By David Fahrenthold The Washington Post
LOS ANGELES — In the little office where they ran the scam, a cellphone would ring on Sonia Bonilla’s desk. That was the sound of good news: Somebody had found them a patient.
When Bonilla answered the phone, one of the scam’s professional “patient recruiters” would read off the personal data of a senior citizen. Name. Date of birth. Medicare ID number. Bonilla would hang up and call Medicare, the enormous federal health-insurance program for those 65 and older.
She asked a single question: Had the government ever bought this patient a power wheelchair?
No? Then the scam was off and running.
“If they did not have one, they would be taken to the doctor, so the doctor could prescribe a chair for them,” Bonilla recalled. On a log sheet, Bonilla would make a note that the recruiter was owed an $800 finder’s fee. “They were paid for each chair.”
This summer, in a Los Angeles courtroom, Bonilla described the workings of a peculiar fraud scheme that – starting in the mid-1990s – became one of the great success stories in American crime.
The sucker in this scheme was the U.S. government. That wasn’t the peculiar part.
The tool of the crime was the motorized wheelchair.
The wheelchair scam was designed to exploit blind spots in Medicare, which often pays insurance claims without checking them first. Criminals disguised themselves as medical-supply companies. They ginned up bogus bills – saying they’d provided expensive wheelchairs to Medicare’s patients, and now needed Medicare to pay them back.
A lot of the time, Medicare was fooled. The government paid.
Since 1999, Medicare has spent $8.2 billion to procure power wheelchairs and “scooters” for 2.7 million people. Today, the government cannot even guess at how much of that money was paid to scammers.
Now, the golden age of the wheelchair scam is probably over.
But, while it lasted, the scam illuminated a critical failure point in the federal bureaucracy: Medicare’s weak defenses against fraud. The government knew how the wheelchair scheme worked in 1998. But it wasn’t until 15 years later that officials finally did enough to significantly curb the practice.
“If you play it right, you can make a lot of money quickly, stealing from Medicare,” said James Quiggle, of the nonprofit Coalition Against Insurance Fraud, recounting the lesson of the past decade and a half. “You can walk into the United States, with limited English skills, no knowledge of medicine, and – if you hook up with the right people, that know how to play the system like a Stradivarius – you can become an overnight millionaire.”
– – –
In the courtroom in Los Angeles, 42-year-old Olufunke Fadojutimi was on trial. Prosecutors alleged that she’d run a wheelchair-scam operation out of an office park suite in suburban Carson, Calif.
As these scams go, this one was medium-size. It billed Medicare for about 1,000 power wheelchairs.
“I said I didn’t need it,” witness Heriberto Cortez, 73, testified. Cortez was recalling the day when a stranger – allegedly one of Fadojutimi’s patient recruiters – came to his house and offered him a wheelchair. He said no. She didn’t listen.
“She insisted,” Cortez said. “She said that they were giving the chairs away.”
Later in the trial, 71-year-old Rodolfo Fernandez testified that a woman showed up at his house in Los Angeles. The woman asked whether he was on Medicare. He was.
The next day, she came back with a van. Other seniors were already inside.
“They took us to a clinic. They did an exam on us,” Fernandez recalled, speaking through a Spanish interpreter.
Authorities said the doctor at this clinic was in on the scam, too. He was paid to find the same problems, every time. The patient was too weak to use a cane. Or a walker. Or even a non-motorized wheelchair. Only a motorized wheelchair would do. Instead of making lame men walk, the doctor’s job was to make walking men lame – at least on paper.
In his testimony, Fernandez noted that the clinic was in a second-floor walk-up.
“I had to climb the stairs,” Fernandez said, in order for the doctor to proclaim him unfit to climb stairs.
After seeing the doctor, prosecutors said, both Cortez and Fernandez got power wheelchairs from Fadojutimi’s company. The company then sent Medicare the bills. Medicare paid.
Today, Cortez’s wheelchair sits in his garage, still wrapped in plastic from the factory. Fernandez’s wheelchair is occupied by an enormous stuffed animal wearing a Los Angeles Lakers hat.
“I put my little teddy bear on top of it,” Fernandez said, as jurors smiled at a photo of the bear in the chair.
– – –
Fraud in Medicare has been a top concern in Washington for decades, in part because the program’s mistakes are so expensive. In fiscal 2013, for instance, Medicare paid out almost $50 billion in “improper payments.” These were bills that, upon further reflection, contained mistakes and should not have been paid.
No one knows how much of that money was actually lost to fraud and how much of it was caused by innocent errors.
The power-wheelchair scam provided a painful and expensive example of why Medicare frauds work so often. The fault lay partly with Congress, which designed this system to be fast and generous. And it lay partly with Medicare bureaucrats, who were slow to recognize the threat and use the powers they had to stop it. As a result, scammers took advantage of a system that was overwhelmed by its own claims and lacked the manpower and money to check most of those claims before it paid.
The scheme first appeared in the mid-1990s in Miami – a city whose mix of elderly people and professional scammers have always made it an incubator of Medicare fraud.
“The patients would be walking,” said one former Justice Department official, recalling investigations from that time. “And they’d have the wheelchair, a $2,500 wheelchair, sitting in the corner with stacks of 1/8stuff3/8 on it. And 1/8investigators3/8 would say, ‘Why do you have this?’ And they would say, ‘They told me I could have this, so I took it.’ “
Fraudsters, they were learning, had invented a twist on an old trick: the Medicare equipment scam.
The original equipment scam had sprung up in the 1970s, when Medicare was young and criminals were still learning how to steal its money. Doctors, for example, could bill Medicare for exams they didn’t do. Hospitals could bill for tests that patients didn’t need.
The equipment scam was the poor man’s way in, an entry-level fraud that didn’t require a medical degree or a hospital.
Instead, the crooks only had to set up a “medical equipment” company and get access to the Medicare system. Then, they needed to learn a simple scheme, in which the fraudster would run the normal order of medical decision-making in reverse.
A legitimate medical-supply company must wait for a patient to see a doctor, then come looking for somebody to fill a prescription. But a fraudster starts with a prescription he wants to fill.
Then he goes looking for a patient and a doctor to foist it on.
By the 1990s, fraudsters had perfected parts of this equipment scam. To find the patients, for instance, they had learned to use professional recruiters, called “marketers” or “cappers.”
These recruiters induced seniors to hand over their Medicare ID numbers. Sometimes, they just paid the patients a bribe. Other times, they talked them into giving the number up free. The government is offering free wheelchairs, but only for a limited time. If you don’t act now …
Most fraudsters had also learned to buy off a doctor or two, paying a set price for each bogus prescription. But some had also perfected a cheaper method.
They corrupted dead doctors instead.
“The Russian mob up in Brooklyn has been doing this for years… . They scour the obits. They find out when Doctor Morris has died. They immediately write to Medicare and they say, ‘Hi, I’m Doctor Morris, and I’m changing my address,’ “ said Lewis Morris, a former top official at the Department of Health and Human Services’ office of the inspector general.
If it works, the dead doctor’s mail is delivered to the live crook. Including paperwork with the doctor’s Medicare ID number. “So the new Doctor Morris, Sammy Scumbag, starts writing scrip in the name of Doctor Morris,” Morris said. Recent reforms have lessened this problem.
The payoff of this whole scheme came when a scammer sent Medicare a bill. The bill would say that the bought-off doctor had prescribed some piece of equipment to the bought-off (or hoodwinked) patient.
The fraudster would say that he had supplied that thing. Now, he wanted Medicare to pay its share – usually, 80 percent of the price tag.
But what was the best kind of equipment to use?
This was the piece of the scam that wasn’t perfect yet. Through the ‘80s and ‘90s, scammers had tried orthopedic braces. Oxygen tanks. Electric nerve-stimulation kits. Prosthetic limbs. Everything had a downside. The items that didn’t arouse suspicions (like diabetes test strips) were often too cheap to make much money from. And the real big-ticket items (like limbs) attracted too much attention if you billed them by the hundreds.
Then they discovered the power wheelchair.
And it was perfect.
“Let me put it to you this way: An $840 power wheelchair, Medicare pays close to $5,000 for. So there’s a huge profit margin there. Huge,” said one California man who participated in a recent fraud scheme involving wheelchairs.
Medicare used to set its payments for most power wheelchairs based on manufacturers’ suggested retail prices. It did not lower those prices significantly for years, even when it was obvious that wholesale prices were far, far lower. So for scammers, each wheelchair brought a hefty profit.
And the chairs were also good for evading authorities’ attention. A wheelchair was supposed to treat a condition – trouble with mobility – that was a heck of a lot easier to fake than a missing arm.
“You don’t have to do s—-, and make a s—-load of money,” the California fraudster said, summing up the scam’s appeal in a single profane sentence. He spoke on the condition of anonymity because his court case is pending. “I would say there’s almost no hassle at all.”
In the courtroom in Los Angeles, another member of Fadojutimi’s operation – office manager Maritza Velasquez – was testifying. She said her husband drove the delivery truck, delivering real wheelchairs to the scam’s bogus patients.
She said he would take pictures at each stop – the chair and the person together – to keep in their files as proof of receipt. Legally, this was not a great idea. Mainly because many of the photos showed recipients standing up. Right next to the chair that Medicare had bought them because they couldn’t stand up.
“There was a guy who was actually in work clothes, like construction clothes, with cement kneepads,” Velasquez said, recalling one photo. He been out doing hard manual labor.
“So that was …” — Velasquez paused on the stand, looking for the right word — “different.”
In the early 2000s, the wheelchair scam spread from Miami to Houston. There, it exploded. In 2001, for example, Medicare had paid for only 3,000 power wheelchairs in the county that includes Houston.
In 2002, it paid for 31,000.
“I was told that I could make a quick 200 bucks. And basically I went up there and I made like $800” on the first day, said Lorine Hawthorne, of Houston. She had been recruited as a marketer for a Houston scam in those go-go days, finding elderly people and delivering them to a handpicked clinic.
“The most I ever made in one day, probably, was like $20,000,” she said. “That’s a lot of money for one day.” Hawthorne pleaded guilty to one count of fraud in 2005.
From Houston, the scam spread: to Louisiana, to Arkansas, to California. Nationwide, Medicare saw a sharp spike in wheelchair claims. Before the fraud had taken off, the chairs were rare: One study estimated that in 1994, only 1 in 9,000 beneficiaries got a new wheelchair.
By 2000, it was 1 in 479.
By 2001, it was 1 in 362.
By 2002, it was 1 in 242.
And beyond the simple increase in wheelchair claims, there were other signs that these claims might be bogus. Before the scam took off, for example, power-wheelchair prescriptions were usually written for patients with serious and advanced illnesses such as multiple sclerosis or Parkinson’s disease.
But as the scam grew, that changed.
“Many more of the diagnoses were things where you sort of go, ‘What?’ “ said James Goodwin, a University of Texas medical school professor. Looking in Medicare’s own data, he saw a rise in power wheelchairs prescribed for more common conditions such as arthritis and back pain. “It becomes a very, very strong picture, strongly suggesting there’s a lot of abuse going on there.”
As early as 1998, Medicare had recognized the existence of the wheelchair scam with a national “fraud alert.” But, to front-line fraud investigators, it was obvious that the crooks were still getting their claims paid.
“An agent in Little Rock witnessed a scooter race in one of the neighborhoods. Old people. One of them had attached an ice chest to it,” said Mike Fields, a fraud investigator at the Department of Health and Human Services (A “scooter” is a less expensive kind of powered chair, also heavily used in frauds.) “It just gets your blood up, you know. Knowing how much we’d paid for them.”
But for Medicare officials at headquarters, seeing the problem and stopping it were two different things.
That’s because Medicare is an enormous system, doing one of the most difficult jobs in the federal government. It receives about 4.9 million claims per day, each of them reflecting the nuances of a particular patient’s condition and particular doctor’s treatment decisions.
By law, Medicare must pay most of those claims within 30 days. In that short window, it is supposed to filter out the frauds, finding bills where the diagnosis or the prescription seems bogus.
The way the system copes is with a procedure called “pay and chase.” Only a small fraction of claims – 3 percent or less – are reviewed by a live person before they are paid. The rest are reviewed only after the money is spent. If at all.
The whole thing is set up as a kind of honor system, built at the heart of a system so rich that it made it easy for people to be dishonorable.
“The thing had been set up to pay the claims of Dr. Marcus Welby, M.D., and it was very good at doing that,” said Ted Doolittle, a former top Medicare fraud-control expert. Marcus Welby, a kindly and honest doctor, was the protagonist of a 1970s TV show.
The wheelchair scam, Doolittle said, hit the system in “a big, undefended underbelly.”
Starting in 2003, Medicare officials started trying to stop the wheelchair scams by changing their rules. That was the beginning of a long – and one-sided – game of cat and mouse.
The officials always thought they’d done enough. The scammers were always a step ahead.
In 2004, for instance, Medicare started to require that any doctor who prescribed a power wheelchair actually had to see the patient, in person. For the scammers, that was a new obstacle. But not a big one. They just had their corrupt doctors see patients in person.
Then, in 2007, the government began a legal crackdown. It began a “strike force” of prosecutors, who targeted equipment frauds in problem cities.
They nailed some of the most egregious wheelchair scammers. But the courts could only handle a relatively small number of scammers, so prosecutors tended to choose the most obvious fraud operations. The smarter, steadier operations didn’t stand out, and survived.
“Not only greedy, but stupid. Those are the ones we catch,” said Malcolm Sparrow, a professor at Harvard’s John F. Kennedy School of Government who has studied Medicare fraud. “We’re mostly getting people who didn’t finish high school, who’ve stolen more than $10 million in three months. Those are the ones we get. And you know the clever people are just invisible.”
So despite these efforts, the scam churned on. In 2012, about 219,000 people got a wheelchair from Medicare. That was 1 in 235 beneficiaries: After a decade in which Medicare tried to make these chairs harder to get, people were getting them at about the same rate as in 2002.
So why didn’t Medicare do even more to stop the wheelchair scam?
The answer seems to be that – in the huge universe of Medicare’s money – this big scam was still not that big. Last year, for instance, power wheelchairs accounted for just 2 percent of Medicare’s equipment spending. Which accounted for just 3 percent of Medicare’s $248 billion outpatient spending (called “part B”).
“Even though power wheelchairs was sort of the big gorilla in the room of 1/8equipment fraud3/8, it was still a tiny little gorilla, in comparison to the rest of Medicare,” said John Warren, who worked in Medicare’s anti-fraud office between 2005 and 2007.
Also, he said, Medicare was always reluctant to clamp down too much on wheelchairs, for fear that it would backlog the system and keep legitimate wheelchair patients from getting their chairs. “Looking back, I think we did pretty good,” Warren said.
In the Los Angeles trial, prosecutors said that Fadojutimi’s operation ran for six years. It adapted to the requirement that doctors see patients in person. It stayed below the radar well enough to avoid the strike-force crackdown.
In fact, it shut down on its own after Medicare started giving its claims special scrutiny. By the time the scam wrapped up in 2010, prosecutors said, it had taken in about $4.3 million from Medicare.
Later, however, fraud investigators stumbled upon the operation. And when they started looking, the scam unraveled quickly.
For one thing, Velasquez had saved pages from the “marketer log,” which the scam used to track which recruiters had brought in which patients. That was, in effect, a running diary of a criminal conspiracy. Government’s Exhibit 25.
“When the government is presenting its case, you might be inclined to say, ‘Wow! She’s guilty,’ “ Fadojutimi’s defense attorney, Femi Banjo, told the jury during his opening statement. His only play was to make the best of a bad situation, urging them to keep an open mind.
Banjo also told the jury that he objected to something a prosecutor had said: that Fadojutimi’s wheelchair operation had “stolen” money from the government.
“This is not about stealing,” Banjo said, trying to draw a moral distinction. “This is fraud.”
After a five-day trial, jurors found Fadojutimi guilty on all seven counts of health-care fraud, plus one count of conspiracy and one count of money laundering. She is awaiting her sentence.
– – –
In the past few years, at last, the government says it has outsmarted the wheelchair scammers.
For one thing, Medicare began using competitive-bidding processes to lower what it paid for wheelchairs. The total spending on wheelchairs and scooters – which had reached $964 million in 2003 – fell to $190 million last year.
It also required wheelchairs to be given out on a rent-to-own basis, instead of paid for upfront. That gave more time to check whether the claim was bogus. And in 2012, Medicare also made a crucial change in the way it handled wheelchair claims. Now, in 19 states, the government reviews all wheelchair bills before it pays them.
Finally, last year the feds went after the Scooter Store.
That company had become famous for its commercials telling seniors, “Your power chair will be paid in full.” In 2007, the store had already been fined for fraudulent practices, which included billing Medicare for power wheelchairs that patients did not want or need.
Last year, as part of a new investigation, federal agents with a search warrant raided the Scooter Store headquarters in New Braunfels, Texas. No new criminal charges have been brought. But Medicare was still concerned enough to cut off funding to the Scooter Store.
It was a death sentence. The business, heavily dependent on federal payments, shut down last fall.
Last year, about 124,000 people got power wheelchairs from Medicare. That was the lowest total since 2001, equivalent to one for every 400 beneficiaries.
That’s the good news. The bad news: When officials go back to try to figure out what the scammers stole, they get mired in an unholy bureaucratic mess.
When officials review old wheelchair bills, they discover that at least 80 percent of them were “improper”: They contain major errors and shouldn’t have been paid as is. Perhaps the patient’s diagnosis didn’t actually qualify for a power wheelchair. Perhaps the paperwork was incomplete.
How many of those bills were sent in by fraudsters trying to squeeze through the system’s blind spots?
Medicare can’t say.
“You’d have to talk to the patient. You’d have to talk to the providers” and ask whether the wheelchair was really needed, said Shantanu Agarwal, a doctor who is Medicare’s top fraud fighter. “And then, at the end of it, you could make a reasonable, fact-based, experienced-based determination about whether this is probably fraud.” Agarwal said. Medicare doesn’t have the time or money to do that for power wheelchairs now.
Today, even while the wheelchair scam is in decline, that same “pay and chase” system is allowing other variants of the Medicare equipment scam to thrive.
They aren’t perfect. But they work. In Brooklyn, for instance, the next big thing is shoe inserts. Scammers bill Medicare for a $500 custom-made orthotic, according to investigators. They give the patient a $30 Dr. Scholl’s.
In Puerto Rico, the next big thing seems to be arms and legs.
In one case there, two dozen companies billed Medicare for $5.3 million in prosthetic legs inside of a year. In many cases, their “patients” had no record of amputations in their medical history. Many of them didn’t even live in Puerto Rico. But Medicare paid for the legs.