Government inefficiency and waste and your tax dollars

AP: Medicare yanks licenses, gives them right back By KELLI KENNEDY Associated Press Regulators fighting an estimated $60 billion to $90 billion a year in Medicare fraud frequently suspend Medicare providers, then quickly reinstate them after appeals hearings that government employees don't even attend, according to an Associated Press review. Federal prosecutors say the speedy reinstatements - though helpful to legitimate suppliers who get snagged on technicalities or minor violations - amount to a missed chance to cut off the flow of taxpayer dollars to bogus companies that in many cases wind up under indictment. Some store owners have collected tens of thousands of dollars even after conviction, prosecutors told the AP. Making matters worse, Medicare officials have failed to collect a single cent from the security bonds that were instituted two years ago specifically to discourage crooked providers from vanishing at the first sign of trouble from regulators. Millions of dollars sit unrecovered; officials blame the delay on personnel changes. The gaps in the system grow out of poor communication between one set of contractors paid to inspect Medicare providers and alert officials to suspicious activity; a separate set of contractors that handles payments; and the agency that runs Medicare. Often, neither the government nor its private contractors attend the initial hearings when suspended companies appeal, allowing them to win practically by default. Officials at the Centers for Medicare and Medicaid Services declined to say why - be it staffing concerns or other issues - they aren't part of the process, even though it's overseen by contractors the agency hires. For years, Medicare has paid claims first and reviewed them later - a process that worked when providers were mostly hospitals because quick payments meant few lapses in service. But the "pay and chase" method has become a boon for criminals, allowing them weeks of lag time to bill for fraudulent claims, receive payment and skip town before authorities catch on. Medicare fraud has grown so lucrative and so easy that drug dealers and organized crime rings are tapping into it: Drug dealers and mobsters have moved into Medicare scams because it affords greater payoffs and carries shorter prison sentences than drug trafficking or robbery. "If Medicare wants to stop fraud, it can't keep pretending these are real providers," said attorney Kirk Ogrosky, former head of the Justice Department's division that investigates health care fraud. "Medicare is adept at enforcing technicalities because the system has been designed for real providers, but outright crooks go undetected because their claims appear legitimate." Officials revoked the licenses of 3,702 medical equipment companies in the fraud hot spots of South Florida, Los Angeles, Baton Rouge, La., Houston, Brooklyn, N.Y., and Detroit between 2006 and 2009, according to data provided to the AP under a public records request. Those areas represent the highest concentrations of Medicare fraud in the country, according to federal authorities who have set up task forces there. Of the providers who lost their licenses in those cities, about 37 percent, or 1,371, were eventually back in business, sometimes within days and often within months. In one notable case, Medicare contractors revoked Simon Seruya's license in 2007 after inspectors visited the Miami address listed for his medical equipment company, only to find no employees or customers. Seruya appealed, was reinstated the same day and resumed billing Medicare. One of his companies was still billing Medicare for several months even after he was indicted for racking up $15 million in bogus charges. Federal health officials eventually revoked Seruya's provider ID in November 2007 - six months after his arrest. He pleaded guilty and was sentenced to roughly four years in prison the next month. Now 78, he was released last month, but his attorney declined requests for an interview. Some companies specialize in helping providers pass inspection, arranging for someone to sit at the front desk, ensure the phone has a valid number and display a few medical supplies, said Omar Perez, an agent for the Department of Health and Human Services' inspector general. "And then they pick up all their stuff and they leave. How do we really address that? Is it fraud? It's certainly part of fraud," Perez said. --- When Medicare began in 1965, Congress mandated that private contractors would process and pay claims. Under 1996 legislation, Medicare hired a separate set of contractors to monitor fraud, reasoning it was wise to separate claims payments from the fraud detection side. The agency has worked to consolidate claims contractors, dropping from 50 to 15 in the past few years, and is in the process of streamlining its fraud contractors and centralizing its claims and fraud databases so that contractors and authorities will be working off the same information. Still, as the program has burgeoned to pay 4.4 million claims worth more than $1 billion per day, that layered contractor system has evolved into an expensive - some contracts are worth nearly $500 million for five years - and time-consuming patchwork process. "You've got a dizzying array of contractors that are supposed to be fighting fraud ... obviously all these contractors that were supposed to be doing all this, it hasn't worked out as well as we hoped," U.S. Sen. Claire McCaskill, D-Mo., noted at a Capitol Hill hearing this summer. Here's how the revocation process works: Medicare hires Contractor A, which is in charge of fraud detection, to inspect a medical equipment company. Under the law, providers are required to have an office that is open and staffed during regular working hours - but some have empty storefronts and some have only a post office box. Contractor A recommends revoking the company's Medicare license to Contractor B. But Contractor B ultimately decides whether to revoke and often does not have the same information that Contractor A has. Sometimes one subcontractor without firsthand knowledge of the case or the necessary medical expertise will overturn a suspension made by the contractor that had direct evidence of fraud, said Ryan Stumphauzer, a former Miami federal prosecutor who specializes in health care fraud. A revocation does not automatically start a criminal investigation - that's also a separate process. So the company appeals, and an independent third party known as a hearing officer decides whether to reinstate the license. If the provider disagrees with that decision, the appeal can be kicked up to an administrative law judge. But federal prosecutors say it rarely gets to the second level, in part because truly fraudulent providers tend to walk away once their licenses are revoked - they often simply obtain new licenses under associates' names and keep right on operating, said Ogrosky, the former Justice official. It's also because Medicare doesn't send lawyers to defend the decision in the first round of appeals. "Nobody from (the government) bothers to attend the appeal hearing, so the judge hears a one-sided story and the government is virtually guaranteed to lose," Stumphauzer said. "Every taxpayer should be outraged." Federal prosecutors say every durable medical equipment company they've indicted has had a site inspection - in other words, an opportunity to have stopped the fraud sooner. Authorities seize assets after indictments, but what's left is usually only a fraction of what was taken. In 2009, Medicare began requiring medical equipment providers to post surety bonds, typically around $50,000, to ensure the agency could recoup some money in case the company was fraudulent and fled. Yet two years later, the agency hasn't recovered any funds from the bonds and hasn't finalized a system to do so, according to a report last month by the HHS inspector general. Medicare officials could have recovered $15 million just from South Florida medical equipment companies based on fraudulent payments in 2007 if the surety bonds were in place, according to the report. Last year in Miami, investigators visited independent diagnostic facilities, another sector prone to fraud, and found that many were not open during business hours and did not have a physical facility. Twenty-seven of 92 facilities, more than one in four, didn't meet standards, and contractors moved to revoke many of their billing privileges. Yet three of the companies continued to receive Medicare payments during the revocation process, according to another inspector general's report. Chris Parrella, a Miami attorney who specializes in health care, said most revocations hamper legitimate providers and have little to do with fraud. He estimated that about 75 percent of clients at his firm are successfully reinstated. "A percentage will not appeal and a percentage will lose and a percentage will get their number back," he said. "It's just a numbers game to diminish the volume of providers in the Medicare program." Here is the difference between government run operations and the private sector. The private sector would fire anyone who oversaw such an incompetent fraud watch program. But, in government the employees don't care whether they show up or not since the chances of them being held to account are nil.