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Health Care Reform:

Health Insurance & Affordable Care Act

Clinics Allegedly Billed Insurance Companies for $1.3 Billion in Bogus Health Claims

WebMD Health News

FBI Cites Massive Medical Fraud Investigation

March 11, 2005 -- California clinics allegedly paid thousands of patients to undergo unnecessary surgical procedures and then billed insurers and employers for as much as $1.3 billion in fraudulent medical services, federal and state investigators said Friday.

Law enforcement officials say that insurers and companies have already paid an estimated $350 million in bogus health claims to surgical clinics in Southern California.

The scam, which first came to the attention of investigators in 2003, has already resulted in criminal charges against a pair of clinics and their owners in two separate cases.

But officials said Friday that their investigation of the operation has revealed a much bigger and more complex fraud network involving dozens of doctors, up to 100 clinics, and many thousands of patients willing to have unwarranted surgery in exchange for payment.

Participating clinics are accused of using networks of recruiters who traveled the country in search of patients, who were paid between $200 and $2,000 to have usually unnecessary colonoscopies or surgeries.

Doctors allegedly created false diagnoses and symptoms and in some cases coached patients on how to lie about their illnesses if ever asked by investigators, officials say.

Clinics would then bill insurance companies highly inflated prices for the operations, claiming that they were emergency procedures and charging more because they were performed outside the plans' usual doctor networks.

Thousands of patients were flown to California from 44 states, Puerto Rico, and the District of Columbia over three years, and many were given free or discounted cosmetic surgeries instead of cash as payment, says Daniel M. Martino, acting chief of the Federal Bureau of Investigation's health care fraud unit.

From Arizona alone, as many as 4,500 patients traveled to California, Martino says. "I would say, conservatively, that 90% of those patients were paid to participate in the fraud. Some recruitment activity is continuing. It's not stopped," Martino tells reporters.

'Rent-a-Patient' Scheme

Government and insurance company investigators say they were struck by the size and scope of the alleged fraud operation, which they have dubbed "Rent-a-Patient."

Clinics initially focused on Vietnamese patients, who they recruited through newspaper advertisements and in nail salons. They then moved on patients in Latino communities, eventually fanning out to members of dozens of health plans across the nation, Martino says.

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