Column: 1-800-GET-THIN: Regulators and insurers twiddled thumbs as a $250-million medical fraud allegedly unfolded

One doesn’t need a long memory to recall the time when a surgical weight-loss program named 1-800-GET-THIN dominated Southern California’s advertising landscape. Billboards featuring a willowy blonde, stating that the surgery was a “safe” one-hour procedure and implying that it was covered by insurance blanketed the Southland like a layer of adipose. Its jingle burrowed into radio listeners’ brains like an ear worm.

As I reported in a series of columns from 2010 through 2014, the people behind 1-800-GET-THIN were the Omidi brothers — Julian, whose medical license had been revoked by the state of California, and Michael, whose license was subject to probation when the first of my columns appeared. That three-year probation expired in late 2011.

Eight of these original columns can be found here.

Even though I reported that at least five patients had died following procedures to implant Lap-Bands at clinics affiliated with 1- 800-GET-THIN, according to lawsuits, coroners’ autopsy reports and other public records, law-enforcement authorities and California regulators took years to jump into action.

Now things seem to be changing. Julian Omidi and one other physician were arrested Wednesday on a 37-count federal indictment alleging they defrauded insurers of more than $250 million in billings related to the 1-800-GET-THIN surgery business, while subjecting patients to “unnecessary medical procedures” such as “sleep studies.” Michael Omidi wasn’t named in the indictment.

Julian Omidi’s lawyer, Kamille Dean, told The Times by email, “The indictment against my clients is based on false claims” and is “fraught with government misconduct.” She attached copies of a couple of complaints she sent last year to a passel of Department of Justice officials, up to and including Atty. Gen. Jeff Sessions, claiming that prosecutors were out to get her client through perjured testimony and other misdeeds.

Among the alleged victims in the indictment are at least eight private insurers and TriCare, which provides medical coverage to active-duty and retired military personnel. The government charges that Omidi and the other physician, Mirali Zarrabi, forced patients to undergo unnecessary tests and then falsified results to prompt the insurers to cover the surgeries.

The federal investigation brought together the Food and Drug Administration, the Internal Revenue Service, the FBI and California law-enforcement authorities, according to a statement from the U.S. attorney’s office in Los Angeles. Seeing so many agencies working together is encouraging. But whatever the outcome of this criminal case, no one should see it as a victory for justice and government oversight. Instead, the 1-800-GET-THIN saga is largely a story of inaction by government agencies and insurance companies while a public health crisis unfolded in front of their eyes.

If you want to know why America’s healthcare costs and insurance premiums continue to rise, one reason is that these sentries consistently and repeatedly fell down on their jobs. In the words of R. Damon Rowe, the agent in charge of the IRS’ end of the investigation, “Those who betray patients and commit healthcare fraud steal from taxpayers‎ and insurance providers, while corrupting the integrity of our nation’s healthcare system.”

This has been a long road. Back in 2015, federal authorities seized $109 million in cash and securities from bank accounts connected to 1-800-GET-THIN, which the government said were funds “traceable to a long-term fraud scheme.” The government is seeking forfeiture of some or all of those funds as part of the criminal case, and says it’s also intending to pursue civil forfeiture of the assets. In 2014, Cindy Omidi, the mother of Julian and Michael, was convicted of federal money-laundering charges, but 1-800-GET-THIN was not mentioned at her trial. She was sentenced to three years’ probation and discharged from supervision early in February 2017.

Where the fraud case goes from here is impossible to know for certain. Although it’s the result of five years of federal investigation, the indictment is only an accusation. But it’s worth recapping the eight years that preceded Wednesday’s arrests. That’s because it’s a saga of regulatory and legislative inaction at the state and federal levels that created a massive public health problem. Some of the loopholes allegedly exploited by 1-800-GET-THIN haven’t been closed, even now.

The biggest loophole fell between the Medical Board of California, which historically has been among our laziest regulators, and the state Department of Public Health. In 2007, a state appeals court stripped the Department of Public Health of its authority over outpatient clinics owned by doctors, and handed it over to the Medical Board. But the Medical Board had no expertise in overseeing medical facilities; the DPH, which did, couldn’t do anything about clinics owned by doctors.

Here’s how that worked with a facility at 9001 Wilshire Blvd. in Beverly Hills, where surgeons associated with 1-800-GET-THIN performed procedures. In May 2009, Department of Public Health inspectors visited the clinic. They produced a 22-page list of deficiencies that makes grisly reading — unsanitary conditions, inoperative scrub sinks, one-time-only equipment being reused. (A copy is here.) At the time, an Omidi lawyer blamed the violations on unidentified facility managers who he said were placed in charge by the Omidis.

The inspectors shut down the clinic on the spot — for a day. But it couldn’t take further action, because the owner of the facility was listed in its records as Michael Omidi, a doctor. Nor did the Medical Board move to shut down the location permanently. Two patients known to have had weight-loss surgery performed at the facilities died soon after their procedures, according to Los Angeles and Riverside county coroners’ reports.

Responsible regulators would have screamed from the rooftops about a loophole that prevented them from doing their jobs. Not the Medical Board. In 2011, when I asked Barbara Yaroslavsky, its then-president, why she had remained largely silent, she replied that she didn’t think it proper for her to “act independently” from the governor’s office, which set her budget. While she remained fixated on being a team player, how many patients became injured or died at clinics nominally under the board’s jurisdiction? We’ll never know.

The Medical Board outsourced its supervision of surgical clinics to four independent accreditation agencies, which are supposed to perform inspections and hold the clinics to professional standards. One problem that cropped up was that when an agency revoked a clinic’s accreditation, the clinic could simply reapply with one of the others and start again from scratch. That accreditation-shopping ceased after 2011, when state law decreed that an accreditation denial or revocation by one agency must be honored by the others.

Who else allowed this crisis to continue? Allergan was the leading manufacturer of Lap-Bands, inflatable cuffs that constrict the stomach to limit food intake, and entities affiliated with 1-800-GET-THIN were among Allergan’s biggest customers for the devices.

Allergan continued to sell them Lap-Bands as local, state and federal agencies stepped up their examinations of the 1-800-GET-THIN affiliates amid questions about the advertising, surgery-related deaths and accusations of insurance fraud. Only in 2012, long after these issues surfaced, did Allergan stop selling to these providers. At that time, Allergan refused to explain its decision to cut the providers off. Allergan exited the Lap-Band business in 2013.

Then there’s the insurance industry. Health insurers depict themselves as bulwarks against billing fraud and unnecessary medical treatment. That’s one reason they were left at the center of the nation’s healthcare delivery system by the Affordable Care Act.

Yet according to the indictment, people associated with 1-800-GET-THIN ripped off these insurers to the tune of more than $250 million. UnitedHealth, one of the nation’s largest health insurers — and one of those listed in the indictment as a victim of the alleged fraud — asserted in a 2014 lawsuit that it had paid some $43 million in fraudulent billings to surgery centers and other entities allegedly connected with the Omidis. The insurer said it got rooked because it placed “justifiable reliance upon … false billing.” The company implied it had no choice but to “rely on the veracity” of the bills, and woke up belatedly to the alleged fraud. UnitedHealth’s lawsuit is still pending in Los Angeles federal court.

In other words, a leading firm in an industry that will waste the time of enrollees and providers debating, for instance, how many days to cover of a patient’s hospital stay, says it somehow allowed $43 million to go out the door before realizing that it was being systematically cheated.

One way the alleged fraud got so out of control was that regulators didn’t seem to talk to one another.

The indictment alleges that Julian Omidi and his co-defendants required Lap-Band patients to undergo medically unnecessary “sleep studies,” then falsified the results so they could bill insurers for sleep apnea treatments. This behavior shouldn’t have been news to the Medical Board of California. In 2015, the board accused Michael Omidi, Julian’s brother, of negligence for having a weight-loss patient undergo a sleep study, then giving her “inaccurate or misleading information” that she had sleep apnea.

The Medical Board settled the accusation by issuing Michael Omidi a public reprimand for having “failed to maintain adequate and accurate medical records.”

As we did in 2012, let us now call the roll of the known departed. Willie Brooks, 1974-2009. Ana Renteria, 1976-2010. Laura Lee Faitro, 1959-2010. Tamara Walter, 1958-2010. Paula Rojeski, 1955-2011. According to coroners’ reports, lawsuits and other public documents, they all died after undergoing Lap-Band surgery at clinics associated with 1-800-GET-THIN. Will they finally get justice?

Keep up to date with Michael Hiltzik. Follow @hiltzikm on Twitter, see his Facebook page, or email michael.hiltzik@latimes.com.

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