Medicare yanks licenses, gives them right back

MIAMI — Regulators fighting an estimated $60 billion to $90 billion a year in Medicare fraud frequently suspend Medicare providers, then quickly reinstate them after appeals hearings that government employees don’t even attend, according to a review of federal records.

Federal prosecutors say the speedy reinstatements - though helpful to legitimate suppliers who get snagged on technicalities or minor violations - amount to a missed chance to cut off the flow of taxpayer dollars to bogus companies that in many cases wind up under indictment. Some store owners have collected tens of thousands of dollars even after conviction, prosecutors said.

Making matters worse, Medicare officials have failed to collect a single cent from the security bonds that were instituted two years ago specifically to discourage crooked providers from vanishing at the first sign of trouble from regulators. Millions of dollars sit unrecovered; officials blame the delay on personnel changes.


The gaps in the system grow out of poor communication between one set of contractors paid to inspect Medicare providers and alert officials to suspicious activity; a separate set of contractors that handles payments; and the agency that runs Medicare.

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Often, neither the government nor its private contractors attend the initial hearings when suspended companies appeal, allowing them to win practically by default. Officials at the Centers for Medicare and Medicaid Services declined to say why - be it staffing concerns or other issues - they aren’t part of the process, even though it is overseen by contractors the agency hires.

For years, Medicare has paid claims first and reviewed them later - a process that worked when providers were mostly hospitals because quick payments meant few lapses in service. But the “pay and chase’’ method has become a boon for criminals, allowing them weeks of lag time to bill for fraudulent claims, receive payment, and skip town before authorities catch on.

Medicare fraud has grown so lucrative and so easy that drug dealers and organized crime rings have entered the field because it affords greater payoffs and carries shorter prison sentences than drug trafficking or robbery.

“If Medicare wants to stop fraud, it can’t keep pretending these are real providers,’’ said attorney Kirk Ogrosky, former head of the Justice Department’s division that investigates health care fraud.


Officials revoked the licenses of 3,702 medical equipment companies in the fraud hot spots of South Florida, Los Angeles, Baton Rouge, La., Houston, Brooklyn, N.Y., and Detroit between 2006 and 2009, according to data provided to the Associated Press under a public records request. Those areas represent the highest concentrations of Medicare fraud in the country, according to federal authorities who have set up task forces there.

Of the providers who lost their licenses in those cities, about 37 percent, or 1,371, were eventually back in business.