Medical Scam Cost Calif. Millions

Patients Allegedly Recruited For Unnecessary, Costly Surgery

(CBS)  Last August, authorities arrested alleged ringleaders of a southern California health scam that has bilked insurers for more than $100 million -- recruiting 5,000 patients from all over America to come to this one surgery center for unnecessary procedures.

As CBS News Correspondent Jerry Bowen reports, it was just one of the nearly 100 clinics involved in a massive $1 billion fraud.

"We've identified a number of patients who've had as many as eight different medical procedures performed on them within a six-month period," says Daniel Martino of the FBI's healthcare fraud squad. "It's outrageous.

"The billings for one particular patient exceeded over $280,000."

Some of the unnecessary operations included dangerous procedures to correct sweaty palms where none existed, unneeded cosmetic surgery and routine $2,000 colonoscopies billed at $40,000.

The ringleaders lured mostly immigrant, low-income workers with company health insurance, promising them up to $5,000 -- no work involved. It even became a family affair, says BlueCross BlueShield, which is suing to get its money back.

"The mother and father go in on successive days and have an endoscopy on one day, a colonoscopy on the other," says Byron Hollis, the national antifraud director for BlueCross BlueShield. "And then the children, as well, were subjected to these same procedures."

Some of the children were as young as 12, according to the lawsuit.

They were able to get away with it, Bowen reports, because of California's prompt pay law, which requires the insurance companies to pay up in 30 to 45 days, leaving little time to verify the claims, and once again, making California the epicenter of insurance fraud.

"It started with staged car accidents in the early 1990s. It got involved in cosmetic surgery fraud cases in the mid 1990s. And now we've grown into this surgery center fraud," says Martino.

While the crackdown continues, what's clear is that consumers are going to pay, too, as fraud continues to push up the cost of healthcare.