Insurance Fraud Casebook

Paying a Premium for Crime

Laura Hymes, Joseph T. Wells, Joseph T. Wells, Laura Hymes

• Publisher: Wiley
• Year: 2014
• ISBN:
  9781118700877
• Edition: 1
• Topic: Negocios y empresa
• Subtopic: Contabilidad financiera

Real case studies on insurance fraud written by real fraud examiners

Insurance Fraud Casebook is a one-of-a-kind collection consisting of actual cases written by fraud examiners out in the field. These cases were hand selected from hundreds of submissions and together form a comprehensive picture of the many types of insurance fraud—how they are investigated, across industries and throughout the world. Entertaining and enlightening, the cases cover every type of insurance fraud, from medical fraud to counterfeiting.

• Each case outlines how the fraud was engineered, how it was investigated, and how perpetrators were brought to justice
• Written for fraud examiners, auditors, and insurance auditors
• Other titles by Wells: Fraud Fighter and Corporate Fraud Handbook, Third Edition

Edited by Dr. Joseph T. Wells, the founder and Chairman of the Association of Certified Fraud Examiners (ACFE), the world's leading anti-fraud organization, this book reveals the dangers of insurance fraud and the measures that can be taken to prevent it from happening in the first place.

CHAPTER 1

Needles in a Paystack

CHARLES PIPER

Susan Shamrock became a doctor because she wanted to provide people with relief from their allergy suffering. Although sticking needles in patients was not her favorite thing to do, Susan knew she was helping them get back to their normal lives. She enjoyed being a physician and helping people.

On the home front, Susan was happily married. She and her husband had two daughters who enjoyed a lifestyle most kids would envy. The girls attended private schools, had the latest electronic gadgets and even received expensive professional golf lessons. The family lived in a big house, and Susan and her spouse drove fancy cars. Dr. Shamrock was highly respected in her community and she gave generously to various local charities.

As the years passed, both Susan and her husband took to gambling at local casinos for entertainment. Eventually, Mr. Shamrock quit his job to pursue professional gambling; by doing so, he could even write off gambling losses on their tax returns. Predictably, Susan's husband lost a lot of their money gambling. But their marriage was good, their kids were happy and Susan's practice was profitable.

A Growing Company

After Susan opened her own allergy clinic, she grew increasingly gratified that she was able to help so many patients; plus the money was good. Business was slow in the beginning, but it didn't take long before patients under her care started coming back for regular treatments. Newer patients followed, and the practice kept growing. Business was so good that she hired employees to schedule appointments, handle accounts payable and receivable and file claim forms with insurance companies and federal and state healthcare programs. She also hired medical assistants and an office manager.

Sometimes Susan became frustrated because a few of her patients didn't respond to treatment regimens. In those instances, her patients not only continued to suffer from their allergies, but they or their insurance companies continued paying for treatment that was not working.

As part of her continuing education, Susan attended various seminars where she learned from other experts in the field. At one training event, the speaker discussed a new allergy treatment that was considered experimental by the Food and Drug Administration (FDA). Susan was intrigued and inspired by the presentation and immediately began offering the treatment as an alternative to her patients who hadn't responded to previous therapy. She even listed the experimental treatment on her website. Several of her patients were willing to try it out of frustration because nothing else worked for them, and they had no financial qualms because their insurance paid for it.

Another New Case on My Desk

I was a federal agent with experience investigating complex fraud schemes (including healthcare provider fraud) when I received a referral in the mail at my office. The note indicated that Dr. Susan Shamrock had possibly miscoded billings for allergy treatments when submitting claims for several of her patients.

The allegation said she provided patients with nonapproved, experimental allergy treatment but listed it on insurance claims as a different, approved treatment. (Allergy treatments not approved by the FDA are not reimbursable by insurance companies or federal healthcare programs.) The referral also mentioned Dr. Shamrock's website description of experimental treatment. Based on her website, there was no denying that Susan was promoting the use of the experimental treatment.

The referral also reported that during a federal audit of a random sampling of billed treatments, Dr. Shamrock was asked to provide supportive documentation for several of the insurance claims she submitted and that the government already had processed and paid. However, Dr. Shamrock ignored or failed to respond to the requests.

Rolling Up Our Sleeves

From experience, I knew that healthcare fraud often affects many insurance carriers and federal healthcare programs — if one program was defrauded by a provider or facility, in all probability other programs and companies were also defrauded. Based on that knowledge, I immediately contacted healthcare fraud investigators I had previously met or worked with and notified them of the referral. Some of those investigators worked for agencies that had their own healthcare programs. I asked the investigators to determine if their agencies received and paid insurance claims from Dr. Susan Shamrock. Only one of the investigators, Agent Andrew Badge, responded positively.

Badge and I had successfully worked together in the past, and, like me, he used to be a street cop before becoming a federal agent. Badge and I met at his office and developed an investigative plan for this case.

Using administrative subpoenas, we separately requested and later obtained copies of numerous patient files and billing records from the doctor's office. Dr. Shamrock took about a month to comply fully with the subpoenas. Waiting this long is not unusual in white-collar investigations, and, in fairness, the doctor had a small office staff and years' worth of records to copy. In addition, they had to do most of the copying after normal business hours when the clinic was closed.

Patient files are often thick and might include: patient contact information (name, address, Social Security number, date of birth, etc.), insurance policy coverage information, claims submitted for payment, records of payment, explanation of benefit forms, dates of treatment, physician notes, lab test results, appointments and so on.

Badge and I worked in different buildings about ten miles from each other so we periodically met for lunch and talked about this case and others. When we finally received the subpoenaed records, we reviewed them at our own offices. We searched for indicators that patients received the experimental treatment, which may have been miscoded and billed as an FDA-approved treatment.

Reviewing the boxes full of patient files was a tedious process. Although I was terrible at dissecting worms and frogs in high-school biology classes, I enjoy dissecting information in fraud cases. The review took several weeks to complete. The first several days were boring because only a couple of files indicated that patients received the experimental treatment. Nevertheless, I carefully reviewed each claim individually.

Although I had never received allergy injections myself, I thought it odd that some of the patients reportedly received shots four or five times a week. I telephoned Agent Badge, told him what I found and added, “I wouldn't go to the doctor's office four or five days a week if they were giving out free lunches — let alone just to get needles stuck in my arm.” Badge remarked, “I'd go if they were giving free lunches.” We both laughed.

More alarming than what I was finding in the patients' files was what I wasn't finding. The files often contained no supportive documentation for any of the billed injections. For example, in one patient's file, the dates on insurance claim forms indicated allergy injections were given to the patient on January 10, 12, 14 and 15. But there was no documentation in the file indicating the patient ever stepped foot inside the doctor's office on any of those dates.

As I continued reviewing patient files, I found repeated instances where there was absolutely no supportive documentation for any of the services billed for.

In addition, when there was documentation, the charts indicated that the patients' next visit would not be for several weeks. The next pages in the patient files often indicated they were last seen on the previously documented dates.

For example, a patient's file might read something like this:

January 3: Patient John Smith seen today and given an injection. His next office visit will be February 5.

Then the next documentation would read:

February 5: Patient John Smith last seen on January 3. Patient given an injection. Next visit will be March 7.

In short, the written notes in the patients' files contradicted the insurance claims. The charts were incriminating evidence that the patient had not visited Dr. Shamrock nearly as frequently as the documents indicated.

I alerted Badge to my findings, and he said he had been seeing the same pattern in his files. At this point, I began to understand why Dr. Shamrock refused to comply with the auditors' previous request for treatment records; she didn't have any to give!

Knowing that documents alone do not prove a case, Badge and I began interviews of patients at their homes. Prior to the interviews, I listed questions to help guide me and gave a copy of the list to Badge. Having most of the questions already written down makes it easier to take notes. I emphasized that the draft list of questions was only to be used as a guide and additional questions would be asked as needed. Badge liked the idea of numbering the questions and said he was going to start doing it for his future interviews.

Our first interview was of a former patient named Steve Hardwick. He said he never received more than two or three injections in any given week. But what Hardwick said next was a complete surprise: “I didn't need to go to the doctor's office anyway; Dr. Shamrock just gave me the filled syringes to inject myself.”

I asked Steve to elaborate. He said that about once each month, he would show up at Dr. Shamrock's office and she would inject him with an allergy shot. During the same visit, the doctor or her assistant would hand him a month's supply of filled syringes, and he would later inject himself with the antigens two or three times a week.

Hardwick said, “Come with me; I think I have a couple of the syringes in the fridge.” We followed him into his kitchen, where he opened his refrigerator and pulled out two filled syringes. Hardwick said, “These are the syringes Dr. Shamrock gave me.”

Understandably, Agent Badge and I asked a bunch of follow-up questions. Steve Hardwick said he liked the arrangement because he could inject himself and didn't need to travel back and forth to the doctor's office all the time. But the fact is, he injected himself only two or three times each week, not four or five times like the insurance claims indicated. Plus, the insurance claims specifically listed the location of service as Dr. Shamrock's office.

I studied the claim forms a little closer and observed that all of the injections were reportedly given on weekdays; never on the weekend. I asked Hardwick if he ever injected himself on the weekend and he said, “Sure, lots of times.” He said he never had to report his dates of injection to the doctor's office.

I speculated that Dr. Shamrock knew that if she listed Saturday and Sunday treatments on her insurance forms, the insurers would reject the claims (because the doctor's business was closed on the weekends). I also figured that since Dr. Shamrock apparently thought she could get away with allowing patients to inject themselves away from the clinic, she would probably have no qualms about listing the incorrect injection dates on some paperwork.

Agent Badge and I photographed, marked and collected the filled syringes as evidence, and Badge later stored them in his office evidence refrigerator. During the next several weeks, Badge and I conducted more patient interviews. On the days we worked together, we alternated buying each other lunch. It seemed like every time it was my turn to pay, Badge picked a more expensive restaurant to eat at.

During our interviews, Badge and I heard similar stories from Dr. Shamrock's patients. A few people also said they received an experimental allergy treatment. Those patients reported that Dr. Shamrock assured them she would take care of the insurance billings. Since the patients didn't have to pay any money out of pocket, they had no concerns about how much the insurers were billed or how the treatments were coded.

After returning to my office, I contacted one of the government healthcare program integrity officials and was informed that each injection should have been given by a qualified and approved healthcare professional inside the physician's office. The official said the patients should have been monitored by a healthcare professional in case they had adverse reactions to the injections. I was also informed that the government would not have paid those claims had they known the patients injected themselves and that the locations of service were falsely recorded. I telephoned Agent Badge and told him what I had learned. He then called the program integrity officials from his agency and received the same information. Some agencies and insurance companies have different rules, so it was important for us to get clarification from the experts at our respective agencies.

In the days that followed, I attempted to quantify the potential dollar loss based on the patient files and claim forms I reviewed. I began adding up all the dollars for the false claims where there was no supportive documentation or false information. I also included the few instances where the experimental treatments were miscoded. But as I continued reviewing the claim forms, I found something even more alarming.

In addition to billing for injections, Dr. Shamrock billed extremely high prices for “preparing and mixing” the antigens in the syringes. Supposedly, each patient had his or her own unique master serum. Injections were billed at about $50 each, but mixtures were billed for thousands of dollars each!

The real money Dr. Shamrock made came from the falsification in the number of antigen mixtures made. To avoid detection, she billed for lots of injections — and made an extra $50 for each fictitious injection.

I also knew that the insurance regulations required patients to pay copayments when they received treatment. Providers are not permitted to waive the copayments. So circumstantial evidence of fraud was established by the lack of patient billings for copayments. Interestingly, Dr. Shamrock had no qualms submitting false claims to insurance companies, but she never sent her patients false bills for the copayments. I suspect she knew darn well that the patients would have been lining up at the door to complain if she tried to defraud them too.

My next question was: ...