textfiles/law/medicp21.law

July 1991                                                         

                                                                  
                      MEDICAID FRAUD                                  

                            By 

                      Larry L. Bailey                                       
                 Deputy Chief Investigator
             Colorado Attorney General's Office
                Medicaid Fraud Control Unit
                      Denver, Colorado
        
                                                                  
     In 1965, as part of Lyndon Johnson's Great Society,
legislation was introduced to create the Medicaid Program.  The
program was designed to provide State-administered financing of
medical services for needy families.
  
   By 1977, Medicaid was a $19 billion a year program, and it
was estimated that fraud was costing taxpayers at least $653
million annually.  These losses threatened the integrity of
Medicaid, and although the Medicaid Program is Federally
monitored, the original legislation did not specify who would
investigate and prosecute any suspected cases of fraud.
Therefore, Congress introduced legislation to form special
Medicaid Fraud Control Units (MFCU).

     Thirty-eight States currently have MFCUs.  Most of the
units are part of State attorney generals' offices, State bureaus
of investigation, State police departments, State auditor
generals' offices, or other similar agencies.  Wherever these
MFCUs are located, it is important that local, State, and
Federal agencies know of their existence, their authority, and
their function.  Many agencies are unaware that MFCUs exist, and
as a result, opportunities to refer pertinent information to
them or to combine investigative efforts with them are often
overlooked.  Therefore, law enforcement agencies should be aware
of the functions of MFCUs and how these units can help them
investigate Medicaid cases.

     This article discusses what MFCUs are, how they work in
conjunction with other law enforcement agencies, and how they
can assist in local investigations that, were it not for MFCUs,
might not otherwise be pursued.  It also illustrates how
important it is for other law enforcement agencies to make
timely referrals of possible crimes to MFCUs.

PURPOSE

     MFCUs investigate and prosecute Medicaid fraud committed by
doctors, psychiatrists, pharmacists, laboratories, hospitals,
nursing homes, and medical equipment and supply companies.
Personnel in the units also investigate suspected abuse of
patients in Medicaid-subsidized facilities, ranging from simple
assaults to sexual assaults or homicides.

     For example, police are often called to nursing homes,
where unattended deaths may appear to be of either natural or
accidental causes.  If foul play or negligence did occur, it is
likely that the nursing home personnel would make untrue
statements to officers and would falsify medical records to
indicate that the person died of natural causes.  To further
complicate the situation, doctors might sometimes certify the
cause of death without a thorough examination of the body, much
less an autopsy.  They frequently draw their conclusions on the
cause of death from statements of personnel at the facility.
While the local police oftentimes do not have the experience or
personnel to investigate such cases, MFCUs can investigate the
possibility of a pattern of abuse or neglect of patients in a
certain facility and may be able to establish a prosecutable
case of negligent homicide.  However, timely referrals by police
to MFCUs is crucial, because if a victim is cremated, it is
virtually impossible to prove that a crime has been committed.

PERSONNEL

     In most States, MFCU investigators are experienced, sworn
peace officers who execute search and arrest warrants,
participate in grand jury investigations, conduct surveillances,
and operate undercover.  For example, investigators in the
Colorado MFCU have, on the average, over 14 years' experience in
law enforcement prior to beginning employment with the unit.  In
those States where MFCU investigators are not police officers, a
sworn officer accompanies investigators whenever it is necessary
to serve arrest or search warrants.

     MFCU investigators who handle fraud cases that involve
billing for services not performed, double billings, or
kickbacks are assisted by auditors in the unit.  These auditors
are usually not sworn officers; however, some MFCUs do have
police officers who are certified public accountants and also
serve as unit auditors.

     In addition to investigators and auditors, MFCUs oftentimes
employ attorneys to prosecute Medicaid cases.  Because the
Federal Government contributes approximately 50 percent of the
total Medicaid budget, it, as well as the States, is the victim
of Medicaid fraud.  For this reason, some of the lawyers are
cross-designated as assistant U.S. attorneys.  This allows them
to file charges in Federal court rather than State court, which
broadens the scope of potential offenses for which the
defendants can be prosecuted.  Federal charges in Medicaid fraud
cases may include mail fraud, wire fraud, filing false claims,
and violations of the Federal kickback statute.

INTER-AGENCY COOPERATION

     In States with large Medicaid programs, such as New York
and California, single Medicaid fraud cases frequently range in
the millions of dollars.  Prior to the creation of MFCUs, this
fraud went virtually unchecked.  For example, one family used a
medical clinic to obtain over $30 million illegally from New
York State.  The family purchased a very expensive apartment in
Manhattan and a mansion in Florida.  They were routinely
chauffeured in a limousine, and they enjoyed all the other
amenities associated with wealth.

     While the situation is now much improved, in order for
MFCUs to be truly effective, it is important that other agencies
notify them when there are possible fraud or patient abuse
problems within their jurisdictions.  The benefit of such
inter-agency cooperation was clearly illustrated in a recent
case in Colorado when investigators with the California Attorney
General's Office advised their counterparts in Colorado that
suspects from a recent California fraud case had moved to the
Denver area, possibly to form a new company.

     Investigators in the Colorado MFCU were able to determine
that the suspects had, in fact, formed a new company in their
jurisdiction.  An MFCU investigator, who joined the company in
an undercover capacity, quickly identified a pattern of fraud
within the company, and he also learned that the suspects hoped
to bribe a government official to obtain confidential
information.

     At this point, a local police department joined the
investigation.  It provided an additional undercover operative
and electronic equipment, as well as detectives to operate the
equipment and assist with the surveillance.  This cooperative
effort resulted in the arrest of five suspects who were charged
with 24 felony counts of bribery of a public official,
conspiracy, and fraud, as well as the seizure of computers and
an automobile.  In addition, the company was put out of business
before it could obtain large amounts of money through fraudulent
activity.  One defendant, who is cooperating with law
enforcement officials, stated that company officials planned to
bilk the system out of $30 million during a 10-month period and
then disappear.

     In another cooperative effort, the Colorado MFCU worked
with local police and the Drug Enforcement Administration (DEA)
on the investigation of a pharmacist and a pharmacist/dentist
who wrote prescriptions for controlled drugs and traded them for
cocaine.  They accounted for the controlled drugs by submitting
false claims to Medicaid that indicated that the prescriptions
were for Medicaid patients.

     The MFCU assisted the police and DEA by reviewing Medicaid
claims and other confidential information that is inaccessible
to police officers who do not work in MFCUs.  This joint effort
resulted in the arrest and successful prosecution of both
suspects on drug and Medicaid fraud-related charges.

CONCLUSION

     Medical providers who cheat one program, such as a private
insurance company, are likely to defraud other programs, such as
Medicaid or Medicare.  Medicaid Fraud Control Units are
invaluable in the effort to reduce the number of Medicaid fraud
and abuse cases.

     MFCU personnel can access confidential information not
available to those outside of their units, and through the use
of MFCUs, law enforcement agencies can broaden the scope of
offenses for which certain defendants can be charged.
Unfortunately, however, because the existence of the units is
not well-known, law enforcement agencies oftentimes fail to make
use of this valuable asset.  Therefore, it is imperative that
police departments educate themselves on MFCUs and how they can
assist law enforcement agencies on the local, State, and Federal
levels.

     Medicaid Fraud Control Units may well be the key to stem
the tide of Medicaid fraud and abuse, but it is impossible for
them to be truly effective until they gain recognition within
law enforcement agencies.  Only then will they begin to make the
considerable contribution of which they are capable.