A fake drug rehab in Palm Beach recruited addicts with gift cards, strip-club visits and even drugs, federal officials said Thursday, July 13, enabling the company to bill for more than $58 million in false treatments and tests.
It’s a scenario often repeated in Southern California, which was part of a massive crackdown on health-care fraud that netted hundreds of arrests across the nation Thursday, including charges against 115 doctors, nurses and licensed medical professionals, according to the U.S. Department of Justice.
Officials said it was the largest-ever health care fraud enforcement action by a Medicare Fraud Strike Force and involved the arrests of more than 400 people for alleged false billings totaling some $1.3 billion.
More than 120 of them were charged for prescribing and distributing opioids and other dangerous narcotics.
The names of all those arrested weren’t immediately available, and it did not appear that California was a primary focus of the action, despite recurring reports of fraudulent practices in Southern California’s large addiction-treatment industry.
In California, 17 people were charged with scheming to defraud Medicare of $147 million; and two of them were indicted for alleged involvement in a $41.5 million scheme targeting Medicare and a private insurer, the DOJ said.
The scheme involved submitting fraudulent claims – and receiving payments for prescription drugs – that were never filled by pharmacies or given to patients.
Also in California, four people were charged in a drug-diversion scheme and a health-care fraud scheme involving kickbacks. One of them is a doctor.
“Too many trusted medical professionals like doctors, nurses and pharmacists have chosen to violate their oaths and put greed ahead of their patients,” said Attorney General Jeff Sessions in a prepared statement. “Amazingly, some have made their practices into multi-million dollar criminal enterprises. They seem oblivious to the disastrous consequences of their greed. Their actions not only enrich themselves often at the expense of taxpayers but also feed addictions and cause addictions to start.
“The consequences are real: emergency rooms, jail cells, futures lost and graveyards.” He said federal prosecutors will continue with investigations of “fraudsters and drug dealers wherever they are.”
At least three Southern California physicians are among those involved, according to documents from the U.S. Attorneys’ Office.
Dr. Jeffrey Olsen was charged with illegally prescribing controlled substances, including the opiate oxycodone. Olsen, 57, of Laguna Beach, surrendered to authorities on Tuesday after being indicted last week by a federal grand jury on 34 counts of illegally prescribing controlled drugs and one count of making a false statement on a DEA registration application. Olsen allegedly sold prescriptions to addicts and drug dealers in exchange for fees as high as $3,000 and without any medical basis for the prescriptions.
During the investigation, Olsen allegedly sold hundreds of prescriptions to addicts in other states, such as Oregon, without ever seeing them for in-person examinations; and allegedly sold more than 1.2 million narcotics pills – almost entirely maximum-strength – in addition to hundreds of thousands of sedative pills such as Xanax and Soma.
In another case, Dr. Thomas S. Powers, of Santa Ana, and Anthony Paduano, of Newport Beach, were arrested Tuesday on healthcare fraud charges that allegedly bilked TRICARE, a health care program for the military.
An indictment alleges that Powers authorized prescriptions for patients he never examined, and Paduano paid Powers $200 for each prescription. Paduano received approximately $1.2 million for referring the prescriptions to a local pharmacy that billed TRICARE more than $4.8 million and was paid more than $3.1 million, it said.
In Palmdale in Los Angeles County, James Chen and his Haeoyou Pharmacy were accused of filling prescriptions for medications without actually seeing patients and submitting fraudulent claims to TRICARE, according to court documents.
In 2013, HY made no claims to TRICARE, the DOJ said. In 2014, it submitted 31 claims totaling $81,401; and in 2015, it submitted 2,798 claims for $62.6 million. The scheme involved Trestles RX and Trestles Pain Management Specialists in Mission Viejo – which are no longer in business, according to paperwork from the Secretary of State – with “huge kickbacks” to be paid from TRICARE reimbursements.
Calls and emails to the accused in these cases were not returned by deadline. Many of the phone numbers associated with them had been disconnected.
Officials did not immediately respond to queries about the many remaining California cases, or say when information would be available. But the U.S. Department of Health and Human Services began suspension actions against 295 health-care providers, including doctors, nurses and pharmacists, the DOJ said.
The Southern California News Group recently investigated the addiction industry and found it peppered with financial abuses that bleed untold millions from public and private pockets, can upend neighborhoods and often fails to set addicts on a path to sobriety. The revolving door between detox centers, treatment facilities, sober living homes and, often, the streets generates huge money for operators who know how to game the system. And even obvious fixes can be hard to make.
California’s lax regulation of the industry has been attacked for myriad failings over the years. But its abandonment of the “certificates of need” system – where would-be rehab operators must prove there’s a local demand for their services before opening – is a key reason why Southern California has become known as The Rehab Riviera, importing addicts from other states.
Officials stressed that the number of medical professionals charged Thursday is significant, “because virtually every health care fraud scheme requires a corrupt medical professional to be involved in order for Medicare or Medicaid to pay the fraudulent claims. Aggressively pursuing corrupt medical professionals not only has a deterrent effect on other medical professionals, but also ensures that their licenses can no longer be used to bilk the system.”
The California Department of Justice’s Medicaid Fraud Control Unit was part of the crackdown, but state officials declined to elaborate “in order to protect the integrity of ongoing investigations,” a spokeswoman for the Attorney General said by email.
“Healthcare fraud is not only a criminal act that costs billions of taxpayer dollars – it is an affront to all Americans who rely on our national healthcare programs for access to critical healthcare services and a violation of trust,” said Tom Price, Secretary of the U.S. Department of Health and Human Services, in a prepared statement.