Fraudulent Foreign Medical Claims Plague Insurers

Norma Hilding was hauling a load of clothing to the needy in Tijuana last fall when her 10-year-old daughter, Marisa, came down with the sniffles.

On the advice of a Mexican friend, she took Marisa to see Dr. Jesus S. Guevara at a tiny clinic he operates in two rooms of his home. Guevara took 20 minutes to examine the Yucca Valley child, gave Hilding a bottle of antibiotics and sent them on their way.

Weeks later, taxpayers got and paid the Tijuana doctor’s bill for Marisa: $10,230 for five days of hospitalization at his clinic.

State health officials are still trying to get a grasp on this and other alleged scams to bilk California taxpayers with phony medical claims. But the Medi-Cal fraud is simply the newest twist in international schemes that have plagued health insurers for a decade.

Foreign doctors from Pakistan to Nigeria are constantly inventing ways of using American patients traveling abroad to file vastly inflated or totally false medical bills to U.S. insurance companies. Sometimes, the patient is unwitting; other times, in collusion. And just as often, travelers themselves devise schemes to make money off their insurer by seeking reimbursement for phony claims.

By the time Guevara was arrested while collecting his mail in San Ysidro, Calif., in June, state investigators said he had filed more than $450,000 in allegedly fraudulent claims for dozens of Southern Californians. Among the bills paid: $3,588 for a Tustin 2-year-old’s cold, and $11,014 in “hospital” bills for two children he examined in his van in East Los Angeles.

“We were billed for dozens of people who were not hospitalized in his nonexistent hospital,” said Don Kennedy, a fraud investigator for Medi-Cal, the government insurance program for California’s poor, called Medicaid elsewhere.

In a jail interview in Chula Vista, Guevara, who faces multiple counts of filing false claims and grand theft, blamed the overbilling on another doctor who, he said, handled his billings for a commission.

For state officials, Guevara’s case was an alarming first. California is the only state whose Medicaid program pays for emergency hospitalization in Canada or Mexico, and, until now, foreign claims had been one of the few areas seemingly free of fraud.

New schemes involving Mexican doctors and “hospitals” and patients recruited from south Orange County cities have gotten so lucrative--and blatant--that the FBI has launched its first investigation of fraud involving foreign physicians.

The San Diego-based FBI task force is investigating, among other scams, rings of Mexican doctors and clinics who employ “cappers” to seek out low-level employees or students at Orange County hotels, restaurants and community colleges, according to sources knowledgeable about the investigation.

The cappers promise the employees kickbacks of up to $3,000 if they allow their insurance to be billed for such procedures as $17,000 emergency appendectomies at south-of-the-border clinics. The employees never have to leave their homes.

Federal officials would not comment on the probe.

Such fraud has gone virtually unpunished by private insurers unwilling to spend the time or the money to legally pursue those submitting fraudulent claims from beyond U.S. borders. If they spot them before they are paid, most firms deny the claims, blacklist the scam artists on their books and leave them free to try again with a competitor.

In the absence of penalties, foreign fraud schemes have become increasingly ingenious.

“It’s a game and if you’re not watching it, it’s a very lucrative game,” said Louis Lovato, a Blue Shield of California investigator.

Families pay for European vacations with bogus claims or get south-of-the-border nose jobs by faking baseball-in-the-face accidents.

Elaborate bills for emergency surgeries come from nonexistent hospitals or dilapidated shacks in such places as Pakistan and Bangladesh. And one otherwise impeccable claim for a hysterectomy performed in Iran was made on behalf of a 16-year-old boy.

The lure of a fraudulent medical claim is simple: Who’s going to hold a claim from say, Ghana, to the same standards as one from the United States? And who’s going to check? One Los Angeles family submitted claims from the Dominican Republic during the Thanksgiving holidays for five years in a row before insurers got suspicious. Every year, Lovato said, one family member ended up in the hospital.

“If it wasn’t grandma, it was the baby,” Lovato said. “We phoned the Ministry of Health in the Dominican Republic, and they had no knowledge of the doctors or the clinic. We were just paying for their vacations.”

In St. Louis Park, Minn., a Nigerian-owned travel agency used its computer to print medical claim forms, rubber-stamped with the name of a bogus hospital, for family members and friends traveling back to Nigeria.

Upon their return, all of the travelers filed claims for hospital stays totaling $200,000, said David Lillehaug, a U. S. attorney in Minnesota whose office successfully prosecuted seven people for the fraud. The travelers also filed claims for lost luggage.

Bilking insurance companies is “the American way,” bragged agency owner Akindele Akinola in a taped conversation with an informant included in court records.

New York-based First Services, which probes claims in exotic locales for insurers, contracts with 45 investigators worldwide, including five in Nigeria, and is working on 100 cases. The firm so frequently sees the same scam hitting several U.S. insurers at once that it gives group rates.

The most common case: a sham five-day emergency treatment at a Tijuana hospital, including two or three days in intensive care.

“I’ve seen more than one hospital billing for an intensive-care unit and when you ask to see the unit, you’ll see a bed with a chair next to it where the nurse will sit,” said Diane Carter Kellner of First Services.

Some Mexican clinics lure insured Americans south by advertising in Spanish-language U.S. newspapers in places such as Santa Ana that they welcome American insurance and waive co-payments. A routine examination often is billed as a costly surgical procedure, Kellner said. Some patients are awarded “finder’s fees” for referring others to the clinics.

Other doctors, not qualified to practice in the United States, try to hide the location of their Mexican clinics by using a U.S. billing address. Last year, a U.S. Postal Service inspector caught up with Neil C. Norton, 82, who was billing for treatments at his Tijuana clinic through a post office box in Bettendorf, Iowa.

Norton, whose Instituto Cientifico de Regeneracion uses “electronic urine crystals analysis” to diagnose a host of diseases, agreed to cease portraying himself as a doctor licensed and practicing in the United States, according to court records.

But insurers continue to pay millions of dollars every year for visits to Tijuana area clinics that offer unorthodox treatments that experts say are worthless and sometimes dangerous. Many of these clinics, like Norton’s, use California border town addresses to pose as American providers, said fraud specialists.

Others use U.S. billing companies that disguise claims for cancer treatments, such as coffee enemas and Laetrile, which the mainstream medical community has long dismissed as having no value in treating cancer, investigators said.

The insurance industry does not know how much it loses to fraudulent foreign claims, because not every company aggressively pursues fraud--nor shares the details of scams they do find.

“It’s very difficult to know how much of this there is, because every insurance company operates as its own little fiefdom,” said George Tellichet, an assistant U. S. attorney in Houston.

Tellichet has spent years preparing a case against Cameron Frye, whose Houston company, North American Health Insurance Coordinators, processes tens of millions of dollars in claims for Tijuana clinics catering to Americans.

Frye, a legend among frustrated insurance investigators, was indicted in 1994 on charges that his company falsely represented unorthodox treatments as conventional cancer therapy, inflated fees and billed for services that were never provided.

Insurers say they continue to receive bills from Frye’s firm as he awaits a January 1997 trial date.

But insurance investigators and prosecutors admit the vast majority of cases never come near a courtroom.

“Most of the time, the insurance companies do not push for prosecution,” said Brownlee, of First Services. “It would help cut or discourage other people from committing fraud. But the insurance companies don’t see any profit in pursuing these people.” Brownlee said he sees the same people in Mexico attempting to bilk insurers and “none of them have been convicted.”

By law, insurance companies doing business in California must have investigative units and refer all suspected fraud cases to the state Department of Insurance. But Kenneth Kensler, a supervising criminal investigator with the department, said: “Some companies take us seriously and some do not. . . . Companies don’t want other companies to know exactly how much they’re losing.”

Kensler said his office has never successfully investigated a foreign case because of the difficulty of securing witnesses and evidence from other countries.

For Medi-Cal investigators, the case of Guevara was an eye-opening example of how fraudulent claims from beyond U.S. borders may become a drain on state and federal treasuries. Before, such claims apparently were aimed only at the private insurance sector.

Fraud investigator Kennedy said a doctor hired to review out-of-state Medi-Cal claims first noticed the high number of bills from Guevara earlier this year. When investigators began interviewing patients, they found that few had spent more than a few hours in Guevara’s tiny Tijuana clinic, he said.

Norma Hilding said she was shocked when investigators told her how much Guevara billed for treating her daughter’s runny nose. Guevara also billed $2,340 for two days of hospitalization for examining her husband’s back.

“It’s unbelievable,” said Hilding, 37, who has not been implicated in the alleged billing scheme. “We never stayed in any hospital.”

Guevara also visited Medi-Cal recipients in Los Angeles and Riverside counties, then billed as if they had been hospitalized in his Tijuana clinic, Kennedy said.

“That’s what got us, that he even came up here to see patients,” Kennedy said.

Medi-Cal watchdog Jan Goldsmith, a Republican Assemblyman from Poway, said the Guevara case shows that foreign coverage is a loophole that needs to be closed. He said he plans to introduce legislation disallowing coverage outside the United States during the next legislative session.