3 Charged in Medi-Cal Billing Scam

In a new round of Medi-Cal prosecutions, the owners of a Huntington Beach laboratory were charged Wednesday with operating a fraud mill that collected more than $1.5 million for blood tests that were never performed.

Court documents filed by the state attorney general’s office say that for more than six months the three business partners submitted phony claims to Medi-Cal, the state’s medical poverty program, using patient names and identification numbers bought on the black market.

The documents said the partners, operating under the name Hospital Circle Medical Laboratories, claimed to have performed hundreds of blood tests but investigators could find no evidence that the laboratory had ever received a single blood sample from any Medi-Cal patient.

“A lot of these laboratories at least create the facade that they are doing legitimate work. . . . In this particular case, they didn’t even make an effort to mask their fraudulent activities,” said Collin Wong, director of state Atty. Gen. Bill Lockyer’s Bureau of Medi-Cal Fraud and Elder Abuse.

He said investigators have seized more than $500,000 in cash assets from the business.

The new charges were filed in an ever-widening probe of fraud in Medi-Cal, the $18-billion federal-state program that provides medical services for California’s poor.

The latest case is part of a government crackdown on fraud that was sparked by the FBI and endorsed by Gov. Gray Davis, who has established a task force of state and federal officials to direct the effort. Since taking office a year ago, Davis has more than doubled the number of auditors and investigators assigned to root out corruption in the vast program.

The initial FBI investigation concentrated on medical supply businesses in the Los Angeles area. In the last two years, more than 100 medical supply wholesalers and retailers have been accused of fraud; 40 have pleaded guilty. The FBI estimates that the fraud uncovered in the program may eventually reach $1 billion.

In recent weeks, the probe has stretched to dental services and now blood laboratories. Last week, three women and one man were arrested in South Gate by the attorney general’s office and accused of paying San Joaquin Valley farm workers to make phony dental claims.

On Wednesday, the attorney general filed charges of money laundering, identity theft and fraud against Imran Shams, 41, of Brooklyn, N.Y., Lourdes Navarro, 41, of Glendale, and Zubair Younis, 42, also of Brooklyn. The charges carry a maximum penalty of 10 years in prison and $1 million in criminal fines.

At an arraignment in Superior Court in Westminster, bail for Shams was set at $2 million at the request of prosecutors who said he had been convicted in 1990 of similar charges involving the Medicaid program in New York. Bail for Navarro was set at $100,000. Prosecutors said Younis was still at large.

In an affidavit, investigators said the three partners were charged with identity theft because they had used the names of legitimate doctors to back up their claims to Medi-Cal. Under Medi-Cal rules, a laboratory cannot claim payment for blood tests unless it includes the name of the doctor who submitted the blood sample.

The affidavit said doctors whose names were used on the billings presented to Medi-Cal by Hospital Circle Medical Laboratory told investigators they had never submitted any blood samples to the lab.

Investigators said that when they searched the laboratory, they did find some blood-testing equipment but it was evident that it had not been used for months. They said some of the equipment was not functional. Chemicals needed to perform the tests, they said, were out of date and “one of the chemicals had mold growing on it.”

The affidavit said a department of health specialist had concluded “there was no way this laboratory had been testing any specimens.”

During the search, investigators said they could only find one employee at the laboratory, a receptionist who said “she never saw anyone operate any of the lab instruments nor has she ever seen any test requisitions or results in the lab. . . . She never saw any blood samples in the lab.”