Feds Bust 30 for Alleged Medicare Fraud

Federal authorities arrested 30 people, including doctors, and were seeking others in a major Medicare fraud bust Wednesday in New York, Louisiana, Boston and Houston, targeting scams such as "arthritis kits" — expensive braces that many patients never used.

More than 200 agents worked on the $16 million bust that included 12 search warrants at health care businesses and homes across the Houston area, where 27 were arrested.

Federal authorities say those businesses were giving patients "arthritis kits," which were nothing more than expensive orthotics that included knee and shoulder braces and heating pads. Patients told authorities they were unnecessary and many never even received them. But health care clinic owners billed between $3,000 to $4,000 for each kit.

Houston's other scam involved billing Medicare for thousands of dollars worth of liquid food like Ensure for patients who can't eat solid food. Authorities said clinic owners never distributed the food to patients. In some cases, clinic owners billed patients who were dead when they allegedly received the items.

It's the third major sweep since Attorney General Eric Holder, Health and Human Services Secretary Kathleen Sebelius announced in May they were adding millions of dollars and dozens of agents to combat a problem that costs the U.S. billions each year.

Using about a dozen agents in targeted cities, including Miami, the Medicare Fraud Strike Force, has recovered $371 million in false Medicare claims and charged 145 people across the country in just two months.

Two shocked female employees arriving for work Wednesday morning at Memorial Medical Supply in a strip mall in southwest Houston were met by federal agents. Authorities confiscated paperwork and a computer. Owners of the business did not respond to calls from the Associated Press.

The suspects arrested Wednesday in Houston will make court appearances Thursday morning. Suspects in Boston, New York and Louisiana will have first appearances later today.

The first strike force started in 2007 in Miami, a city authorities say is responsible for more than $3 billion a year in Medicare fraud. Clinic owners there would bill Medicare dozens of times for the same wheelchair, while never giving the medical equipment to patients.

The problems have become more complex since then.

Officials say the suspects have moved into more sophisticated scams including home health care, physical therapy and infusion drugs. They've even started tapping into Medicaid Advantage, which allows the elderly and disabled to get benefits through private health insurers. The plans receive a government subsidy and generally offer more benefits than traditional Medicare.

Federal authorities say Miami residents are also moving on to other cities, bringing their scams with them.

Strike force teams, each led by a federal prosecutor and a handful of agents, were started in Los Angeles, Detroit, Houston in the past year.

Since 2007, strike forces in Miami, Detroit and Los Angeles have indicted more than 293 suspects and organizations that collectively have billed the Medicare program for more than $674 million.

Agencies participating in the busts Wednesday included the FBI, the HHS Office of the Inspector General, the Drug Enforcement Administration and the Texas Attorney General's Medicaid Fraud Control Unit.

Along with issuing indictments, authorities freeze bank accounts and seize everything from Rolls Royce's to million dollar homes purchased with funds stolen from Medicare.

Suspects are being charged not just with health care fraud, but all relevant conduct. That means average prison sentences 20 percent more than the overall national average sentence in federal health care fraud cases in 2008.

While authorities are gratified by the arrests, the program's purpose is more than punitive. It's also about deterrence.

In some Miami neighborhoods, the fraud is so rampant that it's become a cultural norm, with some patients raking in more than $1,000 a month, Kirk Ogrosky, deputy chief of the U.S. Justice Department's criminal fraud section.

Bill Corr, Deputy Secretary of Health and Human Services and the top HHS official on the HEAT Team, says the interagency partnership is unprecedented in authorities' ability to track Medicare fraud in real time. In the past, authorities have struggled to catch up with fast-moving crooks. By the time local authorities are alerted to potential fraud, it's already been committed. Sometimes the storefront has shut down and moved somewhere else under a different name.

"We are also working together across the federal government on important new innovations in the way we do business on the front end, to try and prevent crime like this from happening in the first place," said Corr.