Major Fraud Cases – Who Pays?

Original story posted on: May 21, 2019

The common thread appears to be physicians willing to take money as administrators.

As we recently reported, according to Assistant Attorney General Brian A. Benczkowski of the U.S. Justice Department’s Criminal Division, “Philip Esformes orchestrated one of the largest healthcare fraud schemes in U.S. history, defrauding Medicare and Medicaid to the tune of over a billion dollars.”

Sadly, even if the amount of fraud in the Esformes case pans out as being accurate, it would barely make the top five fraud cases in the last 10 years. The fines levied against pharmaceutical giants like GlaxoSmithKline and its stunning $3 billion settlement in 2012 dwarf Mr. Benczkowski’s estimate. It is also very unlikely that regulators will recover more than pennies on the dollar on any of the fines that are finally assessed in the Esformes case.

One of the common threads in these cases is the fact that physicians were willing to take money in exchange for doing something other than caring for patients. Physicians were paid to prescribe drugs or refer patients to certain facilities in return for cash or other remuneration. Some of the physicians in kickback schemes like this are eventually charged. Many of them are not.

What is the answer to reducing kickbacks and fraud among doctors?  First, you have to realize how easy it is to hide and rationalize kickback payments. The pharmaceutical industry often hires physicians to come to “speaking engagements” and pays large “speaking fees,” offering travel to exotic destinations. The physician thinks that this payment for services will appear normal to the outside world, even if someone does find out. “Anyway,” they think, “I am a brilliant physician, and I am really being paid what I am worth for speaking.” 

In the case of Mr. Esformes, he was convicted in part for paying physicians as “administrators” in return for referring patients to his facilities. We can see physicians thinking that it is a common practice to pay them to provide administrative services to nursing homes, so who can prove that the payments were made in return for steering patients to the facility paying them?

In the 1950s, criminologist Donald R. Cressey came up with a hypothesis to explain why people commit fraud. The three key elements in the fraud triangle are an opportunity, perceived pressure, and rationalization.

In terms of the perceived pressure to make money, even for physicians and businesspeople like Mr. Esformes, who seem to have as much money as they could ever need, they seem compelled to commit fraud. I am reminded by a line from the movie Wall Street: Money Never Sleeps, the sequel to the landmark 1987 Oliver Stone film starring Michael Douglas as scheming insider trader Gordon Gekko.

Shia LaBeouf’s character asks James Brolin in the film, “everybody has an exact number – what is yours?” 

James Brolin smiles smugly and replies, “more.”


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Timothy Powell, CPA CHCP

Timothy Powell is a nationally recognized expert on regulatory matters, including the False Claims Act, Zone Program Integrity Contractor (ZPIC) audits, and U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) compliance. He is a member of the RACmonitor editorial board and a national correspondent for Monitor Mondays.

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