In September 2011, eight months into her job as Florida attorney general, Pam Bondi made her first visit to the Miami office of her agency’s Medicaid Fraud Control Unit. “I was appalled, shocked to learn that there were so many vacant offices, (with) lights out,” Bondi says. She says she was particularly disturbed that the Miami office wasn’t fully staffed given Miami’s reputation as a hotbed of Medicaid fraud.

 

“We have so many vacant positions that can be filled,” Bondi told Jim Varnado, her inspector general, who was conducting an internal review of the unit to determine, among other things, why it wasn’t producing more arrests and convictions.

Varnado’s report ultimately confirmed what Bondi says she saw in Miami — 45 vacant positions and “no clear chain of command.” Law enforcement officers lacked the training to investigate fraud. Top managers were faulted for intimidating employees from talking forthrightly about problems within the unit. Ultimately, Bondi demoted the fraud unit’s director, fired the head of law enforcement and named Varnado director.

Medicaid fraud in Florida is big-dollar crime. The health care program for the poor in Florida costs taxpayers $21.2 billion, nearly a third of the state’s overall budget [“Pac-Man” ]. Of the total, $11.6 billion is paid for by the federal government. Estimates put the amount lost to fraud in Florida each year at between 5% and 10% of the state budget.

For criminals like Patrick Crisler, the owner of a physical therapy clinic in Inverness in southwest Florida, the program was a giant ATM that he accessed by submitting claims for treatment that he never provided or by billing for more expensive procedures than he did provide. Over three years, Crisler pocketed $450,000 by submitting fraudulent claims. He was arrested in 2011 and convicted this year, caught only after a fraud investigator noticed unusual billing patterns.

“People don’t want to know how bad it is. The amount of money stolen, wasted or abused in the system is frighteningly bad,” Varnado says.

Just as bad — the state’s efforts at combatting the fraud have had a history of futility for decades. The unit has been the target of state audits, reform bills by the Legislature, investigative reports in newspapers and wrongful termination lawsuits alleging discrimination. In 2003, the federal government put the unit on probation.

Today, the state spends $25 million, with a force of 300 people split between the Attorney General’s Office and the state Agency for Health Care Administration, to detect and investigate fraud.

The results? Florida Medicaid investigators made 85 arrests in 2011 and 28 as of August this year. That averages to less than two arrests per law enforcement officer each year — making the state 36th in the number of Medicaid fraud convictions and civil settlements per fraud unit employee. States such as Ohio, with a third of the fraud-fighting budget and less than half the staff, have more convictions than Florida. The state says comparing Florida to other states isn’t fair and that some states may have more resources than what is reported.

Bondi isn’t the first Florida attorney general to be “shocked and appalled” at Medicaid fraud. Incoming attorneys general, from Bob Butterworth in 1994 to Charlie Crist in 2003, have tended to follow similar scripts — outrage, followed by vows to do a better job and replacement of a few top managers.

So far, Bondi hasn’t taken any more dramatic steps than her predecessors, and Varnado acknowledges there will be “no radical departure” in how the state investigates Medicaid fraud.

A flawed system

In part, Medicaid fraud is difficult to detect and investigate because the barriers to entry for crooks are low. A criminal needs little more than a Medicaid provider number and Medicaid billing software to file claims and a bank account to receive payments. Medicaid patient recipient numbers can also be obtained easily. Because of the government’s “pay first, investigate later” system, fraud can go undetected for years after it was committed — and long after the criminal has moved on.

In addition, the fraud-fighting effort in Florida is disjointed and rife with bureaucratic politics, beginning with the relationship between the Attorney General’s Office and the state Agency for Health Care Administration. AHCA’s primary focus is to reimburse Medicaid health care providers as quickly as possible. However, because it writes the checks, AHCA — through its Medicaid Program Integrity Office — also shares frontline responsibility with the fraud control unit for detecting fraud.

But while AHCA is supposed to find fraud, federal law stipulates that AHCA can only stop payments of suspected fraud and must refer investigations to the fraud control unit. The AG’s fraud unit, meanwhile, can investigate a case but relies heavily on AHCA and its own fraud hot line system for referrals. So as AHCA receives tips from hot line callers, Medicaid recipients and its own data queries, it passes them along to the AG’s fraud unit, which then decides whether fraud has been committed. Despite mandatory biweekly meetings between officials from AHCA and the AG’s office, complaints about poor communication between the two agencies persist.

Meanwhile, there are other structural issues, including the lack of prosecutors on the fraud unit’s investigative teams. David Moyé, a Tallahassee attorney and a former assistant attorney general in charge of the Medicaid fraud unit, says California does a better job at fighting fraud because investigators work closely with prosecutors from the moment an investigation begins — eliminating the learning curve that occurs when an investigator passes along boxes of materials to a prosecutor who then has to start from scratch to understand the case.

Another weakness in the system involves the skills and priorities of the fraud unit’s investigative personnel. Florida investigators may lack the sophistication to recognize and pursue financial fraud, preferring instead to focus on another area of responsibility, cases of physical abuse and neglect, Moyé says. Nearly a third of arrests in 2010-11, for example, involved cases of physical abuse and neglect.

Simply hiring more skilled investigators isn’t easy. Experienced white-collar crime investigators typically find better pay and benefits with federal agencies. “It’s difficult to hire qualified investigators in south Florida who do this type of work,” Varnado says.

In addition, the reports required by both the federal and state governments focus on the raw numbers of arrests and convictions, leading to an emphasis of quantity over quality. Last year, for example, an employee of a Brevard County home health provider was arrested for allegedly lying about the hours she worked. Total amount allegedly stolen from Medicaid: $1,327.

Solutions?

What might make a bigger dent in Medicaid fraud?

Giving the fraud unit more training and investigative resources might help. The fraud unit has struggled to aggressively mine Medicaid data, largely abandonding these efforts during most of Attorney General Bill McCollum’s tenure, Moyé says. In 2010, the program got special permission to launch a data-mining project, digging into Medicaid claims to look for suspicious activity. So far, that experiment hasn’t led to a single arrest. “We can do better there, no question,” Varnado says.

Moyé is among those who think that the personnel changes need to go deeper than the top managers.

Opinions differ on whether a shift by the state to a managed care system for Medicaid would help cut fraud. Proponents say the private insurance companies would have an incentive to eliminate fraud in order to maximize their own profits. Opponents say it creates opportunities for more sophisticated fraud because of the added complexity, and the fraud control unit will now have to keep an eye on the managed care companies themselves.

Bondi is looking to use the Office of Statewide Prosecution, part of her office, as a resource in pursuing Medicaid fraud cases. Medicaid was scarcely mentioned in the Office of Statewide Prosecution’s most recent annual report, but Varnado hopes the statewide prosecutors can help.

Bondi says it will “take time” for her changes — so far, she’s hired seven more investigators — to yield results. Meanwhile, the thievery continues: In August, Bondi announced the arrest of an Okaloosa County resident accused of billing more than $270,000 since 2007 for services never provided. So far this year, AHCA has received some 6,800 fraud complaints online or through its hot line system.