Prosecutors Make Arrests in Scheme to Use Homeless to Defraud Medicare, Medi-Cal

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Local and federal prosecutors want to take down what they say is a network of hospitals, doctors, ambulance companies, and others that have used homeless people to bilk Medi-Cal and Medicare out of millions of dollars. KPCC's Brian Watt has more on the story.

Brian Watt: Los Angeles City Attorney Rocky Delgadillo has sued L.A. Metropolitan Hospital, City of Angels Medical Center, Tustin Hospital, and other parties over an alleged scheme he says began on Skid Row.

He says recruiters scouted homeless people who qualify for Medicare or Medi-Cal, and paid them up to 30 bucks to visit an "Assessment Center." Staff at that center allegedly cooked up phony diagnoses, and sent the homeless "patients" to the hospitals for treatments they didn't need.

Rocky Delgadillo: One of our recruits, recruit X, would walk, constantly, four days straight, and so 20 bucks and a hospital bed sounded pretty good. In her case, one of the treatments actually put her life in peril.

Watt: Delgadillo says such a patient might stay in a hospital for a day or two and maybe see a physician shortly before discharge. Then the hospital would return him or her to Skid Row. Tom O'Brien is U.S. Attorney for the Los Angeles region.

Tom O'Brien: Why go through this elaborate ruse? So the hospital could bill Medicare and Medi-Cal millions of dollars for services that were simply not needed or were never even performed.

Watt: O'Brien says federal authorities have arrested the man who ran the "assessment center" and hired the recruiters. Agents also picked up the owner-operator of the City of Angels Medical Center. A federal indictment alleges that both paid and received kickbacks as high as $4,000 a month.

City Attorney Delgadillo says the investigation began almost two years ago when authorities interviewed homeless people they thought hospitals had dumped on downtown L.A.'s Skid Row. But outside the alleged assessment center at 7th and San Julian Streets, a man who identified himself as Ray said the scheme has been going on much longer than two years.

Ray: They come by, they say, "Red, White, Blue." That's standard procedure, everybody knows the code. That means you have the Medicare card.

Watt: For people who said they did have a card, Ray said...

Ray: They bring you here, make sure that your cards are in order, and from here, they take you to the quacks.

Watt: In a statement, the Pacific Health Corporation said Los Angeles Metropolitan Medical Center and Tustin Hospital have cooperated with the City Attorney's investigation since the fall of 2006. The corporation is confident of being cleared of the allegations.