"Now we're seeing people who aren't doctors open these clinics and hire other dirty real doctors to 'work' in the clinic," says the Detroit agent. "Almost every day, there's a new thing."

Like many states, Minnesota pays HMOs to administer its Medicaid programs. But David Feinwachs, an attorney for the Minnesota Health Association, a trade group for the state's hospitals, noticed something odd. While actual providers had seen their reimbursement rates frozen for more than a decade, HMOs were hiking their management fees 10 percent a year just for playing middleman.

So Feinwachs started examining the HMOs' finances. "Because they're nonprofits, nobody ever looks at them," he says. "It's the perfect cover, because everybody goes, 'They're nonprofits. What's the problem?' "

Gov. Rick Scott was CEO of a hospital company nailed with two sets of books. Then he went into politics.
Gage Skidmore
Gov. Rick Scott was CEO of a hospital company nailed with two sets of books. Then he went into politics.
Christopher Dennis and Reginald France work out of the Miami-area HEAT task force office.
Liliana Mora
Christopher Dennis and Reginald France work out of the Miami-area HEAT task force office.

He soon found they'd turned Medicaid into a cash cow, making it several times more profitable than their private insurance. But when Feinwachs asked for more data on their costs, the state blocked him, claiming it was proprietary information.

He was outraged. "You can't take tax-funded programs, turn them over to vendors, and claim that what happened to the money is a trade secret."

He also found evidence that HMOs were overbilling Medicare to cover for cuts in its state Medicaid program, thus making every taxpayer in America chip in for Minnesota's duplicity. Two months later, Feinwachs was fired for insubordination.

Though Congress eventually began investigating his claims and multiple investigations continue, Feinwachs remains unemployed. He now spends his time agitating for reform.

"The interesting thing about health-care fraud is that our government always goes after low-hanging fruit," he says. "If they were storekeepers, we'd put in surveillance systems and armed guards to catch kids stealing gum from around the cash register. Meanwhile, we have people backed up to our warehouses with semitrailers loading the merchandise, and we're oblivious to that."

Some of the Medicare fraud is so ridiculous, it's hard to believe. Take Armen Kazarian, kingpin of Los Angeles' Armenian Mob. The feds say his gang stole the identities of doctors and patients while setting up fake clinics across the country. They knew nothing of medicine, sending Medicare fake bills that showed eye doctors doing bladder tests, obstetricians testing for skin allergies, and dermatologists billing for heart exams. Medicare paid out $163 million before Kazarian and 73 henchmen were caught by the FBI. In February, Kazarian received a sentence of just three years.

Not all schemes are this flamboyant. Some simply employ sleights of paperwork. A Detroit podiatrist billed Medicare $700,000 for performing toenail removals that amounted to little more than toenail clipping. Two Miami doctors billed back rubs as physical therapy, taking in $57 million. In 2009, private ambulance services in Harris County, Texas, billed Medicare $62 million for emergency shuttles. By comparison, New York City received $7 million for the same services.

Some scams are so brazen that they advertise on TV. Remember those late-night Scooter Store ads, promising to get you a motorized wheelchair "at little or no cost to you"?

In 2007, the San Antonio company agreed to pay $4 million in civil fines and forfeit another $43 million for advertising one scooter but delivering a more expensive model on Medicare's dime.

Executives didn't learn their lesson. The Scooter Store was soon caught again, this time for overcharging Medicare by as much as $87.7 million between 2009 and 2011, according to an audit. But the federal Centers for Medicaid & Medicare Services (CMS) agreed to a spectacularly lenient settlement, allowing the company to repay just a quarter of that figure.

The feds would get tough only after CBS aired an investigation illustrating how the company browbeat doctors into writing unnecessary prescriptions for scooters. They raided Scooter Store headquarters in February. It finally appears the company has been barred from federal health programs.

The sad thing about Medicare fraud is that it ends up hurting the people it was initially meant to protect — society's weakest. It also taints the people standing up for them.

Because it treated Texas' poorest citizens — its mentally ill, its drug-addled — Houston Riverside General Hospital, a 95-year-old nonprofit formerly known as Houston Negro Hospital, was at one point losing $10,000 a day. That's when executives decided to cauterize the wound with a hot poker of fraud.

In 1996, the State of Texas accused Riverside of padding fees and billing for drug rehabilitation services it never provided. Texas canceled $1 million in contracts and demanded that the hospital repay $763,000 more. It also urged the feds to audit Riverside's Medicare and Medicaid payments.

Yet charges of fraud weren't enough for bureaucrats to fully close the spigot. The money continued to flow. It would take another eight years before the state had finally had enough. In 2004, it moved most of its drug-treatment contracts to more trusted providers, slashing Riverside's funding by 75 percent.

Congresswoman Sheila Jackson Lee tried to look like a hero as she cried to restore the money for the poor. Gov. Rick Perry obliged with another $3 million.

It wasn't until 2011 — 15 years after the initial accusations — that law enforcement got serious, prompting an administrator, Mohammad Khan, to confess to enriching the hospital through a kickback scheme. He'd been paying "recruiters" $300 a head to bring Medicare patients to Riverside's six psychiatric clinics. They arrived by the van-load for daily therapy sessions they rarely qualified for or received. Medicare picked up the $116 million tab. Only when this scheme was discovered did the CMS finally halt the hospital's payments.

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My Voice Nation Help

This well written article should have beeen published in JAMA and New Engand Journal of Medicine ..

dr. jaya


Well considering that Rick Scott made millions off this should be telling.


Does it surprise anyone that a state that elected a man who made his millions by defrauding Medicare has an increasing problem with medicare fraud? It is high time the people of Florida extruded their crania from their recta and got rid of Gov. Voldemort! Over and over again the voters make the illogical, thoughtless and intelligence-denying choices. 


riverrat69 topcommenter

Medicare fraud might be sweet in south FloriDUH, but it buys you the governors seat in Tallahassee.


Chris mentions the congressional hearings where Congressman Burgess talks about his credit card and Chick-Fil-A.  At 1:01:28 of the same hearings, Congressman Shimkus holds up a card, that runs through the credit card networks, that would prevent much of that fraud.  I am the guy who invented it, and John Shimkus is holding up a card I gave him to demonstrate that not only is this possible, it works today.  We have proven it. 

frankd4 topcommenter

"That's the bread and butter of the fraudster — the fact he can pay somebody to participate in the scheme," says Dennis. "If you have a willing participant, you then eliminate the ability to tie the fraud to you. That person is going to lie for you because they conspired with you."

in the olde dayz a gangster took the newbie with him and at the right time handed the newbie the GUN to do the hit........................voila the newbie was now a co-conspirator

so today the co-conspirator simply has to take money to collude, and collusion is the one thing an auditor cannot design an accounting system to prevent

if these clowns weren't so greedy these overbilling frauds could go on endlessly

frankd4 topcommenter

don't just take ONE geographic area since any medical facility anywhere can simply CODE reimburseable medicare and medicaid medical proceedures to maximize revenue generated

the typical geographic area only need those who qualify for such coverage and who can produce a valid social security number = period

i can predict that every second hobo at a random bus station would be a potential profit center - i withnessed one old dude at BCT central terminal went from a walker ($300) every three weeks to a fully equiped wheelchair ($16,875) which he even had pin-striped; otherwise this miscreant didn't have two nickles to rub together

i saw it start myself a dozen or so years ago at assisted-living facilities whereas the home would profit from commissionable sales of goods and services to the qualifying residents who knew nothing of how things were being paid

finally MAIN street has a scam equal to WALL street, in scope and magnitude, which will eclipse even the mortgage meltdown, and certainly reach beyond our governors office, when fully exposed, as to who all the players really are


Hialeah is third world territory and not part of the United States.