The Miami Herald

Medicare fraud rampant in South Florida

First in a series

Whenever Alexander McCray lights up his crack pipe, U.S. taxpayers help pay for his habit.

McCray has defrauded Medicare by selling his government-issued health card number to private clinics in exchange for kickbacks of $150 to $300 a visit -- as often as three times a day, three times a week over seven years, according to federal records and his own admission.

McCray has signed off on phony infusion treatments for his HIV illness -- therapy that is medically obsolete -- and he has received thousands of dollars from Medicare-licensed clinics all over South Florida.

Money that he has used to buy crack cocaine.

Dozens of clinic operators have in turn filed more than $1.1 million in false claims for fabricated HIV-infusion treatments billed in his name, according to Medicare records reviewed by The Miami Herald. Some 90 doctors, including one indicted in May, appeared on the phony prescriptions written on behalf of McCray.

''I'm the king of it all,'' the 40-year-old, unemployed Opa-locka man told The Miami Herald recently, when asked about his Medicare scams.

McCray, a ''professional patient'' with a 15-year criminal history of drug possession, is among thousands of con artists who have made South Florida the nation's capital of Medicare fraud. A six-month Miami Herald investigation has found that the corruption has spun out of control during the past decade with little effort by Medicare regulators to stop it here and in other major cities. This past week, during a policy forum to confront the crisis, federal lawmakers said Medicare fraud costs taxpayers nationwide at least $60 billion a year.

The Centers for Medicare and Medicaid Services, which manages the 43-year-old federal insurance provgram for the elderly and disabled, doesn't have a specific amount for the cost of corruption nationwide. Internal audits mainly focus on billing mistakes, excessive payments and other waste with only a fractional measure of fraud. Therefore, the agency estimates its combined loss is $11 billion annually.

Private healthcare companies, credit card companies and other industries have implemented new technology to fight fraud aggressively, but Medicare has failed to adopt even the most basic changes that the U.S. Department of Health and Human Services' inspector general has warned are sorely needed to combat the crisis.

Medicare, one of the government's largest agencies, seems more intent on paying claims quickly than verifying them first, according to many critics and law enforcement officials.

DRUG INFUSION

Consider this statistic: In 2005, South Florida clinics -- mostly concentrated in Miami-Dade -- submitted $2.2 billion in HIV-drug infusion bills to Medicare, according to the inspector general. That was 22 times more than the total HIV infusion claims submitted to Medicare by healthcare clinics in the rest of the country combined. The trend continues to this day.

In addition, false claims for medical supplies such as motorized wheelchairs, glucose monitors and oxygen equipment run into the hundreds of millions of dollars annually in South Florida.

These two areas of healthcare corruption, which have become targets of heightened federal prosecutions, account for at least $2.5 billion in Medicare fraud annually in South Florida, according to authorities. But that figure is conservative because it excludes other areas of potential Medicare fraud -- hospitals, home healthcare assistance and prescription drugs.

Still, the medicial equipment and HIV-infusion schemes alone add up to at least $7 million in Medicare fraud daily in South Florida, where a sprawling cast of illegal HIV-therapy clinics, bogus suppliers, inner-city patient recruiters, complicit doctors and devious billing companies have even used the names of dead doctors to bilk the U.S. government out of billions of Medicare dollars.

''I knew Miami was bad, but I was shocked when I got here,'' said Timothy Delaney, assistant special agent in charge of the FBI's office in Miami and the head of the bureau's national healthcare fraud program from 2000 to 2004. ``There is fraud here like nowhere else in the country. Los Angeles is second, but nowhere like it is here.''

South Florida's U.S. attorney, R. Alexander Acosta, placed much of the blame on Medicare and its system of screening bills, saying its poor oversight forces authorities to chase criminals long after they have absconded with taxpayer dollars. Little of the money is recovered.

''At a time when we're trying to find billions of dollars to pay for healthcare in this country, it's disgusting that so much money is being wasted because of Medicare fraud,'' Acosta said.

Kimberly Brandt, director of program integrity at the Centers for Medicare and Medicaid Services, said there's only so much the agency can do to protect the system because of limited resources. Congress has appropriated $720 million to combat fraud, with no increase in the past three years. That's a small piece of Medicare's $432 billion annual budget.

''I think the important thing for people to understand is that this didn't happen overnight, and it's not something Medicare could have detected overnight,'' she said.

Federal authorities are often unable to track down Medicare fraud culprits who flee the country.

A Miami Herald review of FBI, U.S. attorney and federal court records found that at least 56 of the roughly 700 Medicare fraud defendants are fugitives -- with at least 18 suspected of having fled to Cuba during the past five years. The others went to Mexico, the Dominican Republic, Colombia, Canada, Europe or are still in Florida.

Federal authorities and experts who have followed Medicare fraud say the South Florida perpetrators are not unlike segments of immigrant groups in other major cities who band together to abuse the system because of an implicit trust.

Cuban immigrants make up the vast majority of defendants prosecuted on charges of submitting billions of dollars in false Medicare claims since 2004, records show.

Among them: The Benitez brothers, charged with defrauding Medicare by billing $110 million in false claims for HIV-drug infusion treatments at their dozen clinics in Miami-Dade County. Medicare paid their companies about $84 million between 2001 and 2004, according to federal prosecutors.

The three brothers spent their ill-gotten gains on homes, helicopters, hotels, apartments, boats, even a water park -- all in the resort area of Bavaro, Dominican Republic, according to federal authorities.

After being indicted on federal fraud charges in Miami in late May, Carlos, Jose and Luis Benitez used their Cuban passports to travel from South Florida to the Dominican Republic, then to Cuba. With help from Dominican authorities, the Justice Department is seizing their properties and freezing their bank accounts on the island.

The FBI's Delaney and Medicare's Brandt said that illegal healthcare operators of Cuban descent are among several pockets of immigrant groups involved in similar scams in Los Angeles, Houston and New York.

`COMMON BOND'

''We have a close knit community with a common bond,'' Delaney said, describing the Medicare fraud scene in Miami-Dade. ``We have people here that go along with it.''

Said Brandt: ``In the Miami area in particular, with that segment of the population, we've seen high instances of that type of activity. But I want to make it clear, it's broader than that community.''

U.S. Sen. Mel Martinez, R-Florida, who filed legislation in June to combat healthcare fraud, said he didn't think Medicare corruption was strictly a ''Cuban issue.'' But he said the high number of Cuban immigrants charged in South Florida ``is not honoring the heritage of the Cuban people who have done so much for this community and for this country.''

A prominent Miami-Dade doctor known for championing the poor and homeless echoed that sentiment, while strongly condemning Medicare fraud violators as ''street criminals'' who damage society as a whole.

''You're stealing from the American people and you're sacrificing people's healthcare,'' said Dr. Pedro ''Joe'' Greer, a gastroenterologist and hepatologist, who became assistant dean of academic affairs at Florida International University's College of Medicine last year.

Greer -- who was born in Miami but whose family settled here after the Cuban revolution in 1959 -- also said there have been waves of Cuban immigrants who have helped build this community.

``What these criminals do is hurt the great American tradition of allowing people to come into our country and succeed in an honest way. This hurts everybody, the medical profession and hard-working immigrants.''

LIVING ON FRAUD

The temptation of healthcare fraud is great because almost anyone can become a Medicare operator -- even a drug dealer.

Angel Castillo Jr., a high school dropout with a federal drug-trafficking conviction, pleaded guilty in December to running eight medical equipment companies under others' names and submitting more than $48 million in false claims to Medicare.

He said he pulled it off by buying lists of Medicare patients and using physicians' identification numbers on the Internet for prescriptions.

While his bogus businesses raked in about $8 million in 2005-06, he personally pocketed more than $2 million.

Castillo said he used a tight circle of Cuban-American relatives, friends and associates -- along with recently arrived Cuban immigrants -- to pose as straw owners of healthcare companies and to withdraw Medicare payments at local banks and check stores.

He said that he is typical of the illegal Medicare providers who rely on immigrants with common backgrounds.

''We try to keep it among us,'' Castillo told The Miami Herald during a recent interview at the Federal Detention Center in Miami. ``We took advantage of the new Cuban immigrants. The real owners, like me, didn't care. It was just greed.''

In South Florida, Medicare fraud is alluring for everyday criminals, who see the potential risks as low and rewards as high.

EASY SCAM

Setting up a bogus medical equipment operation to stiff Medicare is perhaps one of the easiest scams in the world, said Castillo, adding that he broke into the business through his drug-trafficking contacts.

''A lot of people who used to be in drugs are getting into this business,'' Castillo said. ``You see it as white collar. There's not a lot of risk.''

Members of the Accredited Medical Equipment Providers of America said it's criminals like Castillo who have given their industry -- which does $12 billion in legitimate business across the country with Medicare -- such a bad name.

''It's those few people who have ruined this industry,'' said Jack Marquez, AMEPA's vice president and owner of Cobra Medical Equipment in Miami. ``I'm sometimes embarrassed to say I'm a durable medical equipment business owner due to all the healthcare fraud in South Florida.''

The number of medical equipment suppliers in South Florida -- about 2,100 -- changes weekly because they have multiplied in storefront office buildings and strip centers. The bogus ones can pack up and leave as soon as they make their money.

No particular healthcare or business skills are required to open such a business -- not even a surety bond to guarantee delivery of Medicare-covered services.

Although the Centers for Medicare and Medicaid Services is mandated to do criminal background checks on some healthcare operators under 2006 federal regulations, the agency said it only started doing them in December for medical equipment suppliers in ''high fraud'' areas such as Miami and Los Angeles. The agency can revoke or deny the license of a provider who has had a felony conviction within 10 years. But funding for the limited screening of Medicare applicants expires in September, said agency spokesman Peter Ashkenaz.

Once the agency verifies that a start-up has met some minimal requirements -- including maintaining a small amount of medical supplies -- a provider can bill repeatedly for items, from sterile gauze to oxygen concentrators to artificial limbs.

Fraudulent medical equipment suppliers use patients' Medicare numbers without permission. In effect, they steal their Medicare IDs, which are Social Security numbers, eliminating the risk of bringing actual patients into their schemes.

Lawless providers also bribe physicians and their assistants to write fake prescriptions, or they obtain physicians' personal ID numbers off the Internet and use them without their approval.

One example: Dr. Pedro Cuni, a physician who pleaded guilty in 2006 to writing unnecessary prescriptions for more than 6,000 patients and receiving $50 kickbacks each time from a Hialeah clinic. Cuni, 77, testified for prosecutors at the fraud trial of Dr. Ana Caos in April, saying that at the ''Cuban clinics in Hialeah,'' Medicare patients would be recruited to request prescriptions for bogus back or respiratory problems. In turn, the clinics billed Medicare for unnecessary medications that patients threw in the garbage.

Caos, 62, was found guilty of accepting $100 kickbacks for writing prescriptions for homemade compounded medications billed to Medicare that patients did not need or want. She was sentenced in July to more than three years in prison.

DEAD DOCTORS

In a new congressional report, investigators said Medicare paid an estimated $92 million to medical equipment providers that improperly used the identification numbers of 18,240 dead doctors in Miami and other major cities between 2000 and 2007. Many are still listed as active Medicare physicians, even though they died 10 to 15 years ago.

Medicare, which was criticized for this type of lax oversight in 2001 by the Health and Human Services inspector general, still has no way to catch claims involving deceased doctors, the Senate Permanent Subcommittee on Investigations said.

All of Medicare's woes add to the anxiety of some 44 million beneficiaries -- including 3.1 million in Florida -- who need and deserve the healthcare benefits.

Marjorie Sayre, 80, said her husband complained to Medicare for a year about medical equipment companies that filed fraudulent claims in his name. Among the claims: an artificial leg for a man who still had full use of all his natural limbs.

''There are people who need the money, and Medicare is going downhill because they don't have the money,'' said Sayre, of Southwest Miami-Dade, whose husband, William, died last year.

''It's really frustrating to think that these people are so dishonest that they will probably have a wonderful time with the money,'' she said. ``I can't afford to go to Hawaii and they're probably traveling all around the world.''

SYSTEM BREAKDOWN

Almost everyone agrees Medicare is easy to rip off because it has functioned as an honor system since Congress adopted the health insurance program in 1965. Medicare and its private contractors are required by law to review and pay bills within 14 days, leaving the system vulnerable to criminals who churn claims.

For its part, Congress has done little to oversee and prevent Medicare fraud because of other political priorities, industry lobbyists and campaign donations.

Combined, those influences have undermined attempts to shore up the fragile program for those who need it the most.

''Unless a radically different approach is taken to address the fraud, it's potentially terminal for the Medicare program,'' said Malcolm K. Sparrow, a professor at Harvard University's John F. Kennedy School of Government and author of License to Steal: How Fraud Bleeds America's Health Care System.

Representatives of the medical equipment industry, which has been pounded by fraud-related publicity, said the Centers for Medicare and Medicaid Services has improved its checks and balances slightly since prosecutors began exposing more fraud over the past year.

But since elderly and disabled patients still receive their Medicare services, there's no regulatory or political will in Washington to confront the crisis.

''There's no rush to solve the problem because it's not their money -- it's taxpayer money,'' said Rob Brant, general manager of City Medical Services in North Miami Beach and president of Accredited Medical Equipment Providers of America.

And that indifference has allowed fraud to spread like an epidemic.

Early last year, the U.S. attorney's office in Miami and Justice Department established the nation's first-ever Medicare Fraud Strike Force.

While the team doubled prosecutions -- and reduced total Medicare claims by roughly $1.75 billion in Miami-Dade -- authorities admit that the system has become so vulnerable that they cannot possibly keep up with the billions lost annually to fraud.

''We could double our prosecutions and still not stop the fraud,'' Acosta, the U.S. attorney, said. ``Only Medicare has the ability to close the floodgates.''

Coming Monday: An inside look at the two largest scams in Medicare: HIV-infusion claims and the medical equipment providers.




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