Medicare fraudsters swindle millions from the feds

Hospitals, doctors, and drug dealers have made Medicare the nation's sweetest crime, but the feds are trying to shutter the door

Hank Walther was a federal prosecutor at the time, soon to lead the feds' Medicare Fraud Task Force. He feels they were allowing their adversaries to run scot-free.

"My four-year-old kid could prosecute these cases," he says of the equipment rackets. "They're really easy, and there are plenty of them. A lot of this other stuff — home health, the ambulatory cases, even the mental-health cases — each time we got into those new areas, there was a constant refrain from law enforcement and the U.S. Attorney's Office saying, 'This is too complicated.'"

The feds started teaming prosecutors with detectives in the same approach used to break down organized crime. They began to hunt providers, whose fraud ran to the tens of millions compared with the $1 million to $2 million paydays from equipment scams.

Texas U.S. Rep. Sheila Jackson Lee carried water for Medicare swindler Houston Riverside General Hospital
David Ortez
Texas U.S. Rep. Sheila Jackson Lee carried water for Medicare swindler Houston Riverside General Hospital
Florida Gov. Rick Scott was CEO of a hospital company that was nailed with two sets of books. Then he went into politics.
Gage Skidmore
Florida Gov. Rick Scott was CEO of a hospital company that was nailed with two sets of books. Then he went into politics.

Their discovery: Miami was the MIT of health-care schemes, the nation's unofficial laboratory for ripping off the government.

"When you look per capita, Miami has more people in community mental-health centers than New York and Los Angeles combined," says Walther. "Then you look at the profile of people going in there, and they don't really fit people that need these services."

In 2010, Walther helped take down American Therapeutic, the highest-billing mental-health center in the country. The company was cycling addicts, alcoholics, and Alzheimer patients through its six clinics. Patients' diagnoses were changed so they would qualify for expensive group therapy. In the end, owner Lawrence Duran received an unheard-of 50 years, a sign that judges were finally acknowledging the magnitude of these swindles.

"It's like Whac-A-Mole, says Walther. "You knock one down, but now there's a bigger one somewhere else, and it's different. But once you figure it out, it rains on the back end with bad guys and money."


When the Check Arrives, Minnesota Gets Alligator Arms

For 29 years, David Feinwachs was general counsel to the Minnesota Health Association, a trade group for the state's hospitals.

Like many states, Minnesota pays HMOs to administer its Medicaid programs. But Feinwachs noticed something odd. While actual providers had seen their reimbursement rates frozen for more than a decade, the HMOs were hiking their management fees 10 percent a year just for playing middleman.

So Feinwachs started examining the HMOs' finances. "Because they're nonprofits, nobody ever looks at them," he says. "It's the perfect cover because everybody goes, 'They're nonprofits. What's the problem?'"

He soon found that they'd turned Medicaid into a cash cow, making it several times more profitable than their private insurance. But when Feinwachs asked for more data on their costs, the state blocked him, claiming it was proprietary information.

He was outraged. "You can't take tax-funded programs, turn them over to vendors and claim that what happened to the money is a trade secret."

Still, the HMOs were rattled. Their trade organization reached out to Feinwachs's boss in an attempt to silence him.

To soothe his concerns, Feinwachs was invited to sit in on a conference call in 2010 between the hospital association and Karen Peed, who oversaw the state's Medicaid contracts. "If you can't keep a secret, you have to leave the room," he claims Peed announced during the call. Then she proceeded to explain how Minnesota was rigging Medicaid reimbursement rates.

Think of Medicaid programs as akin to a restaurant bill, where states are supposed to split the tab with the federal government. But through creative accounting, Minnesota had figured out a way to pay for only the garlic bread, sticking the feds with the rest. (Peed's boss, Minnesota Department of Human Services Commissioner Lucinda Jesson, declined our interview request.)

While it may be unseemly for one agency to fleece another, it's not illegal. When the state outsources its deceit to private insurers, however, it quickly tilts from bureaucracy to fraud.

Feinwachs warned his boss, who confronted Peed. She reportedly claimed it was no different than the cost-shifting used by hospitals, where people with insurance are charged more to compensate for patients on public assistance. The big difference, of course, is that you only pay hospitals when you use them. Every taxpayer in America was getting snipped by Minnesota's duplicity.

"It's like comparing panhandling to bank robbery — one's annoying, the other's a crime," Feinwachs says he told his boss. "After that, things got increasingly tense."

Feinwachs refused to back down. "My dad was in a place called Auschwitz," he says. "He used to always tell me, 'If you see something is wrong and you don't speak against it because you're worried you're going to lose something, eventually you're going to lose everything anyway. So you might as well fight.'"

Two months later, Feinwachs was fired for insubordination.

But he'd already raised too much hell for the HMOs to feel safe. In 2011, UCare, one of the HMOs, chose to make amends. It dropped $30 million on the state's doorstep like an orphaned baby — with little explanation.

Minnesota claimed it was a donation. But the feds smelled a rat, believing it to be from Medicaid overpayments.

The move was so mysterious that Congress summoned UCare CEO Nancy Feldman to explain. She admitted that Minnesota was pumping up its Medicaid reimbursements to cover losses in a state program that Medicaid doesn't reach.

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3 comments
bryanflake1984
bryanflake1984

This is a horrible story.  I need to help my mom find a great assisted living center to get into.  I am super skeptical and worried about any option we make going forward.  Can someone please put my mind at ease?


bryanflake1984|http://www.altaridge.com/

mohanlon3
mohanlon3

Looks like the folks getting medicare are not the ones getting the Free Ride,.

BeenThere
BeenThere

This is the kind of article that made the underground press famous for being a resource for The Truth. When Bachmann was still being taken seriously (among circus clowns and Republicans) as a candidate for President, her regular quoting of Grover Norquist (“I'm not in favor of abolishing the government. I just want to shrink it down to the size where we can drown it in the bathtub.”) spawned a likewise saying about corporations. You know you are living in a crazy place when criminals are exalted as “job creators” and law enforcement has to go underground to get convictions of these vicious monsters before our “representatives” go to work freeing them. We are that crazy place; the United States of America.

The simple solution for all forms of government fraud is to call it what it is, “treason,” and prosecute the perpetrators accordingly. If a few hundred of these Medicare fraud CEOs were executed by firing squad a lot would change quickly. Of course the best thing about executing CEOs is that they are easily replaced, so society would suffer no net loss from their absence.

Imagine a society where the smartest people were hard at work doing something useful. We are not that place, of course, but we could have been. Without the Reagan Revolution that celebrated criminal behavior and “screwing the government for fun and profit” (also known as cheating your neighbors and robbing your community) having made getting filthy rich with criminal behavior, the nation might have become a completely different place in 2013. Instead, the ultimate scammers pick off the best brains in every graduating class, corrupting them, making them useless for real work, and wasting lives and fortune with the protection of an entire political party.

 
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