BILLING FRAUD: Doctors, Patients Unknowingly Exploited

      Today's New York Times details a vast but decentralized billing fraud scheme in which "phony medical bills using the names of unsuspecting patients and doctors are being submitted to private insurers" for illegitimate reimbursements totaling "more than $1 billion in fake claims ... around the country." Government fraud investigators say the fake companies prepare invoices based on correct -- often stolen -- information about patients and physicians. The false claims use proper treatment codes and typically "stay below the threshold that touches off closer scrutiny." Insurance companies remit payment to the impostor billing companies, and by the time any alarm is sounded, the perpetrators have closed down shop and moved on to new locations. The Times reports that "the conspirators are not concentrating on any specific companies; indeed, industry executives said, virtually every insurer that does business in states where the scheme has emerged, like Florida, has been deluged with the bogus bills."

Harming Doctors And Patients
      The scheme victimizes both doctors and patients, the Times reports, and, as one doctor comments, creates "a whole new dimension of distrust" between the two. Unsuspecting physicians may get irate phone calls from patients who, having reviewed their claims, are surprised to find their insurance companies have been billed for nonexistent ailments. Doctors whose names have "suddenly appeared on large numbers of phony claims without their knowledge or authorization" find themselves under investigation by insurance companies who start to hold up all payments until each claim has been established as legitimate. Still worse, the Times reports, "tax officials armed with figures supplied by the insurers have gone after the doctors for evading income that actually went to perpetrators of the fraud." Consumer advocates are concerned that patients are being "listed without their knowledge in insurance company computers with ailments they have never had." Joyce Hansen, an executive for Minneapolis-based Integrity Plus Services, a company that has discovered millions of dollars in fraud since last spring, said the scam can impact patients' "future insurability and potentially their employability."

A Mega Scandal
      "This has all the trimmings of a mega-scandal," said Dr. Fuad Ashkar, a member of the Fraud and Abuse Committee of the Florida Board of Medicine and a victim of the scheme. Ron Poindexter, director of the fraud division at the Florida Department of Insurance, said, "In terms of health care fraud, this is the biggest thing on our plate. It's out of control; it's draining our resources." The Times notes that government crackdowns appear not to help, since "schemes to defraud private insurers have exploded in recent years as new laws tightened loopholes that were used to cheat federal health programs." In addition, while the "magnitude of the fraud has attracted an array" of federal and state investigators, "law enforcement officials said they still do not know whether a single, shadowy criminal organization was masterminding the scheme or whether numerous unrelated groups had simultaneously jumped into it." Officials struggling to unravel the scheme indicate that "it appears to involve former narcotics traffickers and certain organized-crime factions, particularly from the former Soviet Union." Crimes of all levels are rolled into the intricate operations, from breaking into medical buildings to stealing patient records, to hacking pharmacy and hospital computer files, to searching through hospital trash. To further complicate the investigation, people involved in the fraud usually have contact only with the person above or below them, making it difficult "to track down higher-ups." One Florida investigator told the Times: "After explaining to one defendant that he had been arrested for participating in a health care fraud, [h]e told us, 'I knew I was laundering money, but I thought it was drug money'" (Eichenwald, 2/6).