6 Arrested in Patient Referral Scheme : Health insurance: This week’s allegations that attorneys’ clients were funneled to doctors are just the beginning, investigators say.

The arrests of five doctors and a Woodland Hills businesswoman for what prosecutors call buying and selling patients are the first fruits of a painstaking 18-month investigation that authorities say promises to net perpetrators of both illegal referral schemes and massive health insurance fraud.

But the work is slow.

The businesswoman, Debra Mattes, head of Medical Marketing Consultants, was arrested along with one doctor, Tarzana-based Karl Epstein, in January. Four more doctors--Ronald Perelman, Philip Lichtenfeld, Robert Glazer and Vladimir Golovchinsky--surrendered Wednesday. They are charged with paying Mattes a total of $194,529 between October, 1986, and January, 1993, to refer clients of personal injury and workers’ compensation lawyers to them as patients.

More arrests--probably of lawyers who engaged in related activities--are expected soon, sources involved in the investigation said.

“We almost have to work backwards,” said John Lancara, chief of enforcement for the California Medical Board, which is participating in the investigation along with the Los Angeles Police Department and insurance industry fraud investigators.

“What makes it particularly difficult is that unlike many of the complaints we receive, this is the kind of crime where the participants are satisfied,” Lancara said. “The patients are satisfied because they’re trying to get a claim that may be fraudulent, the doctors are happy because they’re getting patients and the attorneys are happy because they’re getting their kickbacks. Everybody’s happy.”

The Mattes case, in which the 37-year-old Woodland Hills woman is accused of running a multimillion-dollar operation to funnel clients of workers’ compensation attorneys to doctors as patients, is just the beginning, investigators said.

“The basic premise of what people are doing is buying and selling patients,” said Allen Field, head deputy in the Los Angeles County district attorney’s major fraud division. “They are saying, ‘I will send you X-number of patients each month and you will pay me X-number of dollars.”

According to Field, hundreds of thousands of cases are referred to doctors through workers’ compensation hot lines and other such services each month, and investigators suspect “a large number of them” are illegal.

Although it’s perfectly legal for doctors to advertise, and for services to make medical referrals, it’s against California law for a doctor to pay for such referrals.

“The decision as to where to get medical treatment should be based on the skill and qualification of the doctor, and not on which doctors were paying to refer patients,” said Deputy Dist. Atty. Steve Mazur, who is handling the Mattes case. “It’s unethical.”

Police estimate the illegal referral business to be worth several billion dollars in Southern California alone.

And along with the referrals, police and prosecutors say, comes the temptation to inflate medical bills and treat patients unnecessarily, all of which add to the nation’s escalating health care costs. Of particular concern, according to Field, are businesses that target victims of on-the-job injuries and automobile accidents.

Working backward from alleged illegal referral rings, said Detective Jim Murawski, who is leading the investigation for the Los Angeles Police Department, officials were beginning to gather information about fraudulent billing practices.

And, according to a source in the investigation, with doctors and the head of a referral agency under scrutiny, information was beginning to emerge about attorneys.

Still, the heart of the investigation remains with Mattes.

Prosecutors contend she charged the doctors as much as $2,000 per month for a supply of new patients, and accepted some cases that she knew were based on fraudulent workers’ compensation or personal injury claims.

Mattes’ attorney, Robert Silverman, hotly contested the allegations, saying that Mattes merely advertised for the doctors, and even screened out attorneys she suspected might have been violating the law.

But prosecutor Field characterized her as just one player in “a monstrous problem,” whose full scope is not yet known.

In the Mattes case, court documents allege that in 1989 she wrote a letter to Dr. Karl Epstein, who is also a defendant in the case, outlining the details of a referral arrangement.

Epstein could pay “$150 per patient for the first 10, then $200 per patient for every one after” or “$2,000 per month regardless of 10 or 100 patients,” according to the prosecutors’ complaint in the case.

Mattes published a directory of physicians available to treat workers’ compensation and other such cases, the documents said, which she distributed to attorneys.

But, said Mazur, the directory contained only the addresses of the doctors--not their names or telephone numbers. For details, attorneys seeking to place patients had to go through Mattes to put them in touch with the doctor.

In some cases, authorities allege, Mattes accepted kickbacks from attorneys or doctors who had correspondingly inflated the value of their clients’ medical bills.

Mattes, prosecutors contend, took in $1.3 million from illegal referrals from 1987 to 1990, and also violated the law prohibiting insurance fraud.

All of these allegations are denied by Mattes, who along with Epstein has pleaded not guilty to the charges. The remaining four doctors, all but one of whom are based in the San Fernando Valley, have not yet been arraigned.

Silverman called the prosecution’s version of events “ridiculous,” and said that Mattes was simply performing a screening and administrative service for the physicians when she insisted that attorneys go through her before obtaining the doctors’ names.

If found guilty, Mattes faces a maximum of six years in prison, and the doctors face a maximum of three years.

According to Field, the district attorney’s office is just beginning to prosecute illegal referrals and other medical cases, as part of a mandate from the California Legislature to crack down on health care fraud. Last year, lawmakers allocated $5 million for prosecuting medical crime cases, and this year they doubled that amount to $10 million.

In Los Angeles, a task force was set up to investigate medical cases, led by the Los Angeles Police Department and assisted by the medical board and the National Insurance Crime Bureau, an industry group.

According to Murawski, both illegal referrals and outright insurance fraud are extremely difficult to track.

“We call it a paper chase,” Murawski said. “We get mounds of paper.”

First, he said, authorities must obtain paperwork showing that attorneys, patients and doctors are connected in some way, in order to investigate whether they are part of an illegal scheme.

Investigators must sift through several years worth of records, obtained under search warrants, from doctors who sometimes see dozens of patients in a day.

In some cases, evidence of fraud comes only after evidence of another crime is uncovered.

For example, the task force’s investigators say they were sifting through medical records in Epstein’s office to try to determine whether patients were illegally referred to him by Mattes, when they discovered evidence of insurance fraud.

According to court documents, investigators comparing treatment records with billing records indicated that Epstein had submitted bills for patients on days when he had not seen them.

As a result, Epstein was charged separately with insurance fraud.

“These things have a tendency to snowball,” Murawski said.