Emerging Issues in Healthcare Fraud

1. Emerging Issues in Healthcare Fraud Rebecca S. Busch, RN, MBA, CCM, CBM, CFE, FIALCP, FHFMA CEO, Medical Business Associates 580 Oakmont Lane, Westmont IL 60559 www.medbizassociates.com Bbusch@medbizassociates.com 630.789.9000 August 31, 2009 1

2. Agenda Fraud: key initiative in healthcare reform Global Perspective on Fraud & Fraud Concepts in Healthcare Profiling Fraud Review Critical Schemes Review Latest Fraud Issues Who Gets Hurt? Trigger Points 2

3. FRAUD – Technical Definition • Misrepresentation of a material fact consisting of a false representation, concealment or non-disclosure;     • Knowledge of the falsity • Intent to deceive and induce reliance; • Justifiable and actual reliance on the misrepresentation; and • Resulting damages. 3

4. FRAUD – On the front line • “Things” or “Events” that hurt people • Affecting ones person, home, family, assets, and community • Resulting in disability, financial devastation, loss of loved ones, and death • Leaving a person with a loss of faith, hope, trust, and sense of identity 4

5. WHY AN ISSUE? • 2 TRILLION DOLLAR Industry • OIG ROI ON AUDITS/INVESTIGTATION $17 TO $1 • Estimated that $60 billion annually goes to fraud Source: http://www.oig.hhs.gov/testimony/docs/2009/4-22-09HomelandSecurity.pdf 5

6. OIG areas of concern • Payments for unallowable services • Improper services not rendered • Improper claims submissions • Medicare reimbursement rates are too high for certain services. • Payments for inadequately documented services • Manipulation of billing systems • Inaccurate wage data • Manipulative gaming through discharge or transfer of patients to facilities for financial versus clinical reason. • Unreasonable and not medically necessary services Source: http://www.oig.hhs.gov/testimony/docs/2009/4-22-09HomelandSecurity.pdf 6

7. OIG Identified Vulnerabilities • DME suppliers circumventing enrollment and billing controls • High levels of improper Medicare payment for certain types of CME, prosthetics, orthotics, and supplies (DMEPOS); • Inappropriate reimbursement rate for certain DMEPOS. Source: http://www.oig.hhs.gov/testimony/docs/2009/4-22-09HomelandSecurity.pdf 7

8. 5 Principals of Effective Anti Fraud Activity • Scrutinize individuals and entities that want to participate as providers and suppliers prior to their enrollment in health care programs. • Establish payment methodologies that are reasonable and responsive to change in the market place. • Assist health care providers and supplier in adopting practices that promote compliance with program requirements, including quality and safety standards. • Vigilantly monitor the programs for evidence of fraud, waste, and abuse. • Respond swiftly to detected frauds, impose sufficient punishment to deter others, and promptly remedy program vulnerabilities. Source: http://www.oig.hhs.gov/testimony/docs/2009/4-22-09HomelandSecurity.pdf 8

9. Global Perspective • Primary Healthcare Continuum • Secondary Healthcare Continuum • Information Continuum • Consequence Continuum • Transparency Continuum 9

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16. Healthcare Continuum 16

17. $ - money exchange D – Discounted Price DP- Discounted Product R – Rebates P- Product 17

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21. Fraud Issues • Medical Identity Theft • Illicit Provider Rx Sales • Illicit Internet Rx Sales • Drug Diversion, Adulterated Drugs • Counterfeit Drug Activity • Theft of limited Resources (medically unnecessary services) 21

22. Fraud Issues • Vulnerable Patients – Neglect & Abuse • Patient Experimentation • Off Label Medication Use • Provider False Claim • Foreign Nationals Shopping Health Dollars in US • Vendor/TPA Fraud 22

23. Medical Identity Theft • MIT is the theft of IIHI for the purpose of misrepresentation of health information to obtain access to property or permanently deprive or harm an individual while interacting within the healthcare continuum. Use of an individual’s identity outside the healthcare continuum is considered identity theft. • When a perpetrator steals all or part of the IIHI elements from a medical record file to open up a credit card account and go on a shopping spree, it is considered identity theft—not medical identity theft. The differentiating factor for medical identity theft is that the stolen information is used for illegal gains within the healthcare domain 23

24. Illicit Prescription Activity • Counterfeit Drugs • Adulterated Drugs 24

25. Target Drugs • Antibiotics, vaccines • Antimalarials • Hormones • Steroids. • Anticancer • Antiviral drugs • Transplant rejection drugs • Anything else available 25

26. Sample: Procrit 26

27. Sample: Procrit 27

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29. Sample: Ponstan Although similar in appearance to the authentic tablets, the counterfeit Ponstan tablet on the left contains no active ingredient. Instead, it is composed of boric acid, brick dust and paint. Boric Acid is a pesticide that can cause gastrointestinal and renal failure. 29

30. The counterfeit Lipitor tablets on the left are nearly identical from the authentic tablets on the right. Only distinguishable to the consumer by their bitter taste, the counterfeit tablets were among more than 18 million counterfeit Lipitor tablets removed from the U.S. supply chain in 2003. Columbian authorities raided this manufacturing site where they found more than 800,000 counterfeit Ponstan tablets, as well as large quantities of Terramycin, packaging for both products, and manufacturing equipment. 30

31. Sample: Viagra This is a Viagra counterfeiting site in Egypt. Counterfeit tablets were being given their blue coloring using an old cement mixer. Clearly, the manufacturing conditions were far from sterile. 31

32. This an old cement mixer used to give counterfeit Viagra tablets their blue coloring. 32

33. Counterfeit One Touch Basic/Profile Test Strips • Counterfeit One Touch Basic/Profile Test Strips, lot numbers 272894A, 2619932, and 2606340 • Lot Numbers 272894A, 2619932, or 2606340 appears on the outer carton and on the inside container (vial). • The outer carton is written in Multiple Languages including English, Greek and Portuguese. • The outer carton is labeled as 50-Count One Touch (Basic/Profile)Test Strip packages • The bottom of the outer carton does not include an NDC number. 33

34. What Else?....Rx Providers • “JORGE A. MARTINEZ, M.D. (CLEVELAND):This investigation resulted in the first known prosecution involving a criminal charge of Health Care Fraud resulting in death. • The case focused on the illegal distribution of pharmaceutical narcotics and billing for unnecessary medical procedures. • The investigation revealed that Dr. Martinez provided excessive narcotic prescriptions, including Oxycontin, to patients in exchange for the patients enduring unnecessary nerve block injections. Dr. Martinez’ actions directly resulted in the death of two of his patients. From 1998 until his arrest in 2004, Martinez submitted more than $59 million in claims to Medicare, Medicaid, and the Ohio Bureau of Worker's Compensation. 34

35. What Else?....Rx Providers • In January 2006, a jury found Martinez guilty of 56 criminal counts, including distribution of controlled substances, mail fraud, wire fraud, Health Care Fraud, and Health Care Fraud resulting in death. Martinez was later sentenced to life in prison. • This investigation was conducted jointly with the HHS-OIG, Ohio Bureau of Workers Compensation, DEA Diversion, AdvanceMed, Ohio Department of Job and Family Services, Anthem Blue Cross Blue Shield and Medical Mutual of Ohio.”[1] [1] http://www.fbi.gov/publications/financial/fcs_report2006/financial_crime_2006.htm 35

36. What Else?...Drugs • BANSAL ORGANIZATION (PHILADELPHIA):This investigation was conducted jointly with the DEA and IRS and was focused on a Philadelphia-based Internet pharmacy drug distributor which was smuggling drugs into the U.S. from India and selling them over the Internet. • The criminal organization shipped several thousand packages per week to individuals around the country. In April 2005, 24 individuals were indicted on charges of distributing controlled substances, importing controlled substances, involvement in a continuing criminal enterprise, introducing misbranded drugs into interstate commerce, and participating in money laundering. Over $8 million has been seized to date as a result of the charges. 36

37. What Else?...Drugs • As of December 1, 2006, 12 suspects have pled guilty, three have been convicted at trial, four are in foreign custody, and five remain fugitives. This investigation was worked jointly with the DEA, IRS, ICE, USPIS, and the Lower Merion Police Department. I] [i] http://www.fbi.gov/publications/financial/fcs_report2006/financial_crime_2006.htm. 37

38. Dangerous Doses • Operation Stone Cold Florida counterfeit ring • Ring charged with trafficking in bad medicine – indicted in 2003 on charges of racketeering, conspiracy to commit racketeering, organized scheme to defraud, grand theft, dealing in stolen property, sale or delivery of a controlled substance, possession with intent to sell prescription drugs, sale and delivery of a controlled substance and purchase or receipt of a prescription drug from an authorized person. 38

39. Perpetrators • Michael Carlow – ex-convict • Candace Carlow, wife • Thomas Atkins, brother in law • Marilyn Atkins, mother in law • Jose L. Benitez, business partner • 14 other parties • $42 million dollar enterprise 39

40. Profile of one victim • Timothy Fagan • 16 years of age • Receive a successful live transplant • Mom injecting Epogen at home once per week • Timothy experienced excruciating pain • Mom checks in with Doc – receives notice of counterfeit Epogen 40

41. How did this happen? • Investigation found that no chain of custody exists once the drug leaves the manufacturer. • Drugs lost in the secondary wholesaler market • Anyone can apply for a license 41

42. Manufacturer National Wholesaler Gray Market Regional Wholesaler National Wholesaler Pharmacy Patient 42

43. Jury Convicts Miami Physician and Nurse of $11 Million HIV Infusion Medicare Fraud • Miami physician Ana Alvarez-Jacinto, 54, and nurse Sandra Mateos, 43, were found guilty by a Miami jury for their roles in an $11 million HIV/AIDS infusion fraud scheme. • Evidence at trial established that both defendants worked at Saint Jude Rehab Center Inc. ( St. Jude ), a clinic that purported to specialize in treating HIV/AIDS patients. St. Jude was operated and owned by indicted fugitives Carlos Benitez and Luis Benitez, and managed by convicted co-conspirators Aisa Perera and Mariela Rodriguez. 43

44. Jury Convicts Miami Physician and Nurse of $11 Million HIV Infusion Medicare Fraud • Evidence at trial proved that between June and November 2003, Alvarez-Jacinto, with the assistance Mateos, ordered hundreds of medically unnecessary HIV infusion treatments at the clinic. • Evidence at trial also established that HIV-positive Medicare patients were brought to the clinic by Carlos and Luis Benitez for the purpose of getting cash payments in exchange for allowing the clinic to bill for unnecessary treatments. 44

45. Jury Convicts Miami Physician and Nurse of $11 Million HIV Infusion Medicare Fraud • Testimony at trial revealed that defendant Mateos and other co-conspirators paid the patients cash kickbacks of approximately $150 per visit. • After patients had been paid, they agreed to allow Alvarez-Jacinto and her co-conspirators to prescribe, and sometimes administer, unnecessary infusion treatments. • According to testimony at trial, St. Jude then billed Medicare for approximately $11 million for the unnecessary services. For those claims, Medicare paid more than $8 million to St. Jude. 45

46. WHO GETS HURT? • HIV (Human immunodeficiency virus) primarily infects vital cells in the human immune system • AIDS (Acquired immune deficiency syndrome) the progression of disease • These individuals mostly die from opportunistic infections or malignancies associated with the progressive failure of the immune system 46

47. WHO GETS HURT? • The aim of antiretroviral treatment is to keep the amount of HIV in the body at a low level. This stops any weakening of the immune system and allows it to recover from any damage that HIV might have caused already. • AIDS can attack cells in the immune system for example Platelets: Cells that help the blood to clot. 47

48. WHO GETS HURT? • $11 million dollars stolen • $1,000 per infusion • 11,000 patients (2.3%) • At the end of 2007, the estimated number of persons living with AIDS in the United States and dependent areas was 468,578 48

49. March 2009 Arrest in Florida • Two Miami-area residents pleaded guilty today in connection with a $10 million Medicare fraud scheme involving HIV infusion clinics • $11 million dollars stolen • $1,000 per infusion • 10,000 patients 49

50. March 2009 Arrest in Florida • To make it appear that the patients actually had low platelet levels, Del Cueto admitted that she and her co-conspirators used chemists, including Dagnesses, to manipulate the blood samples drawn from Midway's patients before the blood was sent to a laboratory for analysis. 50