Saturday, February 14, 2009

Medicare Fraud, Medi-Cal Fraud And Health Care Fraud – Recent Case Shows How The Innocent Get Involved

On February 13, 2009, the State of California, Department of Justice Bureau of Medi-Cal Fraud and Elder Abuse filed a felony complaint against three individuals relating to the operation of a CORF (Comprehensive Outpatient Rehabilitation Facility) named Balboa Therapy Center in San Diego. The defendants are being charged with thirteen criminal counts including grand theft, identity theft, health benefits fraud, receiving stolen property and money laundering. If convicted, they could face over twelve years in prison. Although this was Medicare fraud, the State of California has prosecuted this case since a portion of the money paid was through Medi-Cal.

A copy of the complaint is available at:

A review of the arrest warrant declaration is a detailed lesson in health care fraud and how it begins and occurs at every level. It also is a lesson for those in the health care business (physicians, therapists, nurses, patients, marketers, purchasers of businesses, and others) that they need to be careful or they can get caught up working at or for a facility that is committing health care fraud. See:

As attorneys who protect peoples' rights under the Constitution, please remember that an indictment or felony complaint contains allegations that a defendant has committed a crime. Every defendant is presumed innocent unless proven guilty in court.

Without going into all the details which you can review in the arrest declaration, here are lessons for those in the health care business to learn from this criminal case:

Investing In Or Buying Health Care Businesses. A husband and wife, Sanjay and Leena Patel, opened Balboa Therapy Center, with the aid of a consultant. They opened in an area that was already saturated with other centers and there was not enough business to sustain it. After the business was obviously not a success and they billed using fraud and illegal kickbacks in 2005 and 2006, the Patels sold the business to another unsuspecting person for $150,000 who did not realize that the receivables were based on phony billing and illegal marketing and thought it was a great deal.

Lesson: Do not buy a health care business without understanding the business and/or prior extensive experience. The owners were probably not intending to engage in health care fraud when they opened the Center but became desperate when there was not enough business and they were faced with losing their investment. Hire a lawyer who understands the business and not just someone who can draw up a buy/sell agreement. If you are buying a health care business, you need someone who can advise you on how to do your due diligence. If you buy the shares of a business, you could also be liable for prior illegal billing and overpayments.

Why Do People Engage In Illegal Marketing? When the Center did not have enough patients, they hired marketers who paid seniors at retirement homes $100 to obtain their insurance information and sign their names on blank medical forms.

Lesson: Desperate people do desperate things. Faced with a business that did not have enough patients, some people will resort to shortcuts. If you are working at a Center and you see evidence that patients are paid money or given gifts for visits, STOP working there. It is a sign of more extensive fraud. The therapists working at this center saw signs that patients were being billed for services that were not provided but did not quit working there and believed the excuses provided by the owners.

Quit Your Job Or Seek Advice From A Health Care Attorney If You Suspect Fraud Or Anything Wrong. In a CORF, there are a number of licensed professionals that work there. According to the arrest warrant declaration, these licensed professionals at Balboa Therapy received calls from patients complaining about Medicare being billed for services that were not provided. The owners promised to pay restitution to Medicare but that was never done. There was no indication that the professionals reported the fraud or quit their jobs when there was a pattern of unprofessional conduct.

Lesson: We have seen cases where licensed professionals (doctors, nurses, physical therapists, physician assistants, and others) knew things were “not quite right” at a clinic. However, they were afraid to lose their jobs and did not quit when they suspected something was wrong. Instead, they listened to the excuses from the owners or managers (many of whom were not licensed professionals). Do not stick your head in the sand. This can be interpreted by government investigators as you having knowledge of the wrongdoing and tacitly agreeing to being part of it.

We have seen some professionals get charged criminally or with professional misconduct even though they were just employees or independent contractors who were innocent bystanders. Think long term when you see something wrong. If things do not pass the “smell test,” think about whether you want to put your license or liberty in jeopardy for a job or short-term money. Sometimes the salaries paid at clinics that commit fraud are higher than those in the regular market. If it seems too good to be true – it probably is. Seek advice from an outside health care attorney if you are not sure how to proceed. The advantage in seeking advice from an attorney instead of a consultant or accountant is the protection given to your communications under the attorney-client privilege.

Hiring Physicians As Medical Directors Or Using Their Provider Numbers. The owners hired physicians as Medical Directors. The physicians were paid by the hour, did not know what was happening at the business and did not know that the owners billed under their provider numbers.

Lesson: If you are a physician, do NOT agree to work at a Center as a “Medical Director” where you could place your license or provider number in jeopardy without consulting an attorney or person who is familiar with health care law. If it seems like easy money, there is probably something wrong. Assess the risk of getting involved. The physicians most at risk for these ventures are young physicians right out of residency with student loans, older retired physicians who want to keep busy or other physicians with problems or who are very busy with their own practice so they do not focus on the potential risks.

Patients Who Were Paid Kickbacks Reported The Fraud. This case was initiated by patients who reported that Medicare was billed for services they did not receive. The patients admitted they were paid $100 to sign forms and sign-in sheets in different color ink and to give copies of their Medicare cards and drivers’ licenses. However, once they saw the false billing, they reported the fraud to Medicare.

Lesson: Be extremely cautious in marketing to obtain patients. When hiring marketers, understand that they may use tactics that are high pressure or illegal. Do not let marketers persuade you to print fliers that say you are providing “free services” or that they will tell patients how to get Medicare or Medi-Cal or Medicaid programs to pay for services. Further, do not assume that if the patients did something illegal that they will not report you to the government. Even though there have been huge problems with “professional patients” who sell their Medicare and Medicaid/Medi-Cal cards -- the government is reluctant to press charges against patients and prefer to focus on prosecuting the professionals, managers and marketers.

Government Investigations Are Based On The Past. The facts in this case were from 2005 and 2006 -- over 3 years ago. Remember that fraud investigators work on cases that are years old and the state statute of limitation in these cases is 4 years from date of discovery. If you have ever been contacted by an investigator, hire an experienced attorney who can stay in touch with the investigators and prosecuors and determine whether you are a witness, suspect or target and create a strategy for you. We have seen cases where a doctor was contacted by an investigator, the doctor did not hire an attorney and then was completely surprised when faced with charges 2 or 3 years later. You should not panic if contacted by an investigator but, on the other hand, you should take the investigation seriously and see if there is any way to prevent yourself from being charged. There are many investigations that never result in criminal prosecutions or professional accusation charges. However, it is easier to prevent a case from being filed (especially where there are good facts to explain why there was no fraud) than to defend it once the case if filed.

Any questions or comments should be directed to: Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus a significant part of their practice on the representation of professionals, with an emphasis on health care professionals.

Posted by Tracy Green, Esq.
Phone: 213-233-2260


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