Justice: Hospitals Recruit Homeless for Medical Fraud, Insurer Overcharges $320 Million

The Department of Justice announced two settlements in which a local medical provider and an insurer allegedly defrauded Medicare and Medi-Cal of more than $336 million.

ORANGE COUNTY, CA — Two Southern California medical and health plan providers agreed to pay a record sum of money to settle allegations of wrongdoing, the Department of Justice announced Thursday.

Los Angeles-based Pacific Health Corporation, which owns Newport Specialty Hospital and Anaheim General Hospital, agreed to a $16.5 million fine to settle allegations that its hospitals hired people to recruit the homeless from Skid Row for unnecessary medical procedures that could be charged to the government under Medicare and Medi-Cal.

Also on Thursday, SCAN Health Plan, which is based in Long Beach and provides health plans to patients from all over the region, agreed to pay a record $320 million to the state and federal governments to resolve allegations that it received overpayments from Medi-Cal. According to the Department of Justice, SCAN inflated costs and took advantage of calculating errors that enabled the company to charge Medi-Cal higher rates than the medical services warranted, racking up about $320 million in overcharges. The settlement is the largest recovery ever obtained from a single Medi-Cal provider, according to the justice department.

“This massive settlement demonstrates the commitment of the United States Justice Department to eradicate fraud, waste, and abuse in this nation’s public health care programs,” said United States Attorney André Birotte Jr. “We want the entire health care industry to know that we will use every tool at our disposal to ensure that the taxpayers are getting what they pay for when they finance public health programs.”

Skid Row Kickback Scheme

The two Orange County hospitals were part of the criminal probe in which investigators believe the corporation paid more than $2.3 million in kickbacks to marketers to recruit patients who were admitted to the hospitals for in-patient care, whether they needed it or not. The scheme bilked the government out of $16 million in improper payments to the hospitals, allege investigators.

The Pacific Health Corporation and its subsidiaries also face criminal prosecution for the homeless patient kickback scheme, according to the Department of Justice. But if the company abides by the deferred prosecution agreement announced Thursday, the charges will be dismissed in six years.

“Hospitals colluding with marketers to fatten profits through illegal referrals for costly and sometimes needless medical services are pocketing millions of taxpayer dollars,” said Glenn R. Ferry, Special Agent in Charge for the Los Angeles Region of the Office of Inspector General of the U.S. Department of Health and Human Services. “Our agents are monitoring such schemes, and those entering into similar sham contracts should expect investigation and prosecution.”

Shripathi Kamath August 28, 2012 at 12:58 AM
"I'm not part of wall street high finance, but rather main street basic personal finance for the middle class" Ah, that explains it.
Shripathi Kamath August 28, 2012 at 01:06 AM
Yes, we should do good thing and not do bad things, instead of doing bad things and not doing good things. Buy low sell high instead of buying high and selling low. Also no bad regulations. Only good regulations. Because bad regulations are bad. Good regulation will prevent fraud, but not too much. Just enough. No unnecessary ones. Only those which are necessary. "Therefore I will wail and howl, I will go stripped and naked: I will make a wailing like the dragons, and mourning as the owls."--Micah 1:8
tiny August 28, 2012 at 02:07 AM
Joker Joe August 28, 2012 at 02:11 PM
Kathi And who pays for the regulations when they are put into effect?
Kathi August 28, 2012 at 05:09 PM
btw, Obamacare is NOT a single payer system--not yet anyway, although if they try to save $ by squeezing the insurance co's by mandating additional coverage, but prohibiting from charging more to pay for their additional costs, they may put the insurance co's out of biz & millions of people would lose their jobs & income. Obamacare still has private insurance co's. Single payer is just that--no private insurance co's & govt does it all. You like the DMV & PO? There will be similar problems w more govt involvement. Medi-Cal doesn't have a very good reputation for providing quality medical care. Many dr's won't take Medi-Cal patients. Its apparently worse in more rural areas where they are less drs & providers to choose from. & of course Canada has that & people wait extremely long times for even life saving care & a lot of them come to the US for things like hip replacement surgery--if they can afford it--so they can get it done without waiting many months. & I've read in the news about some real neglect in Britain's system. Our system isn't perfect & GOP has submitted quite a few bills to fix things that weren't even considered by Dems--fixes that didn't throw the baby out w the bathwater!


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