As Medicare fraud spreads, SFla tops US for billions lost, spent on Lambos and luxe watches

For two decades the Justice Department has spent a sizable fortune cracking down on criminals ripping off Medicare, but the federal health insurance program still bleeds billions of dollars a year due to persistent fraud in Miami and other hot spots across the country.

Although authorities have won thousands of fraud convictions, technology has made it easier for criminals to steal millions of patients’ identities off the internet to churn out false Medicare claims. They then launder the illicit profits through shell companies, bank accounts and luxury assets — not unlike drug traffickers, federal officials say.

South Florida still ranks as the nation’s healthcare fraud capital, where medical equipment scams involving knee and back braces continue to flourish alongside more sophisticated billing schemes in the expanding field of telemedicine and genetic cancer testing. But such criminal activity has evolved into a franchise of fraud, expanding far beyond this region to metro areas in New York, Houston, Detroit and Los Angeles, to name a few, according to officials.

Earlier this year, for example, federal prosecutors charged a Phoenix couple who owned wound-care businesses and two nurse practitioners with conspiring to defraud Medicare out of $900 million by targeting elderly patients — many of them terminally ill. Over a period of 16 months, Medicare paid the couple $600 million as part of their fraudulent billing scheme, averaging more than $1 million per patient for medically unnecessary or ill-advised amniotic wound grafts.

The couple, who received huge kickbacks from a company that supplied the expensive skin grafts, bought a Ferrari, a Mercedes-Benz, gold bars and a nearly $6 million mansion, according to an indictment.

In late June, the Department of Justice announced what authorities described as a “snapshot” of recent healthcare fraud probes, including the Arizona case. The figures were staggering: 193 business operators, medical doctors and other licensed professionals — including 38 defendants in South Florida — were arrested over a two-week period on charges of submitting $2.75 billion in fake bills to Medicare as well as private insurers.

As a result, the offenders raked in $1.6 billion in mostly taxpayer-funded payments from the financially fragile Medicare program for seniors. Meanwhile, authorities said more than $231 million in cash, gold and other illicit assets were seized.

“The numbers speak for themselves,” said Jeffrey Veltri, special agent in charge of the FBI’s Miami field office. “Healthcare fraud in South Florida is a large and growing problem.”

In recent years, one of the more troubling trends has been not only large-scale hacks of hospitals and insurers for patient identities but also the rampant theft of Medicare IDs sold openly on the internet, which can be exploited for a variety of multimillion-dollar billing schemes.

Selling Medicare ID numbers on the web

Consider the crime of Broward County’s Charles McElwee, who posted an online advertisement promising “Medicare data for sale.” Last year, McElwee admitted in court that he illegally acquired Medicare beneficiary identification numbers (BINs), formed a Fort Lauderdale company called Lead Junkies to sell them for around 12 cents a number and made $310,000 from selling 2.6 million BINs.

McElwee was sentenced to more than three years in prison after pleading guilty to conspiring to violate the Medicare Access and CHIP Reauthorization Act of 2015.

Federal investigators are pursuing leads from his sale of BINs to Medicare fraud suspects.

The Medicare Access and CHIP law makes it illegal to buy, sell or distribute Medicare BINs without permission of the owner. Scofflaws use the Medicare numbers — which replaced Social Security numbers as IDs for Medicare beneficiaries a decade ago — to file fake claims with the federal program.

“The idea of the new law was to get away from using Social Security numbers,” said Assistant U.S. Attorney Jon Juenger, who prosecuted McElwee. “It was supposed to encourage privacy and prevent abuse. But the problem is, people still have easy access to them [BINs]. In McElwee’s case, he was selling them on Craigslist.”

Strike forces

Investigators with the FBI and Health and Human Services-Office of Inspector General and federal prosecutors openly admit that healthcare fraud has been around for a long time. That is why the Justice Department in 2007 started rolling out strike forces in Miami and eventually eight other major regions as they spotted data spikes in phony Medicare claims.

Nationwide, the strike forces have made their mark with prosecutions of more than 5,400 defendants who filed more than $27 billion in false claims with Medicare as well as private insurers. But those astronomical numbers also beg the question: What is it about the Centers for Medicare and Medicaid Services — a massive federal agency with an $850 billion budget funded with payroll taxes — that makes the system so vulnerable to outright theft?

“It’s a trust-based system with a need for rapid delivery of care and correspondingly, a rapid delivery of payment,” said Deputy Assistant Attorney General Lisa H. Miller, a former healthcare fraud prosecutor in Miami. “The amount of money involved means fraud will continue to exist. The threat is ongoing and the threat is significant.

“In response, we are using all available tools at our disposal to target the worst offenders and stop schemes in their tracks,” she said, including using data analytics and creating new incentives for whistle-blowers.

Miller, who oversees more than 200 prosecutors in the Criminal Division’s Fraud and Appellate sections, said the effects of fraud are not only felt upon some faceless government entity, but rather the Medicare beneficiaries who need the care and American taxpayers who foot the bill. Despite deep concerns about the continued viability of the Medicare program, which Congress adopted in 1965, few question its vital role in the nation’s sprawling public-private healthcare network.

Using stolen IDs to bilk Medicare

Many schemes still succeed the old-fashioned way: by exploiting human nature and preying upon Medicare beneficiaries’ fears. At health fairs and in phone calls, marketers continue to push unnecessary, expensive laboratory testing and medical equipment on beneficiaries, while medical professionals willingly authorize prescriptions based upon greed rather than medical need, Miller said.

But as Medicare and technological developments have expanded, she said, criminals have become savvier at buying patients’ stolen identities from website brokers and at using electronic billing to bilk the system in larger numbers over a shorter period of time. At some point, they “bust out” and close shop to evade the attention of investigators.

Unlike in the past, criminals also don’t have to rely as much on paying kickbacks to patients for their Medicare numbers or to doctors for writing phony prescriptions. The bad actors just swipe their identities without the patients’ and doctors’ knowledge.

“What we’ve noticed is that the schemes are more national in scope,” Miller told the Herald. “Telemedicine is a big piece of it. You can access patient populations in 50 states.”

While top Medicare officials acknowledge that fraudulent claims and excessive billing plague the system, they say that “program integrity” measures “saved” the system from losing $14.7 billion in fiscal year 2022, the latest available figures.

Officials also say that the agency has reduced the rate of “improper payments” — a combination of “fraud, waste and abuse” — to 7.46% for the 2022 fiscal year compared with 9.51% in fiscal year 2017. “An improper payment is a payment that should not have been made or that was made in the wrong amount,” according to the Centers for Medicare and Medicaid Services.

But CMS did not provide the Miami Herald with the total amount of improper payments, which experts say could be in the tens of billions yearly.

“When we at CMS have credible allegations of fraud, we stop payments from going out the door,” Dara Corrigan, director of the agency’s Center for Program Integrity, said in a statement, noting that it uses artificial intelligence to detect fraudulent billing patterns, aggressively revokes Medicare providers’ licenses for filing false claims and refers many cases to law enforcement. “If we determine an overpayment was made, we recover those funds.”

Half of U.S. fraud cases come from South Florida

At least half of all the Justice Department’s strike-force prosecutions of healthcare fraud were filed in South Florida, with more than 2,500 convicted defendants since 2007. Authorities say the root of the problem is Medicare’s “pay-and-chase” system, which involves paying claims from clinic owners, doctors and other medical professionals within 30 days and then pursuing them afterward if their bills look suspicious.

“We’re doing our best to keep up and we’re dedicating significant resources to not only stop the bleeding, but to recover as much of the ill-gained funds as we can before it disappears,” said Lynnette Alvarez-Karnes, an FBI supervisory special agent who has been fighting healthcare-fraud rackets in South Florida for nearly 25 years. “Because once the money is cashed out, it’s hard to trace and recover.”

Another problem is the nature of Medicare fraud: It’s like a game of “whac-a-mole,” in which authorities can target one type of scammer overbilling for costly cancer drugs only to see other kinds pop up involving fraudulent claims for home insulin shots or COVID-19 testing during the pandemic.

But what’s really troubling is the resurgence of durable medical equipment [DME] schemes that date back decades, authorities said.

“For some of the schemes like DME, it’s too easy and the money is too good,” said Juenger, chief of the Economic Crimes Section at the U.S. Attorney’s Office in Miami. “I think criminals are tempted by the relative anonymity of the crime. They can buy or steal the identities of the beneficiaries and the doctors and submit millions of dollars in online claims in no time.”

“We often see repeat offenders,” added David Turken, chief of the office’s Healthcare Fraud Section. “Some of them see it as, ‘I served the [prison] time but the money is so good.’ To them, it’s just the cost of doing business.”

Arrest at Biltmore Hotel

Both Juenger and Turken said Medicare fraud offenders have not only become more clever in fleecing the government program but also in laundering the proceeds through shell companies and bank accounts. Their investigative squads have been cracking down on this evolving area of Medicare fraud in South Florida.

One notable example: Alfredo Ruiz, of Miami, and three other men were convicted of conspiring to launder about $4.5 million over a four-month period in 2019 that Medicare paid to two companies, Universal Ortho and Expedited Medical, which operated out of a local storefront. The equipment, including prosthetics, was neither prescribed by doctors nor provided to patients, prosecutors said.

Ruiz took the lead in laundering the fraudulent Medicare proceeds, collaborating with the others to transfer the money through five shell corporations and their corporate bank accounts in small amounts to make it difficult to trace. Each company laundered at least $50,000 per month while Ruiz paid the other men $500 per week.

Ruiz, for his part, lived large. He bought a Rolls-Royce and a Lamborghini, as well as plenty of jewelry, including a 14-karat rose gold ball chain and a King Power Hublot Watch, Diego Maradona edition.

According to federal investigators, Ruiz was arrested at the Biltmore Hotel in Coral Gables. Ruiz left behind a ledger detailing the ring’s money-laundering activity in his room, dubbed the Al Capone suite because the infamous gangster had stayed there during Prohibition.

When Ruiz started cooperating with investigators, word leaked out, leading to a man punching him in the bathroom of the Booby Trap strip club in Doral three years ago. Before the assault, Aurelio Perez shouted at Ruiz: “This is for snitching!”

After Perez beat up Ruiz, he pleaded guilty to retaliating against him. Perez, 55, of West Miami, was sent to prison for two and a half years. Ruiz, 30, who pleaded guilty to a money-laundering conspiracy, was sentenced to five years in prison after getting a reduction for his cooperation.

“Money launderers are one of the primary enablers for healthcare fraud,” said Stephen Mahmood, special agent in charge of the Health and Human Services-Office of Inspector General in Miami. “Healthcare criminals need to get their cash out of the banking system, and they can’t do that without money launderers.”

Miami man plays pivotal role

On a larger scale, a dozen defendants from Miami, Houston and Phoenix were charged in the Justice Department’s latest roundup with conspiring to launder millions of dollars in Medicare payments to 14 Florida medical equipment companies. They provided no medical devices to patients, prosecutors say.

After Medicare paid about $17.6 million to the medical device firms, a group headed by Marco Antonio Ramos Izquierdo, of Miami, transferred $3.9 million of the fraudulent proceeds through 10 shell companies over a nine-month period in 2021, according to an indictment.

After his arrest in May, Ramos Izquierdo, 42, was granted a $200,000 personal surety bond and was required to wear a GPS monitor but he failed to show up for his arraignment the following month to enter a plea. In July, a federal judge designated him as a fugitive.

His whereabouts are unknown, but authorities said Ramos Izquierdo may have returned to his native Cuba — like hundreds of similar Medicare fraud defendants who have skipped bond over the years and fled to Cuba, Mexico and other Latin American countries to evade prosecution in South Florida.

READ MORE: Rogues of Medicare

The indictment says Ramos Izquierdo, who was listed as the president of a Miami-Dade construction company, and several others withdrew cash from the bank accounts for corporate fronts. They also used the shell companies to write checks ranging from $4,000 to $9,000 to others who received a small fee for cashing them. In turn, the check cashers routed the tainted money to others in the group, the indictment says.

Homestead nurse sentenced

In another brazen scheme, a Miami-area nurse practitioner was sentenced last December to 20 years in prison for illegally signing hundreds of thousands of orders for genetic tests at a cost of $14,000 each, as well as filing false claims for medical devices. She schemed with others to bill $192 million to Medicare, which reimbursed most of the claims.

Elizabeth Hernandez, 45, of Homestead was found guilty of playing a central role in a scheme involving telemarketing companies that contacted and convinced Medicare patients to request unnecessary medical products and services, including the genetic tests for cancer as well as orthotic braces.

The companies then sent pre-filled orders for the products to Hernandez, who signed them while falsely stating she had examined or treated the patients, prosecutors said. Hernandez billed Medicare as though she were conducting complex office visits with the patients, most of whom she never spoke to or saw her.

Prosecutors said she routinely submitted claims to the federal insurance program for more than 24 hours of “office visits” in a single day. “In 2020, Hernandez ordered more cancer genetic tests for Medicare beneficiaries than any other provider in the nation, including oncologists and geneticists,” according to the Justice Department.

Although Hernandez went to trial alone, she collaborated with other South Florida telemedicine operators who had already pleaded guilty and were sentenced to prison.

Michael Stein, 36, of Lake Worth, was sentenced to five years in prison for conspiring to defraud the U.S. government by soliciting and receiving kickbacks from another South Florida man who co-owned Panda Conservation Group. The Texas-based company operated two genetic testing labs that billed $90 million to the Medicare program and received $60 million in payments between April and November 2020.

Stein and Panda’s co-owner, Leonel Palatnik, was accused of conspiring to fleece Medicare by exploiting waivers granted to telemedicine providers during the COVID-19 pandemic, prosecutors said.

In 2021, Palatnik, 44, of Aventura, was sentenced to nearly seven years for defrauding Medicare and paying kickbacks to Stein as part of their scheme to bill program for thousands of unnecessary lab tests at Panda.

Telemedicine schemes

Top officials with Health and Human Services-Office of Inspector General say the growing telemedicine business has spread like a virus, leading to schemes affecting elderly patients across the country.

“They’re taking advantage of the elderly who think they’re doing something good for themselves,” said Mahmood, the head of HHS-OIG’s office in Miami. “The patients would get the tests back but they were generic responses. It’s not really useful medicine. It’s a billing scam.”

Both the Health and Human Services and FBI squads regularly team up with strike-force prosecutors to share data, spot patterns and use informants to break up healthcare fraud. They focus not only on Medicare offenders but also on private insurance scammers who overbill for urinalysis tests at substance-abuse clinics and black-market suppliers of pharmaceutical drugs.

In the latest round of takedowns in June, federal agents zeroed in on an organization led by Adam Brosius of Delray Beach, who helped a wholesale distributor of pharmaceutical drugs buy $90 million of heavily discounted HIV medication from five black-market suppliers, according to an indictment.

The HIV drugs were often acquired through “unlawful buyback” schemes in which previously dispensed bottles of prescription drugs were purchased from patients, prosecutors said. The drugs were then resold to Safe Chain Solutions LLC with falsified documentation designed to conceal the true source of the medications.

After purchasing the HIV drugs from the black-market suppliers, Brosius and Safe Chain’s co-owners, Patrick and Charles Boyd, of Maryland, sold the illicit medications at hefty markups to pharmacies across the country, according to the indictment. In turn, the pharmacies dispensed these “diverted” HIV drugs to unsuspecting patients. All three defendants have pleaded not guilty and await trial.

In some instances, prosecutors said, the patients received the bottles labeled as their prescription medication but they contained a different drug. One patient passed out and remained unconscious for 24 hours after taking an anti-psychotic drug thinking it was his prescribed HIV medication.

Losses in billions

The FBI’s Alvarez-Karnes said that although offenders have expanded into drug-diversion pharmacy schemes and substance-abuse scams at “sober homes” that hurt major private insurers, they’re still taking aim at Medicare because of its vast public resources and vulnerability. Even traditional medical equipment companies are still bilking the system without providing any products and services in South Florida.

The losses continue to be in the billions: Since early last year, 232 defendants nationwide have been prosecuted for filing false Medicare claims totaling $6.4 billion, with more than one-third, or $2.4 billion, of that fraudulent billing activity generated in South Florida, according to the Justice Department.

“Medicare has good intentions,” Alvarez-Karnes said, giving the health insurance program credit for improving safeguards against fraud. But she said that “more people are going to exploit” Medicare as regulators make it easier for criminals who hide behind “straw” owners to file phony claims electronically.

In the fight against fraud, she and others said Medicare beneficiaries and the public need to be more vigilant about alerting healthcare regulators and law enforcement when they see suspicious claims on their bills.

“Healthcare fraud doesn’t just harm elderly citizens,” Alvarez-Karnes said. “It harms all citizens and medical services.”

To report suspected healthcare fraud, the public can contact: 1-800-MEDICARE (1-800-633-4227), https://www.medicare.gov/basics/reporting-medicare-fraud-and-abuse, 1-880-HHSTIPS or tips.hhs.gov.

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