California’s largest dental HMO, already under state investigation for allegedly “shoddy” patient care, is now the focus of a federal criminal probe into insurance-fraud allegations made by former employees of Western Dental Services.
About a dozen investigators from the Federal Bureau of Investigation and the U.S. Postal Inspector’s Office raided two Western Dental clinics Friday morning in the Sacramento area and hauled out boxes of medical records sought under court order.
Investigators were seeking evidence of what they believe to be “widespread overbilling” by Western Dental offices throughout California, according to an affidavit filed in U.S. District Court in Sacramento, a copy of which was provided to The Times. The court papers also say that federal investigators suspect the alleged insurance fraud scheme was carried out with the knowledge of Western Dental management and owners.
Western Dental, a private company owned by Robert Beauchamp Jr. and his family, operates a chain of 100 dental clinics in California, many of them catering to lower-income patients. It has about 357,000 members in its dental health maintenance organization.
In a statement, Western Dental President Robert C. Schur said the company is “confident that the FBI will find no evidence of wrongdoing.”
He said the Justice Department had not informed the company about the nature of its investigation. The company pledged “full cooperation” with the federal probe.
No criminal charges have been filed, the FBI said.
The latest disclosure follows recent accusations by state regulators that Western Dental was providing “shoddy, dangerous” medical care to patients and operating a “low-quality dental mill” in which dentists were encouraged to over-treat patients to maximize profits.
The state’s allegations were made in a lawsuit, filed in April, that seeks to place the dental HMO in receivership--a maneuver to effectively replace its management. It is the first time that the California Department of Corporations, the state agency that regulates the HMO industry, has attempted such an action.
State regulators also are seeking a $3-million fine against Garden Grove-based Western Dental.
Western Dental executives have strongly denied the allegations and charged the state lawsuit is an example of regulatory overreach. The company also has blasted Corporations Commissioner Keith Bishop for “a calculated campaign of misinformation against the company.”
The federal probe predated the state’s lawsuit and was a result of a tip from a former Western Dental dentist who claimed the company routinely overbilled insurers for orthodontics and general dental work. The affidavit states that FBI and postal inspectors met with executives from Delta Dental and Kemper Insurance Cos. about the dentist’s claims.
The affidavit also says that investigators suspect Western Dental was submitting inflated claims to Denti-Cal, the state’s dental insurance program for the poor.
According to the affidavit, two former Western Dental insurance clerks told the FBI that overbilling practices were commonplace within the company and that they had received specific training from other Western Dental personnel in how to submit inflated claims.
The former employees said Western Dental would often submit bills to insurers that were double the actual amount charged to patients, according to court papers. Insurers typically pay from 50% to 80% of the amount billed, so by inflating the bills, Western Dental would get a percentage of a higher figure. But the Western Dental claims routinely included a statement from dentists that the amount billed to the insurer matched the actual fees charged to the patient, even though that was not true, the affidavit states.
For example, on crown work for which a patient was billed $341, Western Dental might bill the insurer $600, former clerk Patty Maravillo told investigators. Western Dental would then collect 50% of $600--or $300--rather than the $170.50 that it would have received if it had billed $341.
The patients were typically charged nothing or a nominal amount for their dental services, according to Maravillo.
FBI special agent Todd Drost said the investigation is continuing.
Schur said Western Dental was not surprised by the FBI investigation and suggested that it was connected to a recent highly critical state report on the company, which it has criticized as unfair and flawed.
The company also has charged that there was a “strong political motivation” behind the state’s suit, which was filed a few weeks before Bishop was facing a crucial confirmation vote before the state Senate. Bishop eventually won confirmation.
Bishop has denied any political motive, noting that his agency was investigating Western Dental for eight months before filing the lawsuit. Moreover, Bishop has noted that Western has a decade-long history of run-ins with regulators over its medical care.