Health Care:

Fraud Schemes Committed by Career Criminals and Organized Criminal Groups and Impact on Consumers and Legitimate Health Care Providers

OSI-00-1R: Published: Oct 5, 1999. Publicly Released: Nov 4, 1999.

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Pursuant to a congressional request, GAO provided information on the proliferation of Medicare, Medicaid, and private health insurance fraud on the part of criminals and organized criminal groups, focusing on: (1) the makeup and prior activities of such groups; (2) how organized criminal groups created medical entities or used legitimate medical entities or individuals to defraud Medicare, Medicaid, and private insurers; (3) schemes used by such groups to commit health care fraud; and (4) the impact that illegal activity by such groups has on consumers and legitimate health care providers.

GAO noted that: (1) while the full extent of the problem remains unknown, GAO determined that career criminal and organized criminal groups are involved in Medicare, Medicaid, and private insurance health care fraud or alleged fraud throughout the country; (2) in the cases GAO reviewed, criminal groups varied in size from 2 or 3 participants to more than 20 participants and generally had one leader; (3) many group members had prior criminal histories for criminal activity unrelated to health care fraud, indicating that they moved from one field of criminal activity to another; (4) the primary subjects in these cases had little or no known medical or health care education, training, or experience; (5) at least two groups learned or were suspected of having learned how to commit health care fraud from others already engaged in such fraud; (6) in some of the cases GAO reviewed, criminal-group members had relatives or associates in foreign countries who helped them transfer their ill-gotten health care proceeds; (7) these groups created as many as 160 sham medical entities--such as medical clinics, physician groups, diagnostic laboratories, and durable medical equipment companies, often using fictitious names or the names of others on paperwork--or used the names of uninvolved legitimate providers to bill for services and equipment not provided or not medically necessary; (8) for the most part, these entities existed only on paper(9) once the structure was in place, subjects used a variety of schemes to submit claims to Medicare, Medicaid, or private insurance companies; (10) one scheme used is sometimes referred to as "patient brokering" or "rent-a-patient;" (11) under this scheme, the subjects used recruiters to organize and recruit beneficiaries (patients) who visited clinics owned or operated by such subjects for unnecessary diagnostic testing or medical services; (12) recruiters received a fee for each beneficiary brought in; (13) the above-described activities affect consumers, beneficiaries, health care providers, and law enforcement officials; (14) consumers pay increased health care costs in the form of taxes, because taxpayer contributions support Medicare and Medicaid; (15) in the case of private insurance, insured individuals pay increased premiums; and (16) because of the multiplicity of schemes and the ease with which subjects move their operations form location to location, law enforcement officials find it difficult to keep up with this growing and widespread form of fraud and are often unable to seize or recoup fraudulent proceeds that are quickly moved out of their reach.

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