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Feds recover $4.2 billion in health care fraud, abuse

Money lost to health care fraud in the Medicaid or Medicare programs could be used to pay doctors to treat patients in need, said a South L.A. public health expert.
Money lost to health care fraud in the Medicaid or Medicare programs could be used to pay doctors to treat patients in need, said a South L.A. public health expert.
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Two federal agencies announced on Monday the recovery of more than $4.2 billion in health care fraud investigations in 2012.

The U.S. Department of Health and Human Services (HHS) and the Department of Justice (DOJ) said for every dollar it spends on investigating health care-related fraud and abuse, it recovers $7.90. Over the last four years, it's recovered nearly $15 billion.

Last fiscal year, that meant 1,131 new investigations, 2,148 potential defendants and 826 health care fraud-related convictions.

Brietta Clark, a professor at Loyola Law School who specializes in health care law and access issues, said some health care fraud "looks like any other fraud": Someone's billing the government for a service he or she isn't actually performing. But it can quickly become more complicated.

"Whenever you bill the government, you have to certify that you're billing for something that's medically necessary," she said. If that certification is partly or wholly falsified, that's also fraud.


And then there are kickbacks.

"Even if what [a health provider] is doing is medically necessary, if you have some sort of financial arrangement or kickbacks … you'd be violating the federal anti-kickback law," said Clark.

HHS and DOJ described exactly this sort of scheme in their report. The agencies highlighted an L.A. case that took place in 2012 in which a physician's assistant, along with several co-conspirators, was found guilty of owning and operating "several Los Angeles medical clinics established for the sole purpose of defrauding Medicare":

These clinics hired street-level recruiters to find beneficiaries willing to provide their Medicare billing information. In exchange, the [defendant's] co-conspirators paid the recruiters cash kickbacks. The clinics then billed Medicare for unnecessary [medical equipment] for these beneficiaries. Evidence at trial showed that the defendant worked at the clinic and wrote prescriptions for power wheelchairs for beneficiaries he had never examined and who never visited the clinics. In one case, the evidence showed that he wrote a prescription for a beneficiary who suffered from a mental defect and did not have the mental capacity to operate the wheelchair. The physician’s assistant is currently awaiting sentencing.

In 2009, the Health Care Fraud and Enforcement Team was created by HHS and DOJ in order to crack down in fraud, waste and abuse in the Medicare and Medicaid programs.

Last year was record-breaking in that regard, said Attorney General Eric Holder in a statement. "In the past fiscal year, our relentless pursuit of health care fraud resulted in the disruption of an array of sophisticated fraud schemes and the recovery of more taxpayer dollars than ever before," he said.

The impact on the uninsured

Nina Vaccaro, the executive director of the Southside Coalition of Community Health Clinics, said there's "absolutely" a large swath of the South Los Angeles population that's vulnerable to falling victim to health care fraud. She describes an all-too-common scenario:

Someone with intent to defraud approaches a person insured by Medi-Cal, the state's Medicaid program, and offers that patient money to visit a clinic that's participating in the fraud. Once that patient arrives at the clinic, he or she will be paid, then asked for his or her Medi-Cal account information, which will be used that to bill Medi-Cal for expensive medical equipment – often without explanation to the patient. Most likely the schemer has a relationship with the company that makes the medical equipment, and gets a kickback for every referral completed.

At the end of the day: The schemer makes some cash off the kickback, the patient gets a piece of medical equipment he or she doesn't need, and Medicaid or Medicare loses a whole lot of money.

The problem is compounded by the fact that South L.A. is home to so many of what Vaccaro calls "bodega clinics."

"We don't really know which one is a legitimate physician practice and which is a Medi-Cal mill," she said.

A handful of South L.A.'s federally qualified health centers, Vaccaro said, treat about 150,000 patients every year. But there's around 1 million people in South L.A., and it's unclear where the rest of them get their health care. Presumably, at least some of them are using bodega clinics – "but there's no formal way of reporting and understanding the care that these bodega clinics provide," she said.

Ultimately, she said, health care fraud hurts the safety net population.

"What it does, in both the short-term and in the long-term, is it really impacts the resources that we have to sustain programs like Medi-Cal," she said. 

The reimbursement rates for doctors who are willing to take patients insured by Medi-Cal are already low enough. If the program has to cut costs even more because of money lost to fraud, that could end up dealing another blow to how much doctors get paid for treating Medi-Cal patients. If that rate gets low enough, those doctors may stop treating Medi-Cal patients altogether –and if there aren't enough doctors who are willing to see Medi-Cal patients, those patients will then flock to federally qualified health centers, leaving fewer opportunities for folks who are completely without health insurance.

"If we're spending $4.2 billion a year on wasteful health expenditures, that's not money that's going to be invested in the actual care that's being provided," said Vaccaro.

Clark summarized the problem nicely.

"This is draining Medicaid funds, and the resources for Medicaid are already dwindling," she said.