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


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


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


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:  

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.