A recent FBI investigation in Los Angeles has led to the discovery of a scheme that allegedly exploited the homeless to commit tens of millions of dollars worth of health insurance fraud.

The investigation began in 2004 when Union Rescue Mission employee Scott Johnson began noticing vans loading up homeless people in front of his workplace on LA’s notorious “Skid Row”. Concerned by what he saw, Johnson notified the state authorities. Security cameras on the building also recorded footage of ambulances disposing of patients on the street corner.

Police investigations allege that a conspiracy between the mission operator and a group of private hospitals sought to bribe the local homeless in exchange for their Medicare benefits information. Apparently, the information was then used by the hospitals to submit false health claims on their behalf. Union Rescue Mission residents said that recruiters would arrive each morning and offer food, cigarettes, and sometimes cash to the homeless.

Recruits often received no medical care, but some received medical treatment even when unnecessary. One patient reported receiving a nitroglycerin patch for a non-existent cardiopulmonary condition. The procedure caused a drop in her blood pressure, leaving her ill.

Three hospitals were investigated in connection with the scheme that began in August 2004 and lasted until about October 2007: Los Angeles Metropolitan Medical Centre, City of Angels Medical Centre, and Tustin Hospital and Medical Centre in Orange County.

The investigation has resulted in the arrest of City of Angels Medical Center executive Rudra Sabaratnam and Union Rescue Mission operator Estill Mills. Both men are charged with conspiring to take and receive bribes and with committing health care fraud.

City of Angels and Tustin Hospital reportedly paid Mills $1,600 – $20,000 a month and distributed salaries for the recruiters Mills managed (New York Times 2008/08/10).

As investigations move forward, more arrests are expected to take place. If convicted of all counts, Sabaratnam would face a maximum penalty of 50 years in federal prison, and Mitts would face a maximum sentence of 140 years in prison (CNN 2008/08/07).

In January the CHCAA reported on the case of Arkansas based neurosurgeon Dr. Patrick Chan. He is the Alberta trained doctor who pleaded guilty to accepting millions of dollars in illegal kickbacks from medical device suppliers. The crime was originally brought to light by an industry whistleblower. This precipitated an FBI investigation that included video of Dr. Chan accepting an envelope containing thousands of dollars from a company sales rep, in exchange for using their products in his spinal operations.

On Friday April 4th, 2008, Dr. Chan was ordered to pay a $25,000 fine and sentenced to three years probation. In an interesting twist the judge ordered Dr. Chan to return to Canada since he would likely face deportation because he is a non-US citizen convicted of a serious crime.

According to the Alberta College of Physicians and Surgeons it is unlikely that Dr. Chan will be eligible to reacquire a license to practice medicine in Alberta, however they did not rule out the possibility entirely. College registrar, Trevor Theman, explained that when a doctor has been convicted of a crime their eligibility for membership in the College is determined by the nature/extent of the crime.

Dr. Chan continues to face a myriad of civil suits in relation to unnecessary and damaging spinal operations he allegedly performed on a number of patients. Plaintiff counsel has contended that these actions may be stymied now that Dr. Chan has returned to Canada.

The US Attorney’s Office for the Eastern District of Arkansas, who prosecuted the federal case against Dr. Chan, has not commented on their intentions to pursue criminal or civil action against the device manufacturer. Nevertheless, recent trends have shown vigorous prosecution of these types of cases by federal regulators. Click here to see a good example of this trend.

Former Blue Cross/Blue Shield Account Manager Sentenced for Health Care Fraud Scheme, Tax Evasion

A former systems manager at Blue Cross and Blue Shield of Massachusetts has been sentenced to 2 years in prison and ordered to pay $596,429.50 in restitution for fraud and tax evasion. Over a five year span this individual embezzled hundreds of thousands of dollars by setting up a dummy self-insurance client and then fraudulently issuing cheques to a phony entity called Lane Development.

According to Blue Cross and Blue Shield, Ms. Lisa Delorey was able to mask her activities because of her intimate knowledge of the firms financial processing system. Her aptitude for guile allowed her to fool her colleagues including her supervisor and the Blue Cross Controller, whom she duped into cosigning phony health claim refund cheques using false printouts of account activity.

The crime was eventually uncovered by the IRS during a tax audit of her personal finances. Like Al Capone, Ms. Delorey had failed to declare the additional income from her criminal enterprise on her Federal income tax returns. The matter was eventually referred to the department of justice and the true origins of the money was brought to light.