Atlanta Journal Constitution

Atlanta Journal Constitution
Sunday, May 27, 2012
M.B. Pell

Medicare scams grow in Atlanta
Enforcement in Florida sends crooks to Georgia

Fernando Alfonso and Rita Mateu sought out homeless people at Atlanta area shelters and offered them food or money in exchange for Medicare information. They hired a doctor for a clinic they ran in Woodstock, gaining access to the doctor’s medical billing numbers.

Then the Miami residents used the stolen information to bill Medicare for $1.4 million in services, covering less than a year, that they did not provide, according to records filed in a Georgia federal court prior to their 2010 conviction.

The two were on the leading edge of a still growing wave of crime operations fleeing aggressive federal enforcement in Florida to set up healthcare fraud scams in Georgia, especially metro Atlanta.

The U.S. Department of Health and Human Services Inspector General has been investigating similar cases for the last year, said Kelly McCoy, agent in charge for Georgia.

“I would expect more cases like this to be prosecuted, ” McCoy said. “The gig is up in South Florida, so where else to go, but up 95 and 75, which leads you to Savannah and Atlanta.”

In the past two years, the number of healthcare fraud cases in Georgia has ballooned, siphoning hundreds of millions of tax dollars and making Atlanta a new “hotbed” of medical fraud, experts say.

The number of investigations by the state’s Medicaid Fraud Control Unit, for example, tripled from 131 open cases in July 2009 to 405 this month.

The number of Georgia medical claims submitted by insurance companies to the National Insurance Crime Bureau for fraud review increased by 124 percent, rising from 150 in 2009 to 336 in 2011.

Healthcare fraud is estimated to cost at least $100 billion a year nationally, said Malcolm Sparrow, a professor of public management at Harvard’s Kennedy School of Government. Hard numbers aren’t available for the nation or for Georgia.

The cost is borne by federal taxpayers who support Medicare, state taxpayers who support Medicaid and customers of private insurance companies.

Billions of dollars in fraud add yet another burden to a healthcare system already swamped by overwhelming costs.

To curb abuses of Medicare, the Justice Department and the Department of Health and Human Services created a special task force in 2007 to prosecute fraud in South Florida.

In its first year of operation, the team charged 245 people with filing more than $793 million in fraudulent Medicare claims. Those results more than doubled the number of people prosecuted two years earlier and exposed fraud worth five times as much in false claims.

“We had people that told us Florida was becoming too hot, the federal prosecutors were onto the scheme there, ” said Brian McEvoy, a former federal prosecutor in the Southern District of Georgia. “They thought that by going up to Georgia they could avoid close scrutiny. Georgia is now widely considered to be among the top five [states] in healthcare fraud in the country.”

Some Miami criminal organizations took I-95 north, pulled off at the first exit outside of Florida in Kingsland and set up shop, said McEvoy, now a partner at an Atlanta law firm.

They have continued their northward migration, according to John Horn, the first assistant U.S. attorney in Atlanta.

“We have certainly seen an increase in healthcare fraud in the Atlanta area by people with ties to the Miami area, ” Horn said.

But, pressure on criminal gangs in Florida is not the only reason medical fraud is proliferating in Atlanta.

Metro Atlanta has a large number of hospitals, clinics, urgent care centers and other medical practices. Criminals hope fraudulent claims will be harder to spot among this high volume of medical commerce, said Alanna Lavelle, a former FBI agent and now the director of investigations for the insurance company WellPoint.

Last year, Andrew Sokol, a chiropractor with clinics in Marietta, Buckhead, Duluth and Vinings, was sentenced to almost five years in prison for billing private insurers $6.5 million for physical therapy he did not perform.

Sokol gave MBNA and Bank of America employees gift cards and catered lunches to attract them to his clinic. He knew their insurance policies provided generous chiropractic and physical therapy benefits, the U.S. Attorney’s Office said.

He even ran a raffle with leases for BMWs and Hummers as prizes.

Sokol provided limited, low-cost services, but charged Blue Cross Blue Shield for expensive procedures.

How deep theft runs

The extent of healthcare fraud is unknown largely because both insurers and government administrators are reluctant to conduct the rigorous audits that would define the problem, Sparrow said.

A finding of widespread fraud could embarrass public officials and alarm the shareholders of private insurers, he said.

Lavelle said the insurance industry actively pursues all fraud.

A credible estimate of the extent of fraud is difficult to come by, she said, because it’s hard to tell the difference between fraudulent claims and medically necessary procedures or just overly cautious doctors ordering extra tests.

Even without an accurate estimate, investigations and prosecutions in Georgia demonstrates dramatic growth.

Lavelle described Atlanta as a “hotbed” of healthcare fraud.

“It’s just a culture of fraud here, ” Lavelle said.

Identity theft complaints provide another indicator of the growth of healthcare fraud in Georgia.

Georgia ranked second among states in identity theft complaints in 2011, the Federal Trade Commission reports, up from 7th in 2008.

In one such case, Mateu and Alfonso used the Medicare information of a homeless person, plus billing information stolen from a doctor, to bill the program for $65,240 worth of fake services in 23 days.

Other healthcare fraud operators buy billing information for dozens or hundreds of patients. Often, this information is stolen by people who work in hospitals, doctor’s offices, insurance companies and other health industry companies.

“They treat beneficiary information like currency, ” McEvoy said. “You give somebody a name and their beneficiary information, and they give you $10.”

In 2008, Dayron Porrata paid Wally Proenza $8,000 to $12,000 to steal the names, birth dates, addresses, Social Security numbers and insurance claim numbers of at least 718 Medicare-eligible patients, including Georgia residents, according to court documents.

Proenza worked in the call center of a Florida company that enrolls Medicare-eligible patients in state, federal and local programs, according to court documents. Proenza would print the information from his work computer and hand off the documents to Porrata at a gas station.

The stolen identities were linked to $20 million to $50 million in various forms of Medicare fraud. Both men were convicted of fraud.

Billion-dollar issue

Even without an accurate measure of the cost of healthcare fraud, the dollar figures are high enough to burden the entire national healthcare system, said Sparrow of Harvard.

While the cost may be as low as $100 billion, he told the U.S. Senate in 2009 that the problem could siphon off as much as $500 billion a year.

“One of the things about fraud is you only see the bit you detect and detection rates for white collar crime are typically 5 percent or less, ” he said.

But the cost of healthcare fraud extends beyond higher taxes and costly premiums.

Often, the fraudulent claims don’t involve real patients or therapy. The homeless people Mateu and Alfonso claimed to serve didn’t necessarily need or receive treatment, according to their indictment.

In other cases, patients who need therapy get fake or cheaper treatments that threaten their health or their lives for the benefit of criminals.

Mateu and Alfonso ran a clinic in Woodstock and billed Medicare for expensive injections known as infusion therapy, according to their indictment. Infusion therapy injects medication into people with serious illnesses such as AIDS or cancer.

Fraudulent providers may give patients less expensive injections, such as vitamin B-12, that do not treat their illness, said Lavelle of WellPoint. Or, a fraudulent medical provider may inject a diluted drug and charge for a full dose.

Before she plead guilty to Medicare fraud, Riccy Mederos ran infusion clinics in Florida and then Savannah, according to a criminal complaint in a federal court in Georgia in 2008.

From October 2006 through April 2008, her clinics billed Medicare for eight times the amount of medication they actually provided to patients, according to court documents. Mederos cashed the checks while her patients, who received a tenth of the amount of drugs they thought they were receiving, wasted away.

Pay-and-chase risks

Prosecutors, insurance investigators and other fraud experts agree prosecutions will not stop healthcare fraud.

Law enforcement officials call it the pay-and-chase system.

Medicare, Medicaid and private insurers pay fraudulent claims and then police agencies chase.

“By the time a prosecutor gets involved the money is gone, the damage is done, ” said Stumphauzer, the former prosecutor in Florida.

“We must end the pay-and-chase system. It’s like closing the barn door after horse has left.”

Insurance companies and government programs need to stop fraud before the checks go out the door, Lavelle said.

Private insurers and government programs have recently implemented billing analysis techniques used by credit card companies to identify and stop fraud. Like credit card firms, insurance providers now look for unusual billing patterns.

A credit card company may put a hold on a credit card if they suddenly see a customer from Atlanta making hundreds of dollars worth of purchases in San Francisco.

Likewise, an insurer may investigate a clinic in Macon that bills for services provided to patients mainly from Texas.

Despite these improvements, Lavelle said, Atlanta needs a federal healthcare fraud task force to make the state a less lucrative center for fraud.

The U.S. Attorney’s Office for the Northern District of Georgia would not comment.

“I think the fact that there is not one here causes more of these fraudsters to be here, ” Lavelle said.

By the numbers

$100 billion

A conservative estimate of the annual cost to the country of healthcare fraud.


The increase in the number of Georgia medical claims submitted by insurance companies to the National Insurance Crime Bureau for fraud review from 2009 to 2011.


The number of fraud investigations opened in Georgia by the insurance company WellPoint in 2011. That’s 11 times the number of investigations opened in 2009.


The number of open cases under investigation by the state’s Medicaid Fraud Control Unit. It is three times the number of cases under investigation three years ago.

The cost of fraud

Healthcare fraud affects every resident of Georgia by raising costs for:

Medicare, a federal taxpayer program that insures Americans 65 and older, and the disabled.

Private insurance premiums

Georgia’s fraud explosion

Georgia has experienced a startling increase in healthcare fraud investigations.

The number of Georgia medical claims submitted by insurance companies to the National Insurance Crime Bureau for fraud review increased by 124 percent, rising from 150 in 2009 to 336 in 2011.

Just one insurer, WellPoint, experienced an elevenfold increase in the number of investigations opened from 2009 to 2011. WellPoint, which also contracts to provide Medicare plans, covers 33.9 million people in 14 states, its website says.

The company opened 40 fraud investigations in Georgia in 2009, 244 in 2010 and 448 in 2011, Lavelle said. WellPoint plans to double its investigative team as a result.

State agencies that investigate medical fraud have also experienced substantial growth in case loads in just a few years. The number of open cases for the state’s Medicaid Fraud Control Unit tripled in three years. The unit had 131 open investigations in July 2009 and 405 open cases this month.

The number of healthcare fraud cases under investigation by the Georgia insurance commissioner’s office more than doubled from 18 in 2008-2009 to 37 in 2010-2011.