Big Bills in Little Cuba
MARK STARINSKY
Every year thousands of immigrants risk their lives escaping Cuba, seeking asylum and a better life in the United States. Some travel in makeshift boats or rafts while others gain access overland from Mexico. However Cubans make it to the United States, most end up in South Florida. Maria left Cuba in the early 1970s, before the mass exodus in the 1980s known as the Mariel boatlift eventually closed Cuba's borders to exiles. She lived briefly in Los Angeles, California, before making her way to South Florida. Joe had a more harrowing experience and didn't make it to the United States until the mid-1990s. He never did reveal his life story or how he was able to leave Cuba; he was just happy to be living the American dream in the bright lights of New York City. After being in the country for five years, Joe also moved to South Florida. Although Los Angeles and New York have thriving Latin American populations, nowhere is there a larger Cuban American population than in the greater Miami area. In fact, Hialeah, a city just north of Miami, ranks second on the list of Cuban and Cuban Americans residents of any U.S. city and Spanish is the most-spoken language. Missing their families and cultural familiarities, Joe and Maria both settled down in Hialeah.
The streets of Hialeah had all the comforts of Havana: the smell of cafecitos, a strong mixture of Cuban coffee and sugar; the sound of dominos being played by old men in the neighborhood; the taste of the guarapo, a sweet juice made from raw sugarcane; and the medical clinics . . . the medical clinics? Yes, the medical clinics. It turns out that pharmacies, home health agencies, durable medical equipment (DME) suppliers and clinics dominate many neighborhoods in Hialeah.
Maria owned an interior design company, but business wasn't so great and she was looking around for a better opportunity. With no formal medical training, Maria stumbled upon a company that was seeking new ownership. K&B Equipment, a DME supplier providing breathing supplies to Medicare and Medicaid patients, had gone through nine ownership changes within its ten-year existence. Maria would be the final owner and eventually turn it into the company that is the subject of this case study. Business was good — so good, in fact, that Maria opened two other branches in Hialeah. In the beginning, the sales were legitimate. Doctors sent in prescriptions, orders were filled and patients received their medications. This is where Joe stepped in.
After heading to Hialeah, Joe set up a delivery company and turned it into a thriving business. Eventually he crossed paths with Maria and started handling all of her deliveries. The two quickly became more than business acquaintances; within a few years they were living together as husband and wife.
Running three suppliers was proving to be too much for Maria, and some questionable billings had started taking place. After a solid nine-year run, her business venture was coming to a close — but that didn't mean she was finished. With the experience she'd gained and the contacts she made, Maria set up one final company — the company that would lead to her downfall.
Dusty Shelves
K&B Pharmacy spun off from K&B Equipment and opened on a corner of one the busiest intersections in Hialeah. Walking into the pharmacy, a customer wouldn't notice any differences from a small neighborhood drug store. The shelves were packed with inventory, and there was even a small section of women's clothing in one corner. A close look at the inventory, however, revealed a layer of dust covering the boxes of cough medicine and candy bars. The pharmacy had DME — devices used by ill or injured people, such as walkers, canes and wheelchairs — on display. Under the stress of her failing business, Maria established Joe as the owner and president of K&B Pharmacy. This Cuban exile and one-time deliveryman was now the owner of a multimillion-dollar company receiving payments from Medicare and Medicaid.
Although the pharmacy had canes and wheelchairs in the windows, the only items it actually billed for were levalbuterol and budesonide inhalation medications and the items necessary for their administration. These medications are commonly prescribed to patients with breathing disorders, such as asthma. For most Medicare beneficiaries, though, the diagnosis is usually more ambiguous: chronic obstructive pulmonary disease (COPD), which can mean either chronic bronchitis or emphysema. The medications for both of these diseases are liquids and require the use of a nebulizer, a small device that uses compressed air to break up the liquid into an aerosol that can then be inhaled into the lungs through a face mask or mouthpiece. Nebulizers and their accessories are all considered DME and are payable by Medicare, Medicaid, private insurers, etc. as long as the medications are covered. Payments for these items are relatively small. For example, at the time of my investigation, Medicare reimbursed DME suppliers about $16 per month for a nebulizer rental. During this same time, a supplier could make thousands of dollars for power wheelchairs, hospital beds, or other more advanced pieces of equipment. Maria and Joe were staying below the radar with these small-dollar items — or so they thought.
In the 11 months prior to my investigation, K&B earned more than $2.6 million from Medicare alone. Unless a company has a substantial patient base or is a national chain, it's pretty difficult to earn that type of revenue when you're only making $16 a month per patient. It's probably important to note here that while K&B had the word pharmacy in its title, it was actually a Medicare-certified DME supplier. And to own a DME supplier, you do not need special qualifications or even medical qualifications. A deliveryman, for example, can start a DME company.
Whack-A-Mole
Law enforcement and the federal government recognized the ease of DME supplier ownership and also the spikes in the number of DME companies operating out of South Florida and their respective Medicare reimbursements. A few years ago, the U.S. Department of Health and Human Services, Office of Inspector General (OIG) (the primary agency responsible for combating fraud, waste and abuse in the Medicare program) started Operation Whack-A-Mole. Named after the popular arcade game, the premise behind Whack-A-Mole was that as soon as Medicare shut down one DME company, another quickly popped up. This project consisted of conducting unannounced site visits to more than 1,500 DME suppliers in Miami-Dade and its neighboring counties, Broward and Palm Beach. Approximately 31 percent, or about 500 DME suppliers, didn't meet basic standards that required suppliers to maintain a business address and actually be open and staffed during business hours. As an auditor with OIG, I personally visited more than 100 suppliers in only a few days. Although K&B was not on my list, another auditor on my team did visit the store and found that Maria and Joe maintained the address that Medicare had on file and had staff present. K&B passed the first step of the Whack-A-Mole process, but Joe and Maria couldn't breathe easy yet. K&B was identified through Whack-A-Mole simply because it was a DME supplier operating in a zip code known for fraudulent Medicare activity. And although it passed the basic supplier standards, the store didn't have the appearance of an active Medicare business to the visiting investigator: There were no patients present, there was no one on the telephone taking prescriptions from doctors, there was no one filling prescriptions . . . there were just people loitering around.
At the time of this investigation, Medicare contracted with companies known as program safeguard contractors (now known as zone program integrity contractors) to assist in paying Medicare claims correctly by early detection of fraudulent claims, analyzing data and reviewing records. I routinely partnered with investigators from Florida's program safeguard contractor. One day I was speaking with an investigator about suspicious Medicare claims activity and the topic of nebulizers came up. She faxed me a list of DME suppliers that primarily billed for nebulizer-related drugs, and K&B was in the top ten. The companies that came before K&B were either national retailers or local DME suppliers we were also investigating. However, K&B was the only mom-and-pop business whose billings rivaled those of national retailers. We quickly identified K&B as a company deserving of a closer look.
Store Visit
Since we already had recorded observations of K&B from the Whack-A-Mole project, I decided that an audit was the next step to determine the appropriateness of K&B's payments. After receiving my manager's approval to audit, I prepared the necessary documentation and contacted Joe to schedule a meeting. This initial meeting was not unlike the countless others I had led. I brought two junior auditors with me, and we described the reason K&B was selected for audit and the objective, scope and reporting portions of the process. Maria and Joe were both at the meeting, along with a contracted pharmacist and a support person who ended up assisting us by making copies of medical records. Also present (in the background) were the dusty candy bars and medical equipment. At first glance, nothing during this visit seemed too strange. K&B had all of the necessary documentation I expected a legitimate business to have, including policy and procedure manuals and medical records documentation.
We requested supporting medical records for a sample of patients whom we had previously selected. One by one, we collected physician-signed prescriptions, equipment invoices and delivery tickets signed by Medicare patients. It wasn't until we started questioning Joe about his delivery policies and the day-to-day activities that cracks appeared. Joe was able to discuss the delivery process but allowed Maria any remaining business questions. This is common of nominee ownership cases, where a person allows his name to be used for recording legal ownership of a business yet has no actual decision-making capability over the business. A quick look at the billing records revealed that Joe was supposedly making 45 deliveries across three counties in a single day. Anyone familiar with traffic in a major metropolitan area would find this suspicious, yet Joe swore he made these trips. More important, these visits supposedly consisted of providing a patient with instructions on how to operate the equipment. When Joe's interview was complete, Maria excused him to walk her dog for the rest of the day. My audit team returned twice more to collect the remaining medical records, and both times the pharmacy was silent — there were no phone calls, no ringing fax machine and no patients. Throughout the audit process, Maria and Joe were very cordial, even offering to purchase us pizza from the pizzeria next door. They seemed very confident that the audit would result in their favor. I honestly don't think they expected what came next.
House Calls
Armed with documentation containing signatures of doctors and Medicare patients, we began visiting individuals to determine if they actually ordered or had received the equipment. One by one, doctors attested that the patients were not theirs, they did not have medical records for them and the signatures on K&B's files were not theirs. To ensure that no mistakes were made and to prevent relying solely on a doctor's memory, we sat with medical record clerks at the doctors' offices with lists of patient names for further confirmation that, in fact, they were not real patients. In total, we visited 12 doctors who supposedly ordered 100 nebulizers. Of these 100 claims, more than two-thirds were not actually authorized by the physician in K&B's documentation. One doctor in particular worked at an injury clinic that dealt primarily with workers' compensation, but he supposedly ordered 55 of the claims paid to K&B. Results from our visits to the patients also confirmed our suspicions. The majority of them had never heard of K&B nor did they have the nebulizers that had supposedly been delivered to them. After meeting with doctors and patients, we determined that 87 of the 100 sampled claims were errors, and we extrapolated these errors back to K&B's universe of paid claims. With our overpayment defined, I contacted Maria to schedule a meeting to discuss our results. At this meeting, I explained the additional verification steps we had taken and told Joe and Maria that we estimated K&B had been overpaid almost $2 million. Confused doesn't describe the looks on the couple's faces. I'm not sure if it was the bad news or a translation problem, but they requested that we explain our findings again in Spanish. And while they disagreed with our findings, all they could say is that they would appeal our results. They simply could not explain why a doctor would claim not to have ordered services supposedly rendered by K&B.
The Truth Comes Out
South Florida is teeming with so much Medicare fraud that it's usually difficult to get a law enforcement agent interested in your case. This case was different. We had strong evidence and physicians willing to testify that they had not ordered K&B's services; it was a slam dunk. It helped that the OIG has its own law enforcement subcomponent, the Office of Investigations, tasked with investigating Medicare fraud allegations.
We provided OIG special agents with boxes of medical records, physician attestation statements and a report of our findings. At times, I received calls from physicians wondering if their billing identifying numbers were being comprised and what was going on with the case. At other times, special agents would call for additional information, including updated Medicare claims data. It felt like the end would never come, but then I received a call from the case agent telling me that arrest warrants had been secured for Maria and Joe. Their arrests showed who the true owner of K&B Pharmacy was. Maria quickly hired a high-priced attorney for representation and bonded out of jail. Joe sat in jail for the weekend while waiting for his public defender. It was at this point that we learned Maria and Joe weren't actually married after all.
Maria and Joe were each charged with one count of conspiracy to commit healthcare fraud and five counts of healthcare fraud, each carrying maximum prison sentences of ten years. With the evidence mounting against them, Maria and Joe accepted plea agreements.
They eventually revealed that they accessed physician billing identifying information, such as a unique physician identification number (UPIN) or a national provider identifier (NPI), available publicly online. Once they had the ID numbers and the doctors' addresses, Maria and Joe took turns forging doctors' signatures. They took patient ID numbers from Maria's previous legitimate business, K&B Equipment.
Maria and Joe each ended up pleading guilty to one count of conspiracy to commit healthcare fraud, received 51 months of imprisonment and were ordered to repay the federal government more than $2.6 million. I remember feeling like Frank Wilson, the accountant who eventually brought down Al Capone. Finally, I hadn't just issued an audit report; I actually saw justice served.
Lessons Learned
This audit and eventual investigation taught me that the criminal mind is without limits and, in Medicare fraud, seems to always be one step ahead of the good guys. For example, the NPI system was created to standardize unique health identifiers for healthcare providers. In reality, it seems to have simplifi ed access to information needed for Medicare and other healthcare fraud schemes.
I also learned that fraud examiners cannot simply perform an audit from behind a desk. We need boots on the ground and we have to talk to people. K&B had legitimate-looking documentation, yet talking to a handful of doctors proved that Joe and Maria had woven together an elaborate web of smoke screens and false documentation.
Recommendations to Prevent Future Occurrences
K&B was one small fish in the great ocean of Medicare fraud. Although $2.6 million sounds like a great judgment, investigators are drowning in schemes that plague South Florida. In fact, the approximate 500 DME suppliers found to be nonexistent during Operation Whack-A-Mole billed Medicare approximately $237 million in just one year. After multiple DME audits and law enforcement operations, the Centers for Medicare and Medicaid Services (CMS) implemented accreditation and additional supplier standards, the ultimate first step in preventing future occurrences of DME fraud. CMS now requires that suppliers seeking to obtain or maintain Medicare billing privileges become accredited through one of CMS's ten approved accreditation organizations. CMS also utilizes the National Supplier Clearinghouse to review DME Medicare applications and conduct site visits to verify compliance with DME supplier standards. During this investigation, there were 21 standards. As a direct result of the work conducted in Miami, these standards were increased to 30, adding requirements for maintaining minimum work hours per week and the prohibition against using beepers, answering machines, answering services or cell phones during posted business hours as the primary business telephone.
If you are dealing with an accredited supplier with a Medicare billing number, conduct proactive data analysis of the supplier's claims to identify patterns of aberrant or outlier billing activities. The claims data could reveal that one physician is approving all of a supplier's claims; that every patient is receiving the same package or bundle of equipment; or you may know that equipment should be billed as a group, yet the supplier billed for each component separately. Such analysis is not foolproof and should not be the sole determining factor in your investigation, but it should point you in the right direction.
Unfortunately, most fraud investigations are pay and chase — Medicare pays the claims and fraud is detected after the perpetrators receive the money, putting law enforcement in the position of chasing the funds. The best effort to combat pay and chase is to analyze data before claims are paid, through prepayment medical reviews or predictive modeling. Prepayment medical reviews are costly. Predictive modeling is used in other financial industries, yet it is difficult to predict a patient's healthcare needs. Through the government's Health Care Fraud Prevention and Enforcement Action Teams (HEAT), the public has been solicited for a data analysis system based on predictive modeling. CMS was “charged with developing a data system to facilitate the identification of illegitimate healthcare providers or suppliers when they apply for a Medicare provider number, before they receive the number and begin billing for services. The system, when implemented, should also be able to track billing patterns and identify aberrant patterns in a timelier manner than present systems.”1 CMS is currently using a system that builds profiles of providers, billing patterns and so on and then assigns a risk score to estimate the likelihood of fraud and flag possibly fraudulent claims.
Finally, if all else fails, get out from behind your desk and visit the individuals involved in the transaction: the doctor who supposedly ordered the service and the patient who supposedly received the service. Had we not visited the physicians and the patients K&B was billing for, we would not have identified a problem. I recommend these visits especially in cases were a supplier's documentation appears suspicious. Physicians are busy, and you may spend a lot of time in a waiting room. It helps if you are a law enforcement officer or a representative of a healthcare regulatory agency. Doctors, however, are concerned with protecting their billing privileges and professional integrity and therefore probably will assist in determining whether something was actually ordered. Speaking to patients is generally an easier task. If you are dealing with an elderly Medicare population, you might be the only person they've spoken with all day or all week. These visits are fairly straightforward; patients either have the equipment ordered or they do not. And with K&B, it gave me a chance to really determine if 45 deliveries were possible in one day. As I suspected, it was not.
About the Author
Mark Starinsky, CFE, AHFI, is a senior investigator with General Dynamics Information Technology, providing services to healthcare payers in the detection, investigation and disposition of cases of potential healthcare fraud, waste and abuse. Mr. Starinsky was a U.S. Department of Health and Human Services, Office of Inspector General criminal investigator and senior auditor. During more than ten years with the OIG, he was successful in identifying more than $1 billion of fraud, waste and abuse. He led various reviews of Medicare and Medicaid providers, including home health agencies, durable medical equipment suppliers, mental health centers and health maintenance organizations. Mr. Starinsky has received several awards for meritorious service and is an active Accredited Healthcare Fraud Investigator and Certified Fraud Examiner.