As soon as a pending Medicare fraud lawsuit is settled by Ventura County, the FBI will step up a parallel investigation to determine if any county mental health officials should face criminal prosecution, authorities disclosed Friday.
The focus of the FBI's criminal probe is whether officials deliberately broke the law when billing the federal government for services over an eight-year period ending in 1998.
"We didn't want to do anything on the criminal side that would impact the civil side," said David Nesbitt, FBI agent in charge of the Ventura office. "So we're at a preliminary stage. There are a lot of witnesses we have not talked to and a lot of documents we have not seen."
Nesbitt also revealed that his office began its own separate inquiry into county billing practices eight months ago. He estimated it will take six more months to decide whether criminal charges should be filed.
A civil inquiry by the U.S. attorney's office in Los Angeles began last year after a Ventura County psychiatrist filed a whistle-blower lawsuit complaining that the mental health department systematically overbilled Medicare for treatment.
Federal prosecutors--after joining the case--offered to settle it earlier this month for $17 million, then tentatively accepted a $15.3-million counteroffer by the county.
The Board of Supervisors will discuss the settlement again in closed session Tuesday, county counsel Jim McBride said. "There's more to it than money," McBride said. "That's why we're still talking."
Supervisor John Flynn said he will ask the board to finalize the settlement in open session. "It's time to put this behind us," he said.
Nesbitt said, however, that the FBI is just beginning to look in earnest at whether the county mental health department intentionally broke federal law when apparently overbilling Medicare for services in thousands of cases from 1990 to 1998.
"Because of the civil litigation, the witnesses are 'lawyered' up. So we are stuck," he said. "Once it is closed, we can start talking to some folks. Then we'll know where it's going to lead us."
The FBI opened its separate inquiry in late 1998 after news reports of the county mental health problems aroused Nesbitt's interest, he said.
Since then one local FBI investigator has assisted the U.S. attorney's office, he said. "Now we want to sit down and look at everything that was dredged up in the civil case," Nesbitt said.
Both the civil and criminal cases would be based on violations of the federal False Claims Act, a tough statute that makes it illegal to file false claims with the government and collect money from them.
Under the act, simply proving that the claim was false is enough to collect damages civilly. But criminal charges are not filed unless prosecutors can prove that suspects knowingly broke the law, said Kimberly Dunne, chief of the Public Corruptions and Government Fraud Section of the U.S. attorney's office in Los Angeles.
She would not comment specifically on the Ventura County case.
The whistle-blower provision of the False Claims Act allows those aware of illegal acts to file lawsuits and receive 15% to 30% of the money the government collects if it joins in the lawsuit and wins. In the Ventura case, Dr. Jerome Lance, a veteran county psychiatrist, stands to collect up to $2.5 million.
Even as the FBI confirmed its criminal inquiry Friday, the state prosecutor who reviewed Ventura County billing practices for violations of state law said he found no real problems.
That is because federal billing guidelines are much more stringent than those used by the state, said supervising Deputy Atty. Gen. John Dratz Jr.
Federal investigators contend that county social workers, nurses and psychologists used doctors' names and billing numbers to charge Medicare for services--even if a doctor never had contact with a patient.
That is illegal under federal law, but allowable under state law, Dratz said. "We found that although there were violations of Medicare rules, there were no violations of [state] Medi-Cal rules," he said.
Ventura County could have taken steps, Dratz believes, to obtain a federal waiver so its California-approved billing procedures were accepted by the federal government.
"There are differences in the rules, but I don't think they're that confusing," he said.
Dratz said it is not his intention to give the county billing practices a clean bill of health, because he did not do a full top-to-bottom audit of mental health's billing practices. There were not enough problems to justify that, he said.
Dratz also questioned whether county officials will be charged with any crimes, because he said he saw no intentional acts to defraud.
"The most I see is negligence, or an inattention to medical regulations," he said. "I'm guessing it's inattention, and it is such a big program."
County billing practices became an issue last year, after the Board of Supervisors voted to merge the county's mental health and social service agencies. Psychiatrists opposed the merger, believing it would usher in a "social model" of mental health treatment that would dilute a doctor's ability to make medical decisions.
After that, Lance filed his lawsuit in Los Angeles federal court, and notified federal prosecutors.