Texas at-home health services accused of $374 million fraud

Seven people in Texas billed U.S. government health programs for $374 million in services that weren’t provided or necessary in the largest at-home health-care fraud scheme, according to the Justice Department.

A doctor, the office manager of his practice and five owners of at-home health agencies were arrested yesterday on charges related to their participation in the fraud, the department said in a statement. In court papers, the U.S. described door-to-door efforts to recruit thousands of patients who didn’t need services, a boiler room where falsified documents were signed and overseas bank accounts.

The suspects were indicted in U.S. District Court in Dallas on charges including health-care fraud, and accused of sending $350 million in bogus bills to Medicare and $24 million in fraudulent bills to Medicaid.

The Obama administration has said it’s cracking down on those who steal from government health programs for the elderly, poor and disabled. There are no reliable figures for how much government health programs lose to fraud annually. Senator Tom Coburn, an Oklahoma Republican, estimates the Medicare loss from fraud, waste and abuse at $60 billion to $100 billion annually, according to his spokesman, John Hart.

‘Cottage Industry’

The indicted doctor, Jacques Roy, 54, of Rockwall, Texas, made a “cottage industry” out of signing up patients for services they didn’t need, according to a government detention memo filed with the court.

Authorities say that, between January 2006 and November 2011, Roy and others at his direction certified more Medicare beneficiaries for home health-care services and had more patients than any other medical practice in the U.S.

“Dr. Roy and his co-conspirators for years ran a well- oiled fraudulent enterprise in the Dallas area, making millions by recruiting thousands of patients for unnecessary services and billing Medicare for those services,” said Lanny Breuer, the assistant attorney general for the Justice Department’s criminal division, in a statement.

Roy’s attorney, Patrick McLain of Dallas, didn’t immediately respond to a phone message seeking comment.

The case is the largest health-care fraud case as measured by billings since the Justice Department and Health and Human Services created a first strike force to combat Medicare fraud in 2007, Breuer said in the statement.

Total Amount

Alisa Finelli, a Justice Department spokeswoman, couldn’t immediately provide the total amount of money paid out by Medicare and Medicaid to those involved in the alleged fraud.

The government identified a potential fraud by using data analysis targeting suspicious billing spikes, according to Daniel Levinson, the inspector general for the Health and Human Services Department. Analysts discovered that Roy certified more than 5,000 patients for home health care in 2010, while 99 percent of doctors signed off on 104 or fewer people, Levinson said in a statement.

Staff and contractors at the Centers for Medicare & Medicaid Services discovered the “first indications of improprieties” in late 2008, began investigating in 2009 and referred the case to law enforcement in 2010, said Ted Doolittle, deputy director for policy of CMS’s center for program integrity, in an interview.

“These are difficult and painstaking cases to build,” said Doolittle. “They take a lot of man hours” to check on individual beneficiaries and see whether they are homebound and in need of treatment, he said.

‘Aberrant Claims’

CMS should have spotted the “aberrant claims 5 years ago when they were filed,” said Kirk Ogrosky, a partner at Arnold & Porter LLP in Washington and former federal prosecutor who coordinated Medicare fraud cases. “No single doctor can see as many patients as this doctor claims and the government knew it at the time he filed them.”

Roy and other physicians at his company, Medistat Group Associates, certified that 11,000 patients over five years were eligible for home health-care services such as physical therapy that are supposed to be reserved for the homebound, according to the Justice Department.

Roy relied on home health-care agencies to recruit patients, according to the indictment. The health agencies canvassed neighborhoods, going door-to-door to recruit patients that were sent to Roy or other doctors working for him, authorities said. The doctors then certified that the patients were eligible for home health services even though they didn’t need them, according to the government’s detention memo.

In a Medistat boiler room, employees worked all day placing Roy’s signature on approvals for home health services, the government alleged in the memo.

Fake Identity

Roy created a fake identity and had documents, including a driver’s license and birth certificate with an assumed name, according to the memo. Roy had bank accounts overseas, including in Grand Cayman, according to the government. Millions paid to Roy by government health programs are unaccounted for, the government said in the memo.

One of the indicted home health agency operators is accused of paying recruiters to find patients at a Dallas homeless shelter, according to the indictment. Two others promised free health care and other social services such as food stamps as incentives.

The government suspended 78 other home health agencies associated with Roy based on “credible allegations of fraud against them,” according to a Justice Department news release.

--Editors: Justin Blum, Jim Rubin.

To contact the reporter on this story: Seth Stern in Washington at sstern14bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1bloomberg.net