Medicare fraud cited in area

Times Staff Writer

After a series of surprise inspections in Los Angeles County, Medicare fraud investigators found persistent corruption among medical equipment suppliers who set up phony offices that billed the government $21 million over one year, prompting officials to call for stronger enforcement efforts, according a report to be released today.

Investigators checked 905 suppliers. Their offices should have been filled with wheelchairs, crutches, bedpans and other medical equipment. But the offices of about 115 suppliers -- 1 in 8 -- were closed, in vacant buildings or listed under the addresses of other businesses, such as a doctor’s office and an art gallery, according to the report.

Federal investigators are expected to recommend today that the government investigate those suppliers and do more to fight fraud among Medicare equipment suppliers in L.A. County.


Medicare records show that L.A. County is home to nearly 5,000 suppliers. Investigators have uncovered $300 million in potentially fraudulent billing in the last two years. Victims include non-English-speaking Asian and Latino Medicare recipients who were duped by fake suppliers and then billed for items they did not need or receive.

Investigators from the Office of the Inspector General at the U.S. Department of Health and Human Services visited L.A. in September and October after a similar investigation in southern Florida. Both areas have recently been hit by fraudulent billing to Medicare, the federal health insurance program for the elderly.

Investigators found Medicare managers can do more to reduce supplier fraud, including conduct more surprise federal inspections; require suppliers to pay for and pass a federal background check and maintain a sufficient inventory; charge suppliers who can’t be found during surprise inspections; and declare a temporary moratorium on accepting new suppliers in high-fraud areas.

In response to the report, Medicare managers said they were aware that L.A. had become a fraud hot spot and were addressing the problem through new requirements that are to take effect in 80 metropolitan areas this spring. Included are Los Angeles, Bakersfield, Fresno, Sacramento, San Diego, San Francisco, San Jose and Visalia.

Under the new rules, suppliers will have to apply to one of 10 accrediting organizations, paying fees of $1,500 to $10,000. During accreditation, they will have to pass background checks and more frequent inspections with short notice. If those checks raise suspicions of fraud or the potential for fraud -- for instance, if a manager has had a felony conviction within 10 years -- the supplier could be expelled from Medicare.

Medicare records show that in California, 123 suppliers had their billing privileges revoked for the year preceding April 2007. Of those, 108 were in Los Angeles, Orange, Riverside and San Bernardino counties, and 83 were in Los Angeles County alone.


Suppliers acknowledged their industry has been plagued by fraud, but said accreditation and inspections -- not added fees -- were the answer.

“These type of upfront measures to keep criminals out of Medicare in the first place is the key,” said Michael Reinemer, a spokesman for the Arlington, Va.-based American Assn. for Homecare, a national trade group of about 500 suppliers.

Reinemer said federal regulators cracking down on fraud should be careful not to “penalize the law-abiding, hard-working providers, many of whom are small family-owned operations.”

Bob Achermann, executive director of the Sacramento-based California Assn. of Medical Product Suppliers, said added fees fall even harder on California medical suppliers, who would face a 10% cut to state Medi-Cal reimbursements under the latest budget proposal.

“We applaud all efforts to root out the bad providers,” Achermann said, but, “I don’t know if these efforts will be effective. . . . You cut these rates of reimbursement and increase the burden of being a provider, it creates a very difficult situation.”