The Sopranokovs 

The Russian mob comes to town with a new scam—medical identity theft. 

When FBI special agent Ted Price peered through the window of a dingy brick storefront on Southwest Morrison Street in March, it was what he didn’t see that caught his attention. 

The business, called UnimedCorner, claimed to provide ailing seniors with orthotics—braces and other devices to correct foot, joint and back problems. 

Price and other federal investigators were skeptical. 

On Unimed’s showroom floor, Price saw wheelchairs, motorized scooters, a variety of canes and, on the walls, a selection of amateurish paintings and framed photographs. There was no evidence, however, of the kinds of equipment for which Unimed had billed Medicare nearly $2 million in the previous couple of months. 

“I observed wheelchairs and canes through the window but did not see any orthotics in the store,” Price later wrote in a search-warrant affidavit. “It is a sign of fraud that the store is not stocking the items [for which] it is billing.” 

By the time Price arrived on the scene, the company’s owner, a shadowy Russian immigrant named Alexandr Shcherbakov, was long gone. 

Today, Shcherbakov’s store sits undisturbed. The message light on the phone blinks, dead potted plants droop and a stuffed toy monkey slumps in a glass display case. 

And behind the cash register hangs a framed poster of television’s best-known mobsters, the Sopranos. 

From interviews and information presented in federal affidavits, it is clear Shcherbakov moved to Oregon to commit a crime elegant and lucrative enough to make Tony Soprano envious: medical identity theft. 

... 

“Medical identity theft is the new frontier for organized crime,” says Alex Johnson, a former FBI agent who investigates fraud for Regence BlueShield. “Pretty much anybody can set up a mom-and-pop operation and start cranking out claims.” Someday, most Americans will need a cane, wheelchair, home hospital bed or another of the items healthcare professionals call “durable medical equipment,” or DME. 

For those over 64 and without private insurance, there’s a good chance federally funded Medicare will pick up the tab for that equipment. Last year, according to federal statistics, Medicare spent $8.6 billion on DME. 

Here’s the way the system is supposed to work: A doctor prescribes a device such as a wheelchair for a patient, who presents his prescription to a DME supplier. The supplier provides the equipment and bills Medicare, which typically pays 80 percent of the cost. Unlike pharmacists, who fill prescriptions under strict scrutiny of state and federal watchdogs, DME suppliers are lightly regulated. “DME is very vulnerable to fraud,” says Consuelo Woodhead, the chief healthcare fraud prosecutor for the U.S. Attorney’s Office in Los Angeles. “It doesn’t require any background in medicine, any kind of professional licensure or appreciable capital. 

There are barriers of entry in other medical fields, but not in DME.” To operate, DME suppliers simply need a place of business, a business license and liability insurance. Unlike pharmacists, DME suppliers operate under an honor system: The feds count on them to supply the equipment they claim to provide to the beneficiaries who need it. 

That honor system is not working. 

The epicenter of DME fraud, according to the federal Department of Health and Human Services, is South Florida, where Medicare billing for DME quadrupled from 2002 to 2006 to $1.7 billion. Investigators found much of that increase was due to fraud. In 2006, federal inspectors revoked the licenses of 634 DME suppliers in South Florida, nearly half the DME dealers in the region. 

Later the same year, raids in Southern California yielded similar results: The feds shut down 95 DME suppliers. Many of the DME suppliers shut down around Los Angeles were run by immigrants from the former Soviet Union. It’s probably no coincidence that when the feds raided Los Angeles DME suppliers, some Angelenos fled to cities where there was less scrutiny—such as Portland.

Forgive me for going totally off topic (hey its my blog I write what I want) but it is Sunday and not much news on security.  I wanted to write about an article I saw in the NY Times today called "Even the Insured Feel the Strain of Health Costs". The article details that with the hard economic times even people who have health insurance are being bitten by the ever rising costs of health care.  Rising premiums, covering less procedures and care and charging more for prescriptions and medical care combine to put the bite on everyone.  From my own experience here are 4 examples of how even with health insurance, medical care costs are taking a bite:

1. My wife had minor surgery in September.  It was ambulatory surgery where she went in the morning and went home that afternoon/evening.  Even though we have full PPO coverage and it was participating doctors, hospital, etc. my out-of-pocket costs after insurance were almost $3000! The surgeon received a whopping $472 from the insurance company for the operation and the hospital billed like 17k!  When I called the hospital they said they did not expect to get paid that much, but had to bill it so they could get as much as they could.  I than had to negotiate what I would pay out of pocket beyond that. I also had to pay the anesthesia, the prescriptions, etc.

2. Here at StillSecure we had to switch providers again this year because United Health Care wanted another 15 to 20% raise in premiums. In fact that is about normal for health insurance, way above the cost of living and inflation.  We pay a good chunk of our employees insurance premiums, but even so the 20% or so that we have the employee pick up gets bigger and bigger.  Plus the insurance company covers less and less.  This squeeze is frankly baffling. How can you pay more and get less.

3. I had a dental implant a few months back.  Though we pay for dental coverage, our insurance would cover a bridge or cap, but they don't consider implants necessary and would not cover any of it. I had to lay 2k out of pocket. On top of this the panoramic x-ray the oral surgeon took (which again was not covered, another 100 bucks) showed I had an impacted wisdom tooth with a cyst around it.  My dental insurance covered the wisdom tooth, but the cyst removal would be considered under my regular insurance and my dentist was not participating. In fact I could not find a participating oral surgeon in the area.  So I had to an extra $600 dollars out of pocket and of course my out-of-network deductible was $750, so I ate it again.

4. The orthodontist.  This one is perhaps the worst of all and really gets my goat.  My oldest son went for an orthodontic exam. The doctor told my wife that he would probably need braces when he gets older and that current best practices in orthodontics is to put braces on now in a phase 1 and than if necessary they put other braces on later when more of his adult teeth come in. Putting braces on now would lesson the severity of what he would need later.  OK, great lets do it, right?  Wrong!  Our insurance covers a one time payment of $1200. The dentist said if we use it now, the cost for phase 1 would be $3600.  That leaves a balance of $2400 that I have to pay.  However, if I do it without insurance he would charge me $2400 and than I could use the $1200 towards the phase 2 braces my son may need which could be up to 10k. So if we went through insurance the cost was $3600 with $2400 out of pocket or no insurance $2400 out of pocket.  What is wrong with that picture. Whether I have insurance or not, it still costs me $2400!  This is fundamentally what is wrong with our health care system.  The dentist is willing to accept $2400.  He should take the $1200 from my insurance and I should pay him another $1200.  Anything else is ludicrous and in my mind borders on criminal insurance fraud.

We need to restore sanity to the whole system. It is not just the 48 million people in this country that don't have insurance, it is also the costs of the people who do have insurance. Don't tell me that giving us greater limits to put in tax deferred health savings plan are the answer either.  Fundamentally we need the insurance companies to stop sucking the blood of the premium payers. We need the health industry to bill for what the do and what it is worth, not how to maximize what the insurance company pays and most of all we need to make sure that people can afford and receive decent health care!

BTW, if you want to read an excellent blog on this subject, Dr. Stanley Feld, Brad's dad writes a great blog on it.