Arrests, charges rack up in DME dragnets

Friday, May 31, 2002

LOS ANGELES - Durable medical equipment scams in California are at the center of what one FBI field office is calling the largest healthcare undercover fraud investigation in U.S. history.

In that investigation, known as Durascam, the FBI has arrested 23 individuals for a variety of fraudulent schemes, including illegal kickbacks, upcoding and CMN tampering.

At the same time, the FBI has announced that two ongoing dragnets known as Unwholesum and Phony Pharm have resulted in charges against 263 medical providers who allegedly bilked the state's Medicaid program, Medi-Cal, of $164 million. To date, 145 individuals have been convicted and ordered to pay restitution of approximately $48 million.

Although the inquiries have taken agents to clinical and diagnostic laboratories, the vast majority of fraud was committed by people who'd set themselves up as DMEPOS suppliers, according to FBI Agent Daniel M. Martino, who headed up the Durascam operation.

In that sting, more than 250 retired FBI agents acted as health plan beneficiaries at a phony wellness clinic, Western Comprehensive Care, set up by the FBI in Encino, Calif. Over two years, the FBI found that Medicare and Medi-Cal had paid out more than $40 million to suspects who'd offered kickbacks for the clinic's referral sources to exaggerate and falsify documents.

Some of the Durascam suspects were fly-by-night schemers whom Martin likens to Jesse James. Others, he said, were more established HME providers who, in the highly competitive market of southern California, could not resist the temptation.

"We saw an insidious corruptive element that exists between DME suppliers and medical providers such as physicians and medical clinics and administrators," said Martino. "There's this desire to increase billings and obtain business from various providers because they need the referrals."

In Unwholesum and Phony Pharm, the lead investigator said most of those convicted and suspected of fraud did not come from the ranks of established HME providers but were "bump-and-run" dealers who milk the system for six months and skip town.

Despite Medi-Cal's establishment of a fraud prevention bureau, FBI Agent James J. Wedick said he believed "bump-and-run" dealers would continue to cause hemorrhaging in the state's Medicaid program.

"The system tries to make sure that nobody's health suffers because a bill was not paid," said Wedick. "So the state pays first and tries to catch a fraud later on. That's an inherent weakness. I don't know that it can ever be corrected." HME