Health plans file suit for fraud

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Twelve Blue Cross and Blue Shield health plans have filed a lawsuit against nine outpatient surgical centers, seven medical-management companies and 34 individuals for health insurance fraud.

The suit, which was filed late Thursday in the Federal District Court in Los Angeles, said the defendants used the Southern California centers since 1999 to perform "unnecessary" operations on thousands of healthy patients.

The "rent-a-patient" scam, as the health insurers and law-enforcement officials call it, has been a growing problem in the past few years for Blue Cross health insurers, Byron Hollis, the national anti-fraud director for the association, said at a Washington press conference yesterday.

The suit said the clinics had recruiters seek out-of-state insured residents and transport them to the clinics, where doctors put false diagnoses on their medical records.

The patients had procedures like endoscopies and colonoscopies without ever exhibiting symptoms warranting the procedures, the suit said.

Others had "sweaty palms surgery," an operation that involves collapsing a patient's lung and deactivating a nerve near the spine. Patients were paid money or given free or cheap cosmetic surgery in return, the suit said.

After the surgeries, the clinics would submit the claims to the health insurers. The clinics often exaggerated the cost of the surgery by classifying the procedures as emergency care.

The health insurance companies, which are independently owned but are members of the Blue Cross and Blue Shield Association, said the claims were fraudulently based and cheated them out of $30 million.

CareFirst BlueCross BlueShield processed about $2 million in false claims. The Owings Mills, Md., insurer has 3.3 million customers in Delaware, Maryland, the District of Columbia and Northern Virginia.

The lawsuit, the first from Blue Cross health insurers regarding the scam, follows federal and state indictments against clinic owners and employees.

In October, police arrested the owner and three individuals associated with the Millennium Outpatient Surgery Center in Santa Ana, Calif., one of the defendants listed in the Blue Cross lawsuit.

Most of the defendants listed have closed their centers.

Millennium was closed when Park Center Outpatient Surgery opened in the same space last month, said Manager Alex Martir. He said the new center is not affiliated with Millennium.

Daniel Martino, a supervisory special agent with the FBI, said operators of the "rent-a-patient" scam have filed $1.3 billion worth of false insurance claims in the last three years.

Mr. Martino estimated at the press conference that insurers have lost about $345 million from paying part of the claims.

California's prompt-pay law, which requires insurance companies to pay policyholders 30 to 45 days after a surgery, has contributed to the rise in the number of "rent-a-patient" cases, he said.