July 06, 2001

Medi-Cal Fraud Harms Everyone

By Diana M. Bontá, R.N., Dr.P.H., Director
California Department of Health Services

Medi-Cal fraud harms everyone: providers, beneficiaries and taxpayers. While the majority of providers are honest, hard working and reputable, a minority of unscrupulous providers, and individuals masquerading as providers, are billing Medi-Cal, for millions of dollars they are not entitled to receive.

In 1999, Gov. Gray Davis established a Medi-Cal Fraud Task Force to combat Medi-Cal fraud and abuse. This multi-agency task force launched a crackdown by:

Sending fraud prevention specialists to visit every provider in high-risk groups.

Requiring current providers in high-risk categories to re-apply for a provider number and undergo a vigorous background check and an on-site review.

Establishing a program to identify irregular billing patterns prior to checks being released to stop payment to suspected fraudulent providers.

Launching an intensive effort to crack down on physician and medical clinic fraud.

Last year, Gov. Davis signed into law Assembly Bill 1098, which increases penalties for Medi-Cal fraud and abuse and gives California more power to prosecute fraud.

Current plans include expanding the Medi-Cal Fraud Prevention Bureau and the Anti-Fraud Program to include other high-risk provider groups and tightening the provider enrollment process.

One of many different Medi-Cal provider scams has involved pharmacies and suppliers of durable medical equipment (DME) setting up "shell" companies to disguise phony businesses. In the scam, crooks obtain Medi-Cal provider numbers, bill the program for high dollar amounts in short periods of time and then shut down. Many then re-open their business under a new fictitious name. The current moratorium on the enrollment of new DME providers has significantly reduced this type of scam.

Investigators have identified wholesalers who create and sell fictitious invoices for medications and DME supplies. Fraudulent pharmacy owners and DME suppliers use these fictitious invoices to substantiate their false Medi-Cal claims to state auditors and law enforcement officers.

Another scam involves fraudulent Medi-Cal billing at bogus medical clinics. With the assistance of "cappers," Medi-Cal beneficiaries are given gifts or cash to board vans, which take them to various clinics sometimes far from their homes. At these clinics, employees commonly conduct several diagnostic tests and draw blood samples without performing medical exams. (A "dental" version of the "capping" scheme brings vans full of children to dental offices, where each child may receive a filling in each tooth.) The fraudulent clinics bill the Medi-Cal program for the tests (or the dental fillings) and send the blood samples to fraudulent laboratories, which use them to bill for multiple and repeated tests.

Physicians are also victimized by Medi-Cal fraud. Physician identity theft occurs when an individual obtains a physicians's personal identifying information, such as name, address, Social Security number and medical license number. With this information, criminals can apply for a fraudulent Medi-Cal provider number and bill false Medi-Cal claims in that provider's name. In many cases, the physicians remain unaware of the identity theft until the Internal Revenue Service and Franchise Tax Board contact them regarding failure to pay taxes on the large Medi-Cal payments issued in their names.

Another way physicians can be victimized is when they furnish their Medi-Cal provider numbers to a clinic or agency for which they work and relinquish any oversight of claims billed to them, while the clinic or agency receives the Medi-Cal checks and issues payments to the physicians. Criminals are then able to submit false claims without the providers' knowledge.

If you observe "capping" activity or anything that appears out of the ordinary for a medical provider's office, call CDHS' Medi-Cal Fraud Hotline at 1-800-822-6222. You may remain anonymous when you call. CDHS needs your assistance to stop Medi-Cal fraud.

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