison, saying there must have been extenuating circumstances that would cause a doctor to jeopardize his or her career.

The last few years have seen a change in this attitude, reflected in stiffer prison sentences and victims being ordered to pay restitution. The judicial system is beginning to view the doctor as holding a position of public trust and find that those committing fraud are violating that trust.

Laws have been developed to deal specifically with health care fraud. Investigators have been trained to investigate the tedious crime of health care fraud. Medical terminology, billing procedures, and procedure codes are all elements investigators must know before they can ferret out fraud.

Initially, health care fraud was uncovered through audits or other related methods by individuals skilled in finance and accounting. Methods were designed to ensure a correct and efficient operation, not detect and pursue fraud. To uncover deliberate schemes aimed at stealing required trained investigators. As a result, units of professional investigators have been slowly emerging since 1980. These units are often comprised of former law enforcement officers with expertise in fraud investigations.

These units use a variety of investigative techniques to develop the necessary proof to refer a case to law enforcement for prosecution. Techniques include surveillance, undercover activity, computer analysis, and patient interviews, to name a few.

Some early investigations uncovered blatant billing for services that were never rendered. A tip on one insurance company's antifraud hot line revealed that a doctor in Michigan was billing for services that were never rendered, on days when patients were never even in his office. The tip indicated that the patient had been billed for foot surgery, which never occurred.

Acting on this information, the insurance company went undercover to investigate. It hired an independent doctor to examine the feet of several undercover agents before they visited the doctor in question. The independent doctor found the agents' feet healthy and not in need of medical treatment. The agents' feet were then examined by the suspect doctor and treatment was documented.

The suspect doctor was allowed to choose the foot he thought needed treatment. In one instance, the undercover agent told the doctor that his girlfriend thought his toenail was discolored and would not sleep with him until the toe was treated. The suspect doctor was allowed to pick the toe and said a fungus was growing under the toenail. He said that a salve needed to be applied to the toe and the agent should return weekly so the doctor could review the progress of the foot.

The agent returned three times but was billed for surgery each time. The doctor also billed for a fourth visit-removal of the toenail-which never occurred. This same pattern was followed on other undercover agents.

The insurance company reviewed the doctor's billing patterns for all of his patients. Some patients had as many as 18 permanent toenail removals billed to their insurance company. These patients were interviewed, and their feet were examined. Needless to say, none of the patients had 18 toes, and the patients denied ever having the services done.

This case was prosecuted through the United States Postal Inspection Service on mail fraud charges, which carried a five-year felony penalty and a $10,000 fine. The doctor pleaded guilty to mail fraud and was sentenced to two years in prison, with all but the first six months suspended, and ordered to pay 548,000 in restitution to the insurance carrier. The six-month sentence was to be spent in a halfway house, but it was full. So instead, the doctor had to telephone the halfway house from home before he went to work in the morning and when he returned from work at night.

The judge in this case ordered a study to determine what types of sentences were being given to doctors convicted of health care fraud. The study revealed that sentences were not harsh and, therefore, the judge felt he could not impose a harsh sentence on this doctor, even though he thought what the doctor did was wrong.

Such a fraud usually does not result in physical harm to patients, only financial hardship as costs are passed on to consumers in the form of raised premiums. Many fraud schemes, however, do result in physical harm. These schemes often rely on a patient's greed or drug addiction to succeed. These cases are also difficult to prosecute because schemes usually involve both the patient and the doctor.

One successful prosecution of such a fraud identified a $10 million scheme. Clinics were preying on unemployed auto workers who needed cash to survive. As long as the auto workers' insurance benefits were still in effect, the clinic would see them. These clinics would hire a doctor to sit in a back room only because they needed the doctor's provider identification number to bill the insurance company. Generally the doctor never saw the patients.

The clinic paid cash to anyone who had an insurance card. The initial payment was $10 per visit, but was later raised to $50 a card per visit as the scheme became more lucrative.

The clinics all paid bonuses to runners, individuals who brought at least five people or insurance cards to the clinic. The runner was paid a $50 bonus for the increased business.

Every person who came into the clinic received a series of unnecessary diagnostic services, which included blood tests and exposure to X rays. Clinic personnel were trained to fill out history forms on patients, which included a complaint of some type of injury or pain to justify the services that were billed to the insurance company. The patients were each given the same series of tests without seeing a physician. The insurance carrier was billed up to $1,200 a patient per visit. Lines formed outside the clinic each morning as the victims waited their turn to receive $50 for untold amounts of radiation exposure and injections.

This case required extensive surveillance and undercover work to establish the necessary criminal elements for convictions. Following an eight-week jury trial, nine of the 10 defendants were convicted and sentenced to prison for terms ranging from 18 months to five years. This was one of the first cases of unnecessary medical testing that was prosecuted in the United States.

A similar scheme involved $2.5 million lion over 10 months. To lure patients into the clinic and cover up the scam, the clinic said it was paying patients for their testimonials. The clinic had patients sign a release form to have their voices taped for a radio commercial promoting how wonderful the services were at the clinic. Patients received from $10 to $50 per visit.

This clinic also paid runners to bring in patients or insurance cards, and filled out history sheets on each patient to justify billing activities. To further evade detection, the clinic required new patients to sign a form saying they were not undercover police officers.

As the lines outside the clinic became longer, the clinic hired armed guards to prevent robberies and ensure orderly conduct among patients. One patient identified in the investigation of these two clinics had received as many as 200 X rays in five months.

The perpetrators in this scheme were also found guilty during a jury trial that lasted six months. They were sentenced to prison for terms ranging from one to 10 years and had to pay $1,042,672 in restitution.

Drugs are often used as a catalyst in these schemes. Kenneth Walton, former special agent in charge of the FBI office in Detroit, estimates that approximately 80 percent of all crime is related to narcotics either directly or indirectly. My own experience as an undercover narcotics officer in the Michigan State Police, as well as the many investigations I have been involved with at my company, support this figure. Fraudulent health care schemes involving drugs range from professionals preying on addicts to a variety of script mills generating false billings, performing unnecessary medical services, and illegally distributing controlled substances.

The power that drugs have over people is immense, and addicts will subject themselves to almost anything to get the next fix. Many people who steal from the system rely on this addiction to carry out their fraudulent schemes.

In a recent scheme, a young man was forced for years to perform homosexual acts in exchange for prescriptions for addictive drugs from a physician. This young man complained to his girlfriend about having to perform the acts. He had even entered a substance abuse facility at least two times to try to cure his narcotics habit but was unsuccessful. He also tried to have the doctor prescribe the drugs to his girlfriend by having her go to the doctor's office. But the doctor would tell her to have her boyfriend come in next time.

One day the young man came home from the doctor's office in a depressed state and shot himself. Although the doctor was convicted of illegal distribution of narcotics and had his medical license suspended, he remains out of jail.

Another clinic that specialized in preying on addicts went so far as to perform foot surgery on an undercover agent after the agent said no. This particular doctor would write prescriptions for addictive drugs, specializing in a heroin synthetic called Dilaudid, which costs about 20cts per pill. On the street, addicts pay from $25 to $50 a pill.

To get the prescription for Dilaudid, a patient needed to have an insurance card and undergo foot surgery so the doctor would not be questioned about the amount of drugs he was prescribing. The doctor then billed the insurance company and was paid for the unnecessary surgeries he performed.

The doctor would not issue a prescription unless the patient had been referred to the office by runners the doctor employed. Runners were usually given either an extra prescription of Dilaudid for recruiting a certain amount of new customers or a percentage of the prescription that would be written for one new patient.

Following several months of surveillance and undercover work with patients, an undercover officer was admitted into the doctor's office. The doctor had placed a shroud over the agent's feet so the agent could not see what the doctor was doing. When the doctor recommended the agent have surgery on his foot, the agent declined. The doctor then said that he was going to examine a callus on the agent's foot but, instead, sprayed a freezing solution on the foot and performed surgery.

Ultimately, the doctor was arrested and prosecuted for illegal distribution of narcotics and mail fraud. The doctor was sentenced to 15 years in prison and had to pay $160,000 in restitution.

Another aspect of the script mill involves pharmacies. A recent probe resulted in the indictment of 30 pharmacies and 25 individuals and involved $200 million in fraud. The indictment revealed that the people involved were selling narcotics illegally to street drug dealers and billing insurance companies for expensive, brand-name drugs when cheaper generics were dispensed.

Federal officials stated that this scheme was the largest one of its kind known in the United States. The individuals in this scheme were convicted on a variety of federal charges, including mail fraud and illegal distribution of narcotics. The pharmacies have been dissolved or sold.

As detection and prosecution methods have improved, schemes have become more sophisticated. A recently uncovered scheme was designed to prevent detection by the sophisticated computer systems and dedicated investigation units of the insurance industry.

In this case a clinic used a doctor only to draw blood from patients. The insurance carriers were not billed for this service because the clinic did not want its name associated with the patients. Patients were lured into the clinic on the promise of drugs for blood. Once the blood was drawn, it was sent to two specific labs. The labs would bill the insurance companies for the blood work, then kick back a designated percentage of the insurance payment.

After the blood was drawn, the patient would be referred to one of two specific pharmacies to pick up the prescription. The pharmacy also would bill the insurance company for the drugs that were dispensed and kick back a designated percentage of the payment from the insurance company to the clinic. The clinic was not traceable through the lab or the pharmacy. But the scam went wrong because of the basic honesty of the members of the medical profession. The physician the clinic hired to draw blood recognized the operation was a scam after working only one day and notified the insurance carrier. Subsequent investigation resulted in the prosecution and conviction of the personnel involved, including the labs and pharmacies.

Another scheme, in the western United States, involved mobile medical diagnostic testing labs. A telephone solicitor would call residences, informing people that the clinic was new in the area. The solicitor would talk about the wonderful services the clinic offered and suggest that people come in for "free" tests. In the end, the insurance carrier bills ranged from $10,000 to $18,000. An industry official estimated that in one such scam as much as $ 1 00 million was billed in the past five years.

Copycat scams have also sprung up in several states, including Florida, Texas, and Ohio. These scams have a difficult time existing if patients do not allow themselves to be subjected to unnecessary medical tests. If consumers suspect illegal activity, they should notify their local Department of Licensing and Regulation, their insurance company (especially if it has an investigative unit), or any police agency.

These examples are just a few of the schemes that drain money out of the health care system and prey on victims without concern for their health or welfare. It is difficult to weed out the few who attempt to take advantage of a system that is based on the integrity of the provider.

But strides have been made in the right direction. Several new laws are aimed directly at individuals who attempt to defraud health care insurers. For example, the Health Care False Claims Act, a law developed in Michigan, makes it a felony to attempt to defraud a health insurance carrier, punishable by four years in prison and a $50,000 fine. If a conspiracy is involved, the crime becomes punishable by 10 years in prison and/or a $50,000 fine. Unnecessary medical tests are considered a crime.

The Federal Victim Witness Act took effect in January 1983. It recognizes the rights of the victims and gives federal courts the opportunity to award restitution to the victims of crimes. These laws have enabled victims to recover millions of dollars in losses from individuals convicted in these fraudulent schemes. Antifraud networks have been established across the country to help detect health care fraud, provide training in the latest investigative techniques, and communicate ongoing fraud schemes. The federal government recognizes that health care fraud is a problem and considers it a priority. But these efforts alone cannot stop health care fraud. More deterrents must be created. Those who would defraud the system must face great risk of being caught, and once caught, prosecuted. The medical community must take a stronger stand in monitoring its profession, and the insurance industry must work harder to ferret out fraud and work with law enforcement to seek prosecution for those perpetrating it. Insurance companies that do nothing to detect and prosecute fraud, or those that write off a certain amount of fraud every year as a loss because they don't think it is their responsibility to pursue fraud, are doing a great disservice to their customers.

Individuals have a vested interest in their health insurance premiums. People must realize they do pay for health care fraud. Most people do not present a credit card to a clerk in a department store so the clerk can put on any charges he or she wants. Consumers decide what to buy, how much it is going to cost, and whether they actually need the item before they hand over their card.

That is the very least that should be done when seeking medical treatment. Insurance cards should be safeguarded like any other credit cards. If the insurance carrier sends a form that explains services that have been paid in the patient's behalf, the patient should read the form and make sure that what was billed and paid is actually what was performed.

Everyone must assume a role in the fight to control health care fraud. If we can further reduce the apathy, some of the reluctance to become involved, and each segment of society takes an active role in the fight against fraud, we can create strong deterrents to committing fraud. About the Author . . . Gregory W. Anderson is director of the Corporate arid Financial Investigation Department of Blue Cross and Blue Shield of Michigan. He is the chairman of the ASIS Standing Committee on Insurance Fraud.
COPYRIGHT 1990 American Society for Industrial Security
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Copyright 1990 Gale, Cengage Learning. All rights reserved.

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Title Annotation:health insurance fraud
Author:Anderson, Gregory W.
Publication:Security Management
Date:Aug 1, 1990
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