Orange County Officials Arrest Three in Insurance Fraud Involving Unnecessary Surgeries
Three people were arrested Tuesday following a two-year investigation led by the Orange County District Attorney's Office found that an alleged fraudulent health insurance scheme involving 5,000 patients cost health insurers $96.9 million, the Orange County Register reports. Recruiters for Unity Outpatient Surgery Center in Buena Park from August 2002 to April 2003 allegedly solicited healthy people to undergo surgery in exchange for $300 to $1,000 in cash or credit toward cosmetic procedures (Saar, Orange County Register, 7/22). The reported procedures were not medically necessary and included colonoscopies and surgeries for hemorrhoids, pain management and sweaty palms (Anton, Los Angeles Times, 7/22). Unity officials reportedly recruited people who were members of health plans without preapproval requirements (AP/Arizona Daily Star, 7/22). Prosecutors say Unity officials involved in the scheme received $14.2 million by filing workers' compensation claims and billing health insurers (Orange County Register, 7/22). Authorities also say Unity officials "set up shell companies" that they used to bill health insurers, according to the Times. The defendants have been charged with 46 felony counts including grand theft, conspiracy, insurance fraud and tax evasion.
Prosecutors say the defendants paid almost $1 million to at least seven "cappers," or middlemen, the Times reports. Orange County District Attorney Tony Rackauckas said that more arrests are likely (Los Angeles Times, 7/22). The three people charged are scheduled for arraignment Aug. 6 (AP/Arizona Daily Star, 7/22).
Insurance Commissioner John Garamendi (D) said, "This is one of the most egregious, outrageous insurance fraud cases I've seen." Rackauckas said, "It's hard to imagine anything more reprehensible than deliberately operating on healthy people solely to gain illegal profits" (Orange County Register, 7/22).
Some authorities say "scores of clinics" in Los Angeles and Orange counties are profiting from medically unnecessary surgeries, the Times reports. Some health insurers say the state is a "hotbed for the rent-a-patient scam" because state law requires health insurers to pay claims in 30 to 45 days, a time frame that allows "little time to investigate any single claim for fraud," the Times reports (Los Angeles Times, 7/22).
KPCC's "KPCC News" on Wednesday included an interview with Garamendi about the alleged insurance fraud (Jahad, "KPCC News," KPCC, 7/21). The complete segment is available online in RealPlayer. KPCC's "AirTalk" on Thursday also reported on the alleged insurance fraud. The segment includes comments from Garamendi and Rackauckas (Mantle, "AirTalk," KPCC, 7/22). The complete segment is available online in RealPlayer.This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.