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FBI Conducts Massive Health Care Fraud Probe - 2002-04-19

Americans spent more than $1 trillion on health care last year. Law enforcement officials say $270 billion of it may have been wasted on fraud.

Agents of the Federal Bureau of Investigation describe what they call the largest health care fraud probe in the country. It involved 250 retired agents who posed as medical patients and a clinic called Western Comprehensive Care, which agents set up in a suburb of Los Angeles.

Agent Dan Martino was in charge of the operation. "The focus of it, obviously, was an undercover operation to target those providers, that is, medical supply companies and clinical laboratories that wanted to engage in criminal activity. Those people were contacted, they came in, they offered us kickbacks in exchange for orders, prescriptions or durable medical equipment orders, certificates of medical necessity," he said. "And they would provide those kickbacks."

In addition to illegal under-the-counter payments, the clinics and companies sometimes submitted fraudulent bills directly to insurance companies and government health care programs. The FBI clinic is now closed, but the agents continue to probe as many as 15 criminal rings involved the fraud.

Investigators believe between three and 10 percent of health expenses around the United States are lost to fraud. They say $7.5 billion was lost in California to fraudulent claims last year, much of it in Los Angeles.

Another investigation targeted a Los Angeles chain of orthopedic shoe stores. FBI agent Jim Wedick said the owner worked with accomplices, one of them a doctor who issued unneeded prescriptions for corrective shoes. The owner then billed a government health program, earning $9 million through fraudulent billing.

Although that man has been convicted and has repaid much of the money, the agent said the investigation is growing as the scope of this type of fraud becomes evident. "We literally targeted almost 300 subjects and we estimated the fraud was about $200 million. That has increased to $300 million.

FBI agent Jim Wedick says the large amounts of money in the health care industry attract criminals and con men.

Often, the pickings were easy. Until recently, some public programs had little oversight, but he says that is now changing. "As anyone knows, if you're doing plans where money is being given out to the public, if you don't have an active fraud prevention bureau, you're in trouble," he said.

Alan Cates oversees the fraud prevention office of the California health care program known as Medi-Cal. He said his staff of fraud specialists visits private clinics and laboratories that are part of the government program. "They've been to over 17,000 providers here in California just in the past couple of years, and they've entered all of the information that they collect into a computer database," he said. "And basically what we rely upon is for people to tell us how they operate."

A computer program can later detect unusual billing patterns that may suggest fraud.

Law enforcement officials say they are finding fraud at every level of the U.S. health care industry, and that the billions of dollars lost each year are driving up the cost of medical care in the country.