Health Care Fraud Expert Focuses On Cleaning Up Private Practices

MEMBER PROFILE

Dr. Richard Lyschik, DDS, CFE, FAGD
President of Practice Rescue

Dr. Richard Lyschik, DDS, CFE, FAGD, President of Practice Rescue, was in the health care industry for many years before he added fraud prevention and detection to his skillset. While providing management consultation to many practices, he observed a variety of fraud schemes and was disheartened at how many medical professionals were hesitant to do anything about it. He warns that perpetrators in health care fraud schemes can be anyone and that doctors need to get more serious about punishing fraud.

How did you become interested in fraud prevention and detection?
My parents came to America from Austria and I traveled frequently to Europe as a child to visit family. Learning how to calculate exchange rates and even interpret travel schedules made me analyze groups of data. Traveling from country to country introduced me to strict border crossing protocols and accurate documentation requirements. Seeing the world definitely got my CFE analytical training off to an early start.

I later learned how to run three private practices and began to assist other doctors with their office operations. Eventually I became a management consultant for practices across the country and was exposed to a variety of fraud schemes. I was finally able to validate all of the fraud observations I made over the years as a health care provider when I joined the ACFE.

What are the most challenging aspects of investigating health care fraud?
It is shocking at how difficult it is to get doctors to believe that there could be fraud in the practice and just as hard to convince them to clean it up. I am always surprised at how when we initially discover fraud. Many doctors’ first reactions are that they don’t want to “rock the boat.” They don’t want you to upset the cash flow or their associated lifestyle, and they don’t want to go through a stressful firing and hiring encounter. They also worry about upsetting the morale of the employees — they often say, “What are the other staff going to think?” Some doctors believe they can solve the matter by having a staff meeting and others have even naively thought that if they speak to the fraudster the fraud will stop occurring.  

Another type of doctor I’ve encountered is the one who thinks they are untouchable because they can call upon their CPA, their lawyer, or their malpractice carrier to get them out of “hot water.” It is rewarding though when the doctor recognizes the gravity of the fraud — we have assisted in successfully getting fraudsters fired, prosecuted and incarcerated. Unfortunately, there are times when a casual approach is taken and the fraudster mysteriously disappears and moves on to another similar health care business. It’s unfortunate to know the fraudster has access to money, supplies, drugs and confidential patient files again.

What is your most memorable health care fraud case?
I will never forget the office manager who took home the entire office computer while the doctor was on vacation. She had it cloned by her uncle to capture more than 2,000 patient records filled with social security numbers, insurance policy numbers and credit card data. When the doctor returned from vacation, and the patients’ credit card charges appeared on their monthly statements, it was discovered that the office manager went on a shopping spree for jewelry, exercise clothes, diet pills and more. My team assisted the doctor in the proper termination and subsequent prosecution of that employee.

Additionally, other employees in the practice were let go and strict new fraud prevention guidelines were introduced into the practice. The end result is that the practice became more profitable and added a second doctor within a year because of enhanced practice methods and controls. 

Read Dr. Lyschik's full interview on ACFE.com.

Naughty or Nice: Who Made the List in 2016?

GUEST BLOGGER

Emily Primeaux, CFE
Assistant Editor, Fraud Magazine

He sees you when you're sleeping. He knows when you're awake. He knows when you've been bad or good...

"He," or "she," of course, is the ever present fraud fighter. And in 2016, fraud fighters saw a slew of unsavory characters who clearly ignored the elf on the shelf and instead stole, bribed or colluded to illegally line their own pockets. But for every bad apple, there are unsung heroes — the whistleblowers, journalists, investigators ... the list goes on and on. These heroes go to battle in the trenches every day to root out the crooks and thieves.

In honor of the holiday season, let's ruminate on the past year and the characters that made it onto either the naughty or the nice list.

Naughty

1. Wells Fargo: On Sept. 9, 2016, Wells Fargo negotiated a deal to settle a lawsuit filed by the U.S. Consumer Financial Protection Bureau, the Office of Comptroller of Currency, and the City and County of Los Angeles. Though Wells Fargo didn't admit to any wrongdoing, it did confirm that employees had opened more than two million checking, savings and credit card accounts without customer approval. And in a stunning turn of events, former employees then came forward to say they had called the ethics hotline to report dubious sales practices. However, according to these accounts, some whistleblowers claimed that the bank's strategy for dealing with whistleblowers was to find ways to fire them in retaliation. Though the case is ongoing, John Stumpf has stepped down as the bank's chief executive.
    
2. Andrew Caspersen: On Nov. 4, 2016, this disgraced scion of a wealthy Wall Street family was sentenced to four years in prison for robbing his friends, family and a large hedge-fund foundation in a Ponzi-like scheme. The judge who sentenced him? None other than the ACFE's 2016 Cressey Award winner, Senior U.S. District Judge Jed S. Rakoff. Looks like Caspersen most likely received coal in his stocking this year.
    
3. The Panama Papers: A giant leak of more than 11.5 million financial and legal records from the world's fourth biggest offshore law firm, Mossack Fonseca, detailing financial and attorney-client information for more than 214,488 offshore entities ... otherwise known as the Panama Papers. According to the papers, the leak "exposes a system that enables crime, corruption and wrongdoing, hidden by secretive offshore companies." The leaked documents outed scores of politicians, business leaders and celebrities for fraudulent business practices, including Iceland's Prime Minister, Sigmundur David Gunnlaugsson. He stepped down after documents revealed that he and his wealthy wife had sheltered money offshore.

Nice

1. The Panama Papers: The papers themselves were a great feat of international cooperation when the International Consortium of Investigative Journalists, the German newspaper Süddeutsche Zeitung and more than 100 news organizations released the Panama Papers. These are the good guys.
    
2. Tyler Schultz: When he discovered that Theranos, a health technology and blood-testing company, was using proprietary Edison machines that frequently failed quality-control checks and produced widely varying results, Schultz (an employee of the company at the time) decided to speak up. He drafted an email to founder Elizabeth Holmes to complain that Theranos had doctored research and ignored failed quality-control checks. What makes this move even more incredible is that Schultz is the grandson of George Schultz, a Theranos board member. Since then, a major investor has sued Theranos for fraud and the company has had to stop blood tests, shut down labs and cut jobs. 
    
3. Clare Rewcastle Brown: In 2010, Rewcastle Brown founded The Sarawak Report and Radio Free Sarawak to disseminate news that concerned the Sarawak region of Malaysia and eventually, news surrounding the emerging 1MDB (1Malaysia Development Bhd) scandal. 1MDB is currently being investigated by Swiss, Singh and U.S. authorities. And she's not backing down, despite a Malaysian court issuing a warrant for her arrest for "activities detrimental to parliamentary democracy" and the "dissemination of false reports." She'll be speaking about the scandal at the 2017 ACFE Fraud Conference Europe in London, March 19-21.

The naughty list may never be empty, but at least we have those on the nice list to turn to. And while 2016 saw some pretty egregious schemes, we can enter 2017 knowing that there are those willing to investigate and speak up. Here's to the new year!

Executive to Whistleblower: "Don't Give Me That Ethics Crap!"

GUEST BLOGGER

Emily Primeaux
Assistant Editor, Fraud Magazine

When I moved to Austin at the start of the year, I immediately set out to find new establishments that provide services I use frequently: a local dry cleaner, hair salon, grocery store, post office, etc. Finding a local doctor also always ranks high on my list when I move to a new place. And I’ve moved many times.

The most important criterion I look for in a primary care physician is simply that they are well respected and have positive reviews from friends or other patients. Should anything happen to my health, I want to know I’m in capable and experienced hands.  

“There is no single way to commit fraud in the health care industry,”

- Robert Church, CFE, FCPA, CVA

Health care fraud is a sensitive subject, because its prevalence means people like me can suffer at the hands of an irresponsible few. I recently spoke with Robert Church, CFE, FCPA, CVA, Director of Healthcare Investigations at Forensic Strategic Solutions, about a healthcare fraud scheme that took place at DaVita Healthcare Partners in Colorado. DaVita, a provider of kidney dialysis services, was accused of paying for referrals from physicians, which federal law prohibits. As Church explained, when a company pays a provider practice group or a physician for patient referrals, it becomes more about the money than the patients’ well being. Needless to say, this is exactly what I don’t look for in a new doctor.

Church’s extensive knowledge of the case revealed some pretty deplorable information. A former whistleblower himself, Church jumped right in to explain the discovery of the fraud by David Barbetta, a former financial analyst at DaVita, who worked in their mergers and acquisitions group. According to Church, when Barbetta discovered the fraud, he went to his bosses, but was rebuked at every opportunity when he discussed his findings with upper management. Per reports on the case, one executive even told him, “Don’t give me that ethics crap.” Frustrated and angry, Barbetta knew it was time to leave the company and file a claim with the authorities.

Church went on to explain that Barbetta came to authorities with spreadsheets of sales, emails, and insight into the company and its operations. These showed that DaVita was involved in three fraud schemes:

• They allowed physicians to be a part of joint ventures with DaVita and kidney dialysis centers across the country. They then shared that ownership interest at a lower price than fair market value.
• They bought dialysis centers by acquiring them from referring physicians at a value that was in excess of fair market value.
• Finally, to ensure physicians received as much cash as possible, they manipulated the books and records of these joint ventures to squeeze out as much money as they could. One exec even referred to it as a “money bag for physicians.”

As Church discussed, having a whistleblower was crucial when it came time to find the information the fraud examiners needed to break the case open. However, it’s the lessons learned that fraud examiners should consider. “Fraud and health care can exist at all levels and in a host of ways. There is no single way to commit fraud in the health care industry,” says Church. “Companies that are bottom-line-only oriented or cash oriented will go to great lengths to both commit the fraud and cover it up.”

In DaVita’s case, they recently paid $389 million to settle criminal and civil anti-kickback investigations and ended joint ventures with kidney doctors at 28 dialysis clinics. “Eyes open is the order of the day,” says Church. “Recognize that schemes can take a host of avenues to get a company to the end result.”

To hear the entire interview with Robert Church, visit ACFE.com/podcast.

Hiding in Plain Sight

GUEST BLOGGER

Diane Burley
Chief Content Strategist, MarkLogic

During International Fraud Awareness Week, I’m reminded that illusionists are masters at manipulating our attention – using slight-of-hand, they have us focus intently away from where the trick is being played out.  Skilled perpetrators of fraud do essentially the same thing. They know instinctively, if not cognitively, that the human brain is wired so that as it focuses on one set of information, it must shut out other information.

That’s why it was so easy for two business partners from Houston, with the aid of their wives, to steal more than $5 million in a health care fraud. The men founded a Houston-based home health care company and said they provided skilled nursing to Medicare beneficiaries, including home-bound patients. 

On the surface, it all looked legitimate. And, there are many legitimate operations just like these all over the country. But, in fact, the health care group’s patients were not homebound, nor did they need (or receive) skilled nursing services. Yet they billed Centers for Medicare and Medicaid Services (CMS) and received payment for those non-services.

Catching these kinds of frauds has been near impossible for forensic accountants and investigators, because their actions, albeit criminal, look so reasonable — which is how, according to the FBI, CMS alone is bilked of $80 billion each year. Forensic accountants are trained to look for anomalies: Is a bill excessively high? Is the same amount being processed over and over and over again? Is the number of patients for a single practitioner realistic?

Uncovering fraud requires a highly honed set of skills that combines both the art of knowing how to find patterns and using technology to do the heavy lifting. Highly trained individuals – even highly trained machines – can’t spot ersatz charges when transactions are perceived to be like all the other claims. And spotting the illusion — and stopping it — has been a big problem for CMS and virtually every organization in every industry. Until now.

We implemented an enterprise NoSQL database for CMS, and they were astounded at the ease with which each new external dataset could be added. By eliminating the need for modeling data, CMS was able to increase the odds in its favor to interrupt and catch this fraud earlier next time. Our technology allowed the focus and examination to be put on the right information – not the illusion the criminals had created.

During Fraud Week, it’s nice to share a success story that shows how new technology can be an effective weapon in the fight against fraud.

Health Care Fraud: An Unfortunate Certainty

LETTER FROM THE PRESIDENT

James D. Ratley, CFE
ACFE President and CEO

Death and taxes. Add health care to that short list of certainties. And while you're at it, tack on the word fraud to health care.

In May 2012, U.S. authorities charged 107 people, including doctors, nurses and other licensed medical professionals, for allegedly trying to defraud Medicare of about $452 million — the largest Medicare fraud sweep to date. The sad thing is that chances are that we'll probably soon be reading about an even more serious case.

"Health care fraud shows no sign of abating," said Dr. Joseph T. Wells, CFE, CPA, founder and chairman of the ACFE, during his keynote message at the 23rd Annual ACFE Fraud Conference & Exhibition. "Don't expect a downturn anytime soon."

Because health care fraud affects everybody, and many ACFE members work in the industry, we've begun the new "Rx for Fraud" column and will occasionally include feature articles on the topic.

In Fraud Magazine's cover article, "10 popular health care provider fraud schemes," author Charles E. Piper, CFE, CRT, writes that the difference between the health care realm and many other industries is its huge, alluring, easy pile of cash. According to the Centers for Medicare & Medicaid Services (CMS), national health expenditures in the U.S. reached $2.6 trillion in 2010 — 17.9 percent of GDP. 

The CMS projects U.S. health spending to rise to 7.4 percent in 2014, as a result of the major coverage expansions from the U.S. Affordable Care Act (ACA) — an estimated additional 22 million people will be insured. Over the period of 2015–2021, health spending is projected to grow at an average rate of 6.2 percent annually. 

Piper's 10 schemes aren't exhaustive — providers have many more tricks up their lab-coat sleeves. But these are representative of classic crimes. Of course, most health providers, facilities and institutions are dedicated to giving, not taking. However, the small percentage who are fraudsters can steal large amounts because they're close to the money, and they enjoy the trust of institutions and patients.

To learn more about the subject, here are two great possibilities:  

• Healthcare Fraud: Auditing and Detection Guide
• Health Care Reform & the New Opportunities for the Ethically Challenged 

Health care fraud — like death and taxes — isn't going anywhere. In fact, it will increase in the next decade. We're here to help deter and combat it.