Fraud Scheme Targets Patients, Doctors, Insurers

Dr. Lawrence Silk was a latter-day Marcus Welby, asking a hairdresser’s wages to salve the arthritic joints and lower the blood pressures of poor and elderly patients at his office in an oceanside strip mall.

Then a health care fraud ring started sending bogus bills to insurers in his name.

Now someone in Panama is cashing checks made out to him. He’s waiting six months to be paid while insurers scrutinize each bill he sends. The Internal Revenue Service says he owes tax on tens of thousands of dollars he hasn’t received. And he’s behind on his rent.

“We’re what you call treading water,” said Silk, 63. “I didn’t pay the landlord last month.”

The billings are part of a fraud that started in South Florida and has spread as far as New York and California in the last year. Insurers and law enforcement officials say organized scam artists with a detailed knowledge of insurance billing are behind it.

For at least three years, they have favored the Florida retirement belt known as “God’s Waiting Room,” where insurers process a disproportionate mass of bills from elderly patients.

From January through March, insurer United Healthcare turned up about 1,000 phantom billing cases in South Florida alone, using an IBM fraud detection system to screen bills submitted to 35 private health insurers. Phantom billing cases comprise about two of every five fraudulent billings, according to Joyce Hansen, who oversees United Healthcare’s fraud division, Integrity Plus Services Inc.

“It appears that the people doing this understand the insurance business, because they seem to know where our controls are and they know how to bypass our controls,” said Hansen, a past president of the Health Care Anti-fraud Assn.

Florida prosecutors believe phantom billing networks are getting patient information from purloined medical files, doctors’ trash cans and insurance workers selling confidential files on the black market. There’s no way to quantify the problem, said prosecutor Beth Blechman, in charge of Medicaid fraud at Florida’s Office of Statewide Prosecution.

“It’s pervasive,” she said. “It is very common for provider numbers to be accessed by people who have no business with them and billed fraudulently.”

Florida’s Agency for Health Care Administration compiled a list of 50 suspected bogus providers during an investigation of Medicaid fraud in October 1996. A lone family fraud ring set up 28 phantom billing companies that targeted the Medicaid health insurance program for the poor, said Blechman, who is still prosecuting the group.

The ringleader, former drug dealer Gabriel Hernandez, was convicted in April 1997 of racketeering and is serving a 10-year sentence for bilking Medicaid out of $3 million from 1994 through 1996.

After phantom billing schemes started being detected in Florida, scam artists began looking farther afield, and so-called “carrier shopping” became a national scourge.

Margery Glover heads fraud investigations at Xact Medicare, a contractor that processes the 74 million claims filed annually by elderly Medicare policyholders in New Jersey and Pennsylvania. She has referred 14 phantom billing cases to federal prosecutors this year. Insurers operating in California, Michigan, Illinois and New York say they’re seeing similar problems.

The FBI and state prosecutors have had trouble tracing fraudulent operators because they often change names and locations before discrepancies are detected.

It isn’t just insurers and doctors who pay. Policyholders pay in higher rates. Those with lifetime caps on coverage might find out too late--when the insurer refuses to pay beyond a $1 million cap, for example--that they are being denied coverage because crooks have used their names. Some patients have asked insurers to remove fraudulent charges from their accounts, Hansen said. But many people, especially elderly patients, don’t check their statements, and the charges won’t be removed if no one notices.

Cesar Tejera of Pembroke Pines, Fla., was meticulous in scanning his bills, calling his insurer to point out each new bogus claim on the policy he shares with his wife. But swindlers still managed to collect on more than $30,000 in claims he never made.

“It seemed like every week I was receiving claims from the insurance company that were being filed on my behalf or my wife’s behalf, always a different doctor and always a different procedure totaling $1,000 or $2,000,” said Tejera, a 37-year-old computer repairman.

The bogus bills collected in the name of Silk, the North Miami Beach doctor, reveal the crooks’ expertise. Two insurers paid $1,580 for patients Silk never treated. In identical bills naming two Miami women, the companies paid for a comprehensive examination of breathing problems--a test Silk doesn’t have the equipment to perform in his office. The insurance codes for most procedures, which are frequently changed, are accurate.

The bills were sent to the Miami post office box of M.T.W. Associates, a nonexistent company that claimed to be billing for Silk. M.T.W. billed for the costliest procedures it could seek without providing more paperwork.

Each bill accurately listed the name and policy number of an actual policyholder Silk had never seen and was signed Lawrence Silk, M.D., followed by his taxpayer identification number.

“Whoever it is has got to be pretty sharp,” Silk said.

If ever a doctor was undeserving of such treatment, it’s Silk.

When patients complain that they can’t afford an ambulance or taxi to the Miami Heart Institute eight miles away, Silk drives them. He sometimes “forgets” to charge indigent patients, like the 90-year-old man who dropped in on a recent Monday without an appointment because he feared no one could understand his impaired speech over the telephone.

Most of Silk’s patients are Medicare and Medicaid recipients from Miami or Miami Beach. He charges $45 to $60 per visit--the price of a permanent at nearby Isabel’s Hair Place--and his highest bill in years has been $165. So he was taken aback when insurers started sending him five-digit receipts for treating patients from Illinois to Maine.

“When all of a sudden you get something for $20,000 from Minnesota you start to notice,” the silver-haired doctor said. “If I saw somebody for $20,000, I’d remember it.”

Now he’s trying to explain to the IRS why he shouldn’t have to pay taxes on $40,000 in payments that went to chiselers using his name. Tax collectors base their figures on the bills insurers compile under a doctor’s taxpayer identification number--the number the scam artists used on their bills.

Meanwhile, Silk continues to see his patients, hoping authorities catch the culprits before he is forced out of business.

“I didn’t win the lottery,” he said. “I win this.”