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.

Ex-MD gets 5 years for drug scam

After being stripped of his medical license for defrauding terminally ill cancer patients out of thousands of dollars, Ravi Devgan, 60, finds himself in hot water again over his involvement in a major drug scam. Devgan was convicted and sentenced to 5 years in prison for his involvement with a known drug dealer in trafficking prescription narcotics, including the highly addictive OxyContin. His accomplice testified that they conspired to enlist patients for whom Devgan would write these prescriptions. She ( the drug dealer) would then collect the prescriptions from the pharmacy and sell them on the street for a profit that she and Devgan would share. The crown prosecution is pushing to have this new sentence added consecutively to his current three year sentence for medical fraud.

In October 2007, Devgan was convicted of defrauding a Mennonite family out of thousands of dollars for injections of sheep fetus given to their severely disabled twins. Devgan administered these injections despite the revocation of his medical license and the gravely questionable nature of the treatment.

Merck Pays 650 Million to Settle Fraud/Kickback Allegations

Merck has agreed to pay the US federal government $650 million dollars in one of the largest health care fraud settlements in US history. The two cases brought against the pharmaceutical giant are the result of investigations by the US Department of Justice that ended in 2001, and rely largely on information provided by industry whistle blowers.

The first case relates to a pricing scheme that intentionally denied Medicaid the best available prices for pharmaceuticals. In the US, drug companies are required by law to give Medicaid the best available rates for drug products. According to the charges, Merck purposely failed to inform Medicaid of price breaks on certain medications.

There are additional allegations that Merck gave discounts to hospitals when they prescribed a Merck product over a competitor’s. However, when the prescription was renewed, Medicaid was charged at the full price and not informed of the discount given to the hospital.

In the second case, Merck is accused of establishing reward schemes for physicians who prescribe their products. Most of these kickbacks were disguised as “training fees” provided to Merck by the physician. As part of the settlement, Merck does not admit any wrongdoing in either situation.

This case underscores the need for regulators to impose higher ethical standards on drug companies to ensure that business practices operate to balance the economic imperative and the need to protect the public interest. Having said that, the relationship between health care providers and pharmaceutical companies should be better scrutinized to reduce the likelihood that a conflict of interest will arise in the first place. The outcome of this episode also highlights the positive effect of reporting fraud when it is encountered. If you suspect an individual or organization of committing health care fraud in Canada, you are advised to report it to your ministry of health, private insurance company, or via the CHCAA tips line/website.

Recognize it. Report it. Stop it.