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Session Description. This Presentation provides a firsthand-source look at the 'what, how and where' of the most damaging and widespread types of fraud schemes that continue to target public programs and private health plans in the United States. 

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Session Description

  • This Presentation provides a firsthand-source look at the 'what, how and where' of the most damaging and widespread types of fraud schemes that continue to target public programs and private health plans in the United States. 
  • Case examples will illustrate the 'what, how and where' of those schemes, including common denominators that facilitate the fraud, how schemes have been detected and lessons learned

Partners in Health Care Fraud and Abuse Solutions


US Health Care System



Ted Doyle

Director of Client Solutions

Over 26 years of public & private sector Health Care Insurance experience, focused mainly on detection and prevention of health care fraud

Experience includes more than 12-years working for US CMS

Managed the CMS LA and Miami Field Offices (SIU Services)

Responsible for identifying inappropriate payments exceeding $177 million, projected savings exceeding $462 million, and the revocation of billing privileges for 272 providers suspected of fraud

SIU Director & Internal Audit Manager for Commercial Insurer

Two-time recipient of the HHS Secretary’s Award, 2-time recipient of CMS Administrator’s Citation, 2-time recipient of HHS Inspector General’s Cooperative Achievement Award, and recipient of Commendation for Distinguished Public Service from the District Attorney, LA County, California

On “Bureau of National Affairs Health Care Fraud Report” Advisory Board

Participated in 1st National Health Care Fraud Summit hosted by HHS/DOJ

Requested speaker at Health Care Anti-Fraud Conferences/Meetings

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health care fraud in the united states
Health Care Fraud in the United States


Health care related fraud has become a significant drain on the resources of the American health system, impacting federal and state health plans as well as commercial health insurance products

public perception

20% of Americans say it’s acceptable to defraud insurers

40% say it’s okay to exaggerate claims to beat the deductible

One-third of doctors say it’s necessary to “game the health care system”

Over one-third of doctors say their patients ask them to help them obtain fraudulent coverage for services

health care fraud the motive
Health Care Fraud“The Motive”
  • 2010: $2.6 trillion national health care expenditure
    • 52 % private-sector $$$
    • 48 % public-sector $$$
  • SOURCE: Centers for Medicare & Medicaid Services, National Health Expenditure Projections

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health care fraud the damage
Health Care Fraud“The Damage”
  • 3% To 10% of annual U.S. Expenditure*
  • Translation: $78 billion to $260 billion in 2010 alone


U.S. Government Accountability Office; National Health Care Anti-Fraud Association

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PRE Patient Protection and Affordable Care Act (PPACA) Projected Medicare & Medicaid Spending & Estimated Fraud 2005-2015 ($Bs)


system s inherent vulnerabilities
System’s Inherent Vulnerabilities
  • Necessary assumption of honesty
  • Thousands of payers
  • 1,000,000 providers
  • 4 billion+ transactions annually
  • Evolving system
    • Plan/product design
    • Less paper, human scrutiny; more auto-adjudication
    • ICD-10 conversion October, 2013
  • Fraud perceived as low-risk/high-reward crime

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contributing factors
Contributing Factors
  • The Need to Pay Large Volumes of Claims Promptly and Electronically
  • Complex Coding and Payment System
  • Speed at Which Fraudulent National Schemes Can Payoff
  • Regulatory and Compliance Considerations

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the collateral damage
The Collateral Damage
  • Corruption of patients’ medical histories
  • Medical identity theft
  • Theft of patients’ finite health benefits
  • Physical risk/harm to patients
  • Financial Damage for Health Care Payors
the perpetrators
The Perpetrators
  • Dishonest patients
  • Dishonest providers (individuals or institutions)
  • Professional criminals/bogus providers
  • Other parties to the system
    • Dishonest billing services
    • Dishonest payer employees

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most common forms of provider fraud
Most Common Forms of Provider Fraud
  • Billing for services not rendered
  • Misrepresentation of services provided
  • Provision of medically unnecessary services

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Healthcare Fraud Environment

  • Insurers (Payers & Plans) need to be aware of heightened risk in these locations
  • Trends morph from one high risk area and appear in another high risk area VERY easily

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Trends in Provider/ Member Based Healthcare Fraud

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Benefit/Program Trends

Provider and/or Member Based Health Care Fraud

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fraud schemes that continue to target public programs and private health plans
Fraud Schemes That Continue to Target Public Programs and Private Health Plans

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notable hot spots
Notable Hot Spots
  • Outpatient surgery center schemes (“rent-a-patient”)
  • Cosmetic surgery schemes
  • Imaging/other diagnostic testing
  • Pain management & related narcotic Rx schemes (“pill mills”)
  • Partial Hospitalizations, Inpatient One-Day Stays
  • Common denominators:
    • Little or no medical necessity
    • Little or no validation of “Ordering Relationship”
    • Little or no validation of provider’s legitimacy
    • Risk/harm to patients

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other top risks
Other “Top” Risks
  • Ambulance Transports
  • Alternative Medicine
  • Weight Loss Clinics
  • Hospital Fraud
  • Podiatric Fraud
  • DME Fraud
  • Sleep Studies
  • Dialysis Fraud
  • Clinical Laboratory
  • Wound Repair Upcoding
  • Unlicensed Ambulatory Surgical Centers
  • Free Standing Emergency Rooms

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less prominent frauds chronic cases
Less-Prominent Frauds - “Chronic Cases”
  • Evaluation & Management upcoding – “time bandits”
    • Office visits & ALL patients billed for same level of service
    • Consultations (in- and outpatient)
    • Emergency evals, with non emergency diagnosis
  • Prescription drug diversion – “doctor-shopping”
    • Abuse and/or resale of controlled substances – “A perfect storm”:
      • Narcotics (vicodin, oxycontin, fentanyl, methadone)
      • Sedatives/anxiety drugs (valium, xanax)
      • Stimulants (ritalin, adderall/amphetamine)
    • Medical-claim cost far exceeds Rx cost
    • Significant potential liability for Rx payers
anorectal manometry
Anorectal Manometry
  • Monday, March 8, 2010: California Medical Clinic Owner Convicted in $3.4 Million Medicare Fraud Scheme.
  • Manuk Karapetyan, 46, an Armenian national, found guilty of 22 counts of health care fraud and six counts of money laundering for a scheme that billed more than $3.2 million in only one month for medical services that were not provided
  • Charges against Karapetyan are in connection with approximately 6,000 health insurance claims for more than 800 patients supposedly treated at Karapetyan’s clinic, USA Independent Medical Corp
  • No patients received medical services, and no doctors provided any medical services
anorectal manometry23
Anorectal Manometry
  • USA Independent billed for services such as echocardiography, office evaluations, ultrasounds, electromyography studies of the anal or urethral sphincter, and Anorectal Manometry.
  • Karapetyan sentenced to five years in state prison
  • In total, Medicare paid over $30M for suspected fraud related to ARM (CPT: 90911, 91010, 91122, 43236)
  • Source -
anorectal manometry lessons learned
Anorectal ManometryLessons Learned
  • How does fraud or “over-utilization” like the ARM Occur?
  • How can it be prevented?
ca doctor glen r justice charged in 1mfraud scam
CA Doctor Glen R. Justice Charged in $1MFraud Scam
  • Charged with fraudulently billing up to $1 million for injectable cancer medications that never were provided
  • Billed for injectable cancer medications when patients never received those medications
  • “Upcoded” claims by claiming that more expensive injectable medications were provided
  • Scheme involved medications: Neulasta, Neupogen, Procrit/Epogen/Aranesp, and Neumega
  • Scheme ran from 2004 thru October 2009
  • Physician’s plea agreement acknowledged that the public and private health insurance companies suffered losses of between $400,000 and $1 million
  • Source:

Fraud and Organized Crime Armenian-American Crime Ring Mirzoyan-Terdjanian Organization

armenian american crime ring
Armenian-American Crime Ring
  • Largest Medicare fraud scheme ever committed by a single enterprise
  • 73 defendants—including members and associates of an Armenian-American organized crime enterprise
  • federal indictments announced in five states
  • more than $163 million in fraudulent billings
  • 55 arrested in a nationwide takedown carefully planned and carried out by the FBI
  • More than two dozen search warrants were also executed at the same time.
  • Headquartered in New York City and Los Angeles but operated throughout the U.S. and around the world
armenian american crime ring28
Armenian-American Crime Ring
  • Subjects allegedly stole identities of thousands of Medicare beneficiaries and doctors licensed in more than one state
  • Other subjects leased office space and opened phony clinics
  • Others simply rented a PO box
  • Other subjects opened bank accounts to receive Medicare funds
  • Subjects billed Medicare for services never provided
  • Funds directly deposited into designated bank accounts and immediately withdrawn and laundered
  • Opened were at least 118 phony clinics in 25 states
  • Significant lead came from Income Tax Investigation
fraudulent billing ordered services
Fraudulent Billing & “Ordered Services”
  • Independent Diagnostic Testing Facilities (Labs)
  • Clinical Testing Laboratories
  • Durable Medical Equipment
  • Home Health Services
  • Hospice Services for “Terminally Ill”


  • Tests & Equipment Not Really Ordered and Likely NOT Performed
  • Tests For Which A Clinical Relationship Does NOT Exist
deceased but not dead gone
Deceased But Not “Dead & Gone”
  • Deceased Members
  • Deceased Performing Providers
  • Deceased Ordering Providers
  • Identity Theft
identity compromise
“Identity Compromise”
  • Compromised IDs – Medicare Program
    • More than 200,000 Member IDs have been compromised
    • More than 4,900 “False Front” Providers identified
      • Source: CMS PSC, Western Integrity Center, May 2010
  • Deceased Doctors
    • Dead Doctors Used to Scam Government Out of Medicare Money:
    • Senate Hearing Viewable at:
    • Fraudulent providers submitted claims based on “orders” from some doctors who were dead for 10 years or more
    • From 2000 to 2007, Medicare paid between $60M & $93M for claims where the “ordering” or prescribing doctor had been dead for at least 12-months
fraud interdiction program former deputy da albert mackenzie
Fraud Interdiction ProgramFormer Deputy DA Albert Mackenzie

50 Crook Project

  • Program’s core project wherein numerous medical doctors suspected of being involved in healthcare fraud have been identified as viable tax fraud cases
  • Originally the list consisted of 50 medical doctors we identified who had failed to report over 122 million in income paid by Medicare
  • As the suspects have been arrested, leads have been developed leading to additional suspects involved in these multi-million dollar healthcare fraud cases
  • Led to recent Armenian-American Arrests in LA and other US cities
people vs parviz berjis
People vs. Parviz Berjis
  • $23 million in automobile insurance, workers’ compensation, and tax fraud
  • Sentenced to 8 years in prison
  • Ordered to pay $2.2 million in restitution to L.A. County and $2.8 million in back state taxes
people vs saud salim rayyis
People vs. Saud Salim Rayyis
  • Convicted of tax fraud for failing to report $4 million
  • Sentenced to 3 years in prison
  • Surrendered medical license
  • Will be deported upon release
heat h eath care fraud prevention and e nforcement a ction t eam
  • Cabinet-level Attention and Coordination
  • Prevention -- Detection -- Enforcement
  • Increased Use of Technology to Prevent and Detect Fraud
  • Expansion of Medicare Fraud Strike Forces (“MFSF”) and Investigative Techniques
  • Recommendations to Remedy Vulnerabilities
  • National Summit on Health Care Fraud
    • Public-Private Collaboration
heat initiative www stopmedicarefraud gov

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heat initiative
HEAT Initiative
    • Charges filed for criminal health care fraud against more than 800 defendants
    • Secured 583 criminal convictions
    • Opened 886 new civil health care fraud investigations
    • Obtained 337 civil administrative actions against individuals and organizations committing health care Fraud
    • Recovered more than $2.5 billion in criminal, civil and administrative actions related to health care fraud enforcement activities

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the good news
The Good News!

Private health insurance - 2009 Stats

  • Every $2M invested in fighting health-care fraud returns $19.5M in recoveries, court-ordered judgments and prevented losses
  • SIUs on average:
    • Produce an ROI of 9 to 1
    • Bring in recoveries of nearly $4.3 million
    • Generate savings of more than $11.1 million
    • Establish $8.8 million in prevented losses
    • Had 453 total open cases
    • Handled 940 total cases
    • Handled 31 cases per Investigator

Source: NHCAA ( - Anti-Fraud Management Survey CY 2009

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the good news40
The Good News!

Health Care Fraud & Abuse Control Program Annual Report for Fiscal Year 2009 - Enforcement Actions

  • U.S. Attorneys' Offices opened 1,014 new criminal health care fraud investigations involving 1,786 potential defendants
  • Federal prosecutors had 1,621 health care fraud criminal investigations pending, involving 2,706 potential defendants, and filed criminal charges in 481 cases involving 803 defendants
  • 583 defendants were convicted for health care fraud-related crimes
  • DOJ opened 886 new civil health care fraud investigations and had 1,155 civil health care fraud matters pending
  • Source:

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Contact information

      • Ted Doyle
      • Director of Client Solutions
      • (414) 828-6884

Partners in Health Care Fraud and Abuse Solutions