Home Medical Firm Accused of Medicare Fraud : Health care: GAO report alleges that leading provider First American submitted $14 million in improper billings.

First American Health Care, the nation’s largest provider of home medical care for the elderly, has improperly billed Medicare for everything from alcoholic beverages for supervisors to country club membership fees, according to a draft audit by the General Accounting Office.

The GAO conducted a 19-month investigation of the privately held company based in Brunswick, Ga., finding that it forged medical records, continued to visit homes even when patients objected and billed the government for gifts given to physicians in return for patient referrals.

Health and Human Services Inspector General June Gibbs Brown is expected to testify today at a House Commerce Committee hearing that First American submitted roughly $14 million in improper billings during a 12-month period.

First American spokesman Jeff Stives said the company is not aware of some of the allegations raised by the GAO, but has denied all of the previous allegations brought by the HHS Inspector General’s office. “We have been accused and accused and accused, but we have yet to have our day in court,” he said. “We have been hung out to dry by the inspector general.”

The hearing is expected to highlight the growing problem of Medicare fraud, which is gaining new attention as the federal government grapples with how to slow massive cost growth in the program.

Medicare provides health benefits for 35 million Americans--those over 65 and disabled people of all ages.

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In the drive to balance the federal budget by 2002, Republicans want to trim $270 billion from future growth in Medicare spending--representing the biggest single chunk of the GOP’s $894-billion deficit-reduction package.

Experts estimate that 10% of all public and private health spending is attributable to fraud and waste. In the case of Medicare, such a high fraud rate would mean $18 billion is being improperly spent this year out of the federal program’s $181 billion in disbursements.

The Medicare system “is so inefficient that it makes easy pickings for crooks,” according to Commerce Committee staffers.

Among other key examples that will be introduced at today’s hearing is a case in which the government has paid up to $84,000 a year for bed sore bandages for just one patient. The bandages were packaged into a “surgical wound kit” containing a small amount of gauze, rubber gloves and a plastic bag. Nursing homes and hospitals could legally bill Medicare for using three or four kits a day for each bed sore--all at $30 per kit.

The GAO is expected to lambaste HHS for its weak prosecution of fraud and waste in the Medicare system, charging that the health agency’s approach is antiquated compared to the investigative techniques used by the private insurance industry. Only 140 people were convicted of Medicare fraud last year and just 60 civil settlements were made.

Medicare officials as well as members of Congress are particularly concerned because home health care spending has been the fastest-growing category of Medicare outlays, soaring at a rate of at least 25% a year recently.

The services at home can include the work of physical therapists, nurses or homemaker aides. Standards of eligibility have been considerably eased in recent years, causing an explosion in demand.

The service is fully covered by Medicare and requires certification by a doctor. Because there is no charge to the patient, there is considerable demand from patients and their families for home health services. First American, for example, has grown rapidly in recent years, more than doubling the number of its local offices, according to the GAO report. The firm operates 354 offices in more than 21 states and took in Medicare revenue of nearly $616 million last year.

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HHS officials have taken steps to bar First American Health Care from the Medicare program, according to the GAO audit. First American is appealing the administrative action, which could exclude it from Medicare for seven years. The GAO report was requested by Rep. John Dingell (D-Mich.).

Brown, the HHS inspector general, is expected to testify today that First American is under civil and criminal investigation.

Among the charges made by the HHS inspector general is that First American made a significant number of Medicare charges that were “for the personal use or enjoyment of the Mills family,” referring to First American Chief Executive Robert Mills. The charges included utility payments on Mills’ condominium, maid services and cable TV fees for Mills’ mother, according to a finding by the HHS inspector general that was included in the GAO report.

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Times staff writer David Olmos in Los Angeles contributed to this report.