Monday, July 28, 2014

Three Indicted In California Federal Insurance Fraud Case Involving Allegations That Medically Unnecessary Procedures Were Performed For Free Or Discounted Cosmetic Surgery

On July 16, 2014, a federal grand jury indicted three Southern California residents in a scheme to defraud health insurance programs by submitting bills in alleged medically unnecessary medical procedures performed on insurance beneficiaries who received free or discounted cosmetic surgery. The Indictment claims that there were more than $50 million in unnecessary medical procedures billed. An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.

The indictment in Case No. SACR14-00110-JLSoutlines allegations in which marketers or cappers lured patients to a surgery center in Orange County, California known at various times as Empire Surgical Center, Vista Surgical Center and Princess Cosmetic Surgery. The marketers allegedly told patients that they could use their union or PPO health insurance plans to pay for cosmetic surgeries, which are generally not covered by insurance. This involved private insurance but was investigated by Department of Labor which indicates that there may have been some government beneficiaries 

When patients came to the surgery center for a consultation, they were told that they could receive free or discounted cosmetic surgeries if they underwent multiple, medically unnecessary procedures that would be billed to their union or PPO health care benefit program, the indictment alleges. The unnecessary procedures typically performed on the “patients” were endoscopies (usually esophagogastroduodenoscopies, or EGDs), colonoscopies and cystoscopies.

Once the health care benefit program paid the claims, the patients were given free or discounted cosmetic surgeries, including “tummy tucks,” breast augmentations, rhinoplasties (“nose jobs”) and liposuction. Further, according to the indictment, tummy tucks were billed as hernia repair surgeries, and rhinoplasties were billed as deviated septum repair surgeries.

The three defendants charged in the indictment are: (1) Vi Nguyen, 31, of Placentia, who was a consultant at the surgery center and who is charged with 10 counts of mail fraud; (2) Theresa Fisher, 44, of Tustin, who was another consultant at the surgery center and who is charged with five counts of mail fraud; and (3) Lindsay Hardgraves, 30, of San Pedro, who was a marketer and charged with two counts of mail fraud.

Attorney Commentary: There were similar state and federal criminal cases some years ago in Orange County with different surgery centers that also charged the physicians with performing the medically unnecessary surgeries. At this point, no physicians are charged but that could change depending on the evidence and whether these defendants later cooperate and present evidence that the physicians who performed the unnecessary procedures knew or should have known that they were unnecessary. This is a case where the fraud was driven by illegal marketing to patients. Physicians and owners of surgery centers must be careful on how patients are recruited and what promises, if any, are made in order for them to have procedures performed at a certain facility. 

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



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