Cover Page

Contents

Cover

Title Page

Copyright

Dedication

Preface

Insurance Fraud Classification System

Chapter 1: Needles in a Paystack

A Growing Company

Another New Case on My Desk

Rolling Up Our Sleeves

Presenting the Facts for Justice

About the Author

Chapter 2: The Good Doctor and the Insurance Consultant

A Growing Company

On a Hunch

Paging Dr. Ahmet

Working Through the Pain

Indisputable Evidence

Trend Setting

About the Author

Chapter 3: Greasing the Wheels in the Oil Business

Long-Distance Call for Help

A Groundbreaking Case

Looking Outside for Suspects

Lack of Accountability

About the Author

Chapter 4: Living the Dream, Keeping Up the Lie

The Family Illness

Watching and Waiting

About the Author

Chapter 5: Extinguishing an Arson Fraud

Backyard Barbecue

Expanding the Team

Good Faith Is Easily Exploited

Lazy Appraisal Work

Outcome of the Investigation

About the Author

Chapter 6: Weakest Link in the Chain

The Unexpected Meeting

The Interview

The Interrogation

The Second Interview and Interrogation

The Crime Ring Breaks

About the Author

Chapter 7: Everyone Gets Hurt: A Study in Workers' Compensation Fraud

Bundled and Bungled

Unlikely Rescuer

Crash Course in Insurance

Tracking the Letters of Credit

It All Comes Together

About the Author

Chapter 8: The Hazards of Doing Business with Friends

It Started with a Single Call

Understanding the Industry

What Jack Did Not Know

It Does Not End with a Confession

Plea Deal

About the Author

Chapter 9: There's Gold in Them Thar Malls!

When It Rains, It Pours

Divide and Conquer

Just the Tip of the Iceberg

Whistleblower, Beware

Complications Begin to Mount

Delay, Delay and Delay!

Our Team Enters the Fray

An Outcome, Not a Resolution

About the Author

Chapter 10: Damsel in Diamonds

Viceroy Jewelers

One Thing Leads to Another

The Truth Comes Out

Solving the Paperwork Puzzle

Duty Calls

Police Involvement

About the Author

Chapter 11: Operation Give and Go

Designing a Sting

The First Deal

On a Roll

Unexpected Consequences

Successful Sting

About the Author

Chapter 12: An Inspection Is Worth a Thousand Photos

Start Your Engines

Bringing on a Navigator

Becoming Car Buffs

Seeing What's Behind the Photos

One More for the Road

About the Author

Chapter 13: The Danger of Trusting Too Much

A Single Suspicious Check

Climbing the Fraud Ladder

Surprise Interview

Where Did It Go?

About the Author

Chapter 14: The Twin-Cities Machine

Running a Machine

The Team Versus the Machine

Ambulance Chasers, Runners and the Mob

Interviews

Medical Mill

Out of Sight, Not Out of Mind

The Big Picture

About the Author

Chapter 15: With Friends Like These . . .

False Alarm?

Nagging Suspicions

Mounting Dread

Now What?

Justice

About the Author

Chapter 16: All the Buzz

Partnerships in Action

Confirmed Suspicions

Lying Under Oath

Understanding the Elements

Preparing for Legal Action

Realities of the Courtroom

The Verdict Is Only the First Step

About the Author

Chapter 17: Getting Rich from the Elderly

The Promises of the Plan

A Different Side of Betty Comes Out

The Complaints Keep Coming

Unwelcome Visitors

The Plan Fails

About the Author

Chapter 18: Transparent Greed

Business as Usual

Imitation Is the Highest Form of Flattery

Glass Star's Evolution

The New Guard in Full Swing

A Holdout from the Old Guard

Brand New to the Job

Gathering Witnesses

About the Author

Chapter 19: Fault of Fortune

The Ethical Dilemma

The Consortium and Its Needs

The Reservations

The Investigation

Veracity Test

Too Good to Be True

The Interview

About the Author

Chapter 20: Going Blind to Fraud

Popular with the Auditors

Second Opinion

The First Visit

Audits and Reports

Fraud Referral

Tallying the Losses

About the Author

Chapter 21: Going Against the Cartel

The Cartel Climate

Acceptable Expenditures

Strange Bedfellows

The Plan in Action

David Beats Goliath

About the Author

Chapter 22: Falling Prey to Online Charms

A Good Deal Gone Bad

Call for Help

Seeing the Big Picture and the Red Flags

Revealing Records

Satisfied Customers

About the Author

Chapter 23: Big Bills in Little Cuba

Dusty Shelves

Whack-A-Mole

Store Visit

House Calls

The Truth Comes Out

About the Author

Chapter 24: Rushing an Insurance Claim

Second Generation

Unwelcoming Client

Spending Spree

The Robbery

The Rush Ends

About the Author

Chapter 25: Ignorance Is Bliss, While It Lasts

No Experience Necessary

Second Chance

Nitty-Gritty Fraud Examination

Bribes, Donations, Rebates and Consignments

About the Author

Chapter 26: The Name Game

Not Just Another Case

Beware of Intentionally Complicated Structures

Repeat Offender

Piling Up Boxes

You Can't Plan for Everything

About the Author

Chapter 27: Woo, Wed, Insure, Murder

We Have a History

Character Testimonials

Different Kinds of Evidence

About the Author

Chapter 28: Mystery Shopping for Fraud

Silver Star

Independent Expertise

Shopping Trip

Broken Paper Trail

Under Oath

Settlement Discussions

About the Author

Index

Title Page

To Grampy Hymes, a casebook enthusiast and retired dentist who has seen insurance fraud from inside the clinic

Preface

The idea of shared risk is the foundation of all types of insurance. In one of the earliest examples of shared risk, ancient Chinese traders would distribute their cargo throughout many different oceangoing vessels to limit the incurred losses if any single one of them capsized. Later, the Babylonians enacted the first known written laws in the Code of Hammurabi (circa 1750 B.C.), which, among its many provisions, allowed lenders to charge additional costs to cancel loans for which the collateral was lost or stolen.

Early insurance was principally limited to the extreme risks associated with ships and the goods they transported on the high seas. But even in ancient Rome, records exist to show that there were burial societies that paid for funeral costs of their members out of the dues they were assessed. The Achaemenid Empire in ancient Persia (circa 550–330 B.C.) was the first to offer individuals insurance for their general interests. Each year citizens presented the ruler with a gift. If it was worth more than 10,000 gold coins, the gift and the giver were recorded in a ledger. If the gift giver later needed money for an investment, for a child's wedding or another personal venture, the government would give him or her twice the amount of the recorded gift.

By the mid-1400s, marine insurance was highly developed but other forms of insurance were not. Sharing losses, rather than making a profit, was the main goal at the time. However, after the Renaissance in Europe, the insurance industry experienced significant growth and became much more sophisticated.

Other disasters began to be covered by insurance after the Great Fire of London of 1666, which destroyed 13,200 buildings. In 1680, Englishman Nicholas Barbon established the first fire insurance company, known as The Fire Office. Around the same time, Mr. Edward Lloyd of London opened a coffee shop that became a popular hangout for ship owners and merchants. Risk takers also congregated at Lloyd's to provide insurance (for a profit) for shipping concerns. Documents would be prepared, and those providing the insurance would each sign at the bottom, a process that added the term underwriter to our lexicon. Lloyds's of London would go on to become one of the largest insurance entities in the world.

More insurance companies sprang up in England and continental Europe after 1711, during the so-called bubble era. Many were downright fraudulent get-rich-quick schemes that sold worthless securities to the public. Others were woefully undercapitalized and could not cover their losses from claims. And no systems had yet been developed to weed out fraudulent claims by the insureds. The resulting chaos of the burgeoning industry took more than a century to right itself.

What we now call health insurance probably began in Germany, building on the tradition of welfare programs in Prussia and Saxony that began in the 1840s. By 1880, German Chancellor Otto von Bismarck introduced old-age pensions, accident insurance, medical care and unemployment insurance. The British followed with a system of social insurance in the early 1900s, which was greatly expanded after World War II.

In America, the insurance industry developed slowly, helped along by Benjamin Franklin. In 1752, he founded the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire, which made significant contributions to the prevention field by warning against certain fire hazards and refusing to insure high-risk dwellings. Around the same time, the sale of life insurance commenced in the United States, mostly tied to religious institutions. The Presbyterian Synods in New York and Philadelphia started the Corporation for Relief of Poor and Distressed Widows of Presbyterian Ministers. And within 50 years, nearly two dozen life insurance companies went into business, but most failed.

By the mid-1850s, life insurance companies had started taking hold in the United States. New York Life was formed during this period and is now one of the most prominent. Early life insurance companies had to contend with crooked agents in their employ, a problem that still exists in measure today. It was common then for agents to sign up people they knew to be in bad health for the sole purpose of collecting a commission on the sale; no physical exams were required at the time. But by the late 1800s, employing doctors to use standard criteria for evaluating risks reduced (but did not eliminate) the problem. The other half of the fraud equation was the insurance companies themselves. Many that sprang up were nothing more than Ponzi schemes, which were mathematically predestined to fail.

In the early 20th century, the insurance industry blossomed with profits, and companies sought to expand by offering additional coverage for a variety of risks. One of the first forms of insurance for health was established by Britain in 1911 with the passage of the National Insurance Act. In the United States, a group of Dallas-based teachers formed a partnership with an area hospital in 1929 to provide a set amount of health and sickness coverage in exchange for a set, prepaid fee. This partnership eventually became known as Blue Cross. Meanwhile, physicians developed Blue Shield as an alternative. The two groups eventually merged.

During World War II, wage freezes were instituted throughout companies in America. Group life and health insurance offerings sprang up (at mostly the companies' expense) as corporations, desperate for workers, saw a legal way to attract and keep employees. Such large group policies went to large carriers, which led to a consolidation of the industry, squeezing out smaller entities.

As the healthcare market grew, the U.S. government began encouraging participation, which led to tax-exempt status for employer/employee contributions in 1954. Although some continued to strongly oppose a nationalized healthcare system, Congress enacted Medicare and Medicaid in 1965. Medicare called for compulsory hospital insurance for those over 65; Medicaid provided care for low-income people through a program that combined federal and state resources, the benefits of which vary from state to state depending on per-capita income.

While many counties have nationalized healthcare, the United States remains a patchwork of governmental and private plans. This has resulted in some of the world's most expensive and ineffective health insurance coverage. In 2010, the U.S. Congress passed the Patient Protection and Affordable Care Act (ACA), seeking to extend mandated coverage for nearly 50 million uninsured Americans. The ACA also wants to slow down the growth in the cost of healthcare and improve the patient delivery system. But it has been used as a political football, as a large minority of Americans oppose mandated, universal healthcare. Only time will tell whether it is better or worse than the system (or lack thereof) it replaces.

Fraud in the insurance and healthcare industry has always been a problem. Although there have been many attempts to determine the actual costs, the figures are estimates at best and unsupported guesses at worst. Suffice it to say that fraudulent transactions regarding insurance claims probably exceed those in any other area for a number of reasons.

First is the concept of diffusion of harm. This means that fictitious claims are spread across a large number of people. While a person might never steal from a neighbor, committing fraud against a faceless corporation, governmental agency or insurance company is easier to justify. Second, most people just don't like insurance companies. Many argue that they are bloated, rich bureaucracies interested only in their own welfare and not the people they insure. They claim that the insurance companies are there when collecting premiums but absent when it comes to paying claims. This attitude makes insurers an easy target for fraud.

The third reason for large volumes of insurance fraud might relate to the technological processing of claims. Those charged with developing systems to prevent insurance fraud are certainly no smarter than some of those committing it, and internal control systems are designed only to be reasonable, not foolproof. In short, where there is a will, there is usually a way. A fourth reason for insurance fraud, particularly as it relates to health insurance, stems from a patient's instinctual trust of his or her medical provider. Many of us think of our doctors and nurses as benevolent caretakers who have our best interest at heart, but we fail to realize that these providers commit the overwhelming majority of healthcare fraud. Whatever the causes, most experts believe insurance and healthcare fraud is getting worse, not better.

This collection of case studies comes to you directly from members of the ACFE; each case has been investigated and written by anti-fraud experts working directly to combat insurance schemes. The case studies cover a wide array of insurance fraud — from healthcare fraud, to arson, to murder and everything in between — because we want to provide a panoramic view of the problem rather than limit the cases to a narrow sector of the industry. We changed the names of the people and places to protect the anonymity of those involved, but the cases themselves are real. All profits from this publication will be donated to the ACFE Scholarship Foundation to train the next generation of anti-fraud experts.

As legislation develops and the insurance industry evolves, staying abreast of the trends will be essential for the fraud fighters investigating the crimes and the consumers trying to avoid becoming victims. We hope this collection offers you an informative but also entertaining reference, whether you are reading it as an expert or an interested novice.

Laura Hymes, CFE
Dr. Joseph T. Wells, CFE, CPA
Austin, Texas
March 2013 

Insurance Fraud Classification System

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*We include government health care providers in the category of “Insurer.” Although these programs are susceptible to frauds by other insurers, such schemes would fall under the “False Claims of Coverage” branch of this tree.


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CHAPTER 1

Needles in a Paystack

CHARLES PIPER

Susan Shamrock became a doctor because she wanted to provide people with relief from their allergy suffering. Although sticking needles in patients was not her favorite thing to do, Susan knew she was helping them get back to their normal lives. She enjoyed being a physician and helping people.

On the home front, Susan was happily married. She and her husband had two daughters who enjoyed a lifestyle most kids would envy. The girls attended private schools, had the latest electronic gadgets and even received expensive professional golf lessons. The family lived in a big house, and Susan and her spouse drove fancy cars. Dr. Shamrock was highly respected in her community and she gave generously to various local charities.

As the years passed, both Susan and her husband took to gambling at local casinos for entertainment. Eventually, Mr. Shamrock quit his job to pursue professional gambling; by doing so, he could even write off gambling losses on their tax returns. Predictably, Susan's husband lost a lot of their money gambling. But their marriage was good, their kids were happy and Susan's practice was profitable.

A Growing Company

After Susan opened her own allergy clinic, she grew increasingly gratified that she was able to help so many patients; plus the money was good. Business was slow in the beginning, but it didn't take long before patients under her care started coming back for regular treatments. Newer patients followed, and the practice kept growing. Business was so good that she hired employees to schedule appointments, handle accounts payable and receivable and file claim forms with insurance companies and federal and state healthcare programs. She also hired medical assistants and an office manager.

Sometimes Susan became frustrated because a few of her patients didn't respond to treatment regimens. In those instances, her patients not only continued to suffer from their allergies, but they or their insurance companies continued paying for treatment that was not working.

As part of her continuing education, Susan attended various seminars where she learned from other experts in the field. At one training event, the speaker discussed a new allergy treatment that was considered experimental by the Food and Drug Administration (FDA). Susan was intrigued and inspired by the presentation and immediately began offering the treatment as an alternative to her patients who hadn't responded to previous therapy. She even listed the experimental treatment on her website. Several of her patients were willing to try it out of frustration because nothing else worked for them, and they had no financial qualms because their insurance paid for it.

Another New Case on My Desk

I was a federal agent with experience investigating complex fraud schemes (including healthcare provider fraud) when I received a referral in the mail at my office. The note indicated that Dr. Susan Shamrock had possibly miscoded billings for allergy treatments when submitting claims for several of her patients.

The allegation said she provided patients with nonapproved, experimental allergy treatment but listed it on insurance claims as a different, approved treatment. (Allergy treatments not approved by the FDA are not reimbursable by insurance companies or federal healthcare programs.) The referral also mentioned Dr. Shamrock's website description of experimental treatment. Based on her website, there was no denying that Susan was promoting the use of the experimental treatment.

The referral also reported that during a federal audit of a random sampling of billed treatments, Dr. Shamrock was asked to provide supportive documentation for several of the insurance claims she submitted and that the government already had processed and paid. However, Dr. Shamrock ignored or failed to respond to the requests.

Rolling Up Our Sleeves

From experience, I knew that healthcare fraud often affects many insurance carriers and federal healthcare programs — if one program was defrauded by a provider or facility, in all probability other programs and companies were also defrauded. Based on that knowledge, I immediately contacted healthcare fraud investigators I had previously met or worked with and notified them of the referral. Some of those investigators worked for agencies that had their own healthcare programs. I asked the investigators to determine if their agencies received and paid insurance claims from Dr. Susan Shamrock. Only one of the investigators, Agent Andrew Badge, responded positively.

Badge and I had successfully worked together in the past, and, like me, he used to be a street cop before becoming a federal agent. Badge and I met at his office and developed an investigative plan for this case.

Using administrative subpoenas, we separately requested and later obtained copies of numerous patient files and billing records from the doctor's office. Dr. Shamrock took about a month to comply fully with the subpoenas. Waiting this long is not unusual in white-collar investigations, and, in fairness, the doctor had a small office staff and years' worth of records to copy. In addition, they had to do most of the copying after normal business hours when the clinic was closed.

Patient files are often thick and might include: patient contact information (name, address, Social Security number, date of birth, etc.), insurance policy coverage information, claims submitted for payment, records of payment, explanation of benefit forms, dates of treatment, physician notes, lab test results, appointments and so on.

Badge and I worked in different buildings about ten miles from each other so we periodically met for lunch and talked about this case and others. When we finally received the subpoenaed records, we reviewed them at our own offices. We searched for indicators that patients received the experimental treatment, which may have been miscoded and billed as an FDA-approved treatment.

Reviewing the boxes full of patient files was a tedious process. Although I was terrible at dissecting worms and frogs in high-school biology classes, I enjoy dissecting information in fraud cases. The review took several weeks to complete. The first several days were boring because only a couple of files indicated that patients received the experimental treatment. Nevertheless, I carefully reviewed each claim individually.

Although I had never received allergy injections myself, I thought it odd that some of the patients reportedly received shots four or five times a week. I telephoned Agent Badge, told him what I found and added, “I wouldn't go to the doctor's office four or five days a week if they were giving out free lunches — let alone just to get needles stuck in my arm.” Badge remarked, “I'd go if they were giving free lunches.” We both laughed.

More alarming than what I was finding in the patients' files was what I wasn't finding. The files often contained no supportive documentation for any of the billed injections. For example, in one patient's file, the dates on insurance claim forms indicated allergy injections were given to the patient on January 10, 12, 14 and 15. But there was no documentation in the file indicating the patient ever stepped foot inside the doctor's office on any of those dates.

As I continued reviewing patient files, I found repeated instances where there was absolutely no supportive documentation for any of the services billed for.

In addition, when there was documentation, the charts indicated that the patients' next visit would not be for several weeks. The next pages in the patient files often indicated they were last seen on the previously documented dates.

For example, a patient's file might read something like this:

January 3: Patient John Smith seen today and given an injection. His next office visit will be February 5.

Then the next documentation would read:

February 5: Patient John Smith last seen on January 3. Patient given an injection. Next visit will be March 7.

In short, the written notes in the patients' files contradicted the insurance claims. The charts were incriminating evidence that the patient had not visited Dr. Shamrock nearly as frequently as the documents indicated.

I alerted Badge to my findings, and he said he had been seeing the same pattern in his files. At this point, I began to understand why Dr. Shamrock refused to comply with the auditors' previous request for treatment records; she didn't have any to give!

Knowing that documents alone do not prove a case, Badge and I began interviews of patients at their homes. Prior to the interviews, I listed questions to help guide me and gave a copy of the list to Badge. Having most of the questions already written down makes it easier to take notes. I emphasized that the draft list of questions was only to be used as a guide and additional questions would be asked as needed. Badge liked the idea of numbering the questions and said he was going to start doing it for his future interviews.

Our first interview was of a former patient named Steve Hardwick. He said he never received more than two or three injections in any given week. But what Hardwick said next was a complete surprise: “I didn't need to go to the doctor's office anyway; Dr. Shamrock just gave me the filled syringes to inject myself.”

I asked Steve to elaborate. He said that about once each month, he would show up at Dr. Shamrock's office and she would inject him with an allergy shot. During the same visit, the doctor or her assistant would hand him a month's supply of filled syringes, and he would later inject himself with the antigens two or three times a week.

Hardwick said, “Come with me; I think I have a couple of the syringes in the fridge.” We followed him into his kitchen, where he opened his refrigerator and pulled out two filled syringes. Hardwick said, “These are the syringes Dr. Shamrock gave me.”

Understandably, Agent Badge and I asked a bunch of follow-up questions. Steve Hardwick said he liked the arrangement because he could inject himself and didn't need to travel back and forth to the doctor's office all the time. But the fact is, he injected himself only two or three times each week, not four or five times like the insurance claims indicated. Plus, the insurance claims specifically listed the location of service as Dr. Shamrock's office.

I studied the claim forms a little closer and observed that all of the injections were reportedly given on weekdays; never on the weekend. I asked Hardwick if he ever injected himself on the weekend and he said, “Sure, lots of times.” He said he never had to report his dates of injection to the doctor's office.

I speculated that Dr. Shamrock knew that if she listed Saturday and Sunday treatments on her insurance forms, the insurers would reject the claims (because the doctor's business was closed on the weekends). I also figured that since Dr. Shamrock apparently thought she could get away with allowing patients to inject themselves away from the clinic, she would probably have no qualms about listing the incorrect injection dates on some paperwork.

Agent Badge and I photographed, marked and collected the filled syringes as evidence, and Badge later stored them in his office evidence refrigerator. During the next several weeks, Badge and I conducted more patient interviews. On the days we worked together, we alternated buying each other lunch. It seemed like every time it was my turn to pay, Badge picked a more expensive restaurant to eat at.

During our interviews, Badge and I heard similar stories from Dr. Shamrock's patients. A few people also said they received an experimental allergy treatment. Those patients reported that Dr. Shamrock assured them she would take care of the insurance billings. Since the patients didn't have to pay any money out of pocket, they had no concerns about how much the insurers were billed or how the treatments were coded.

After returning to my office, I contacted one of the government healthcare program integrity officials and was informed that each injection should have been given by a qualified and approved healthcare professional inside the physician's office. The official said the patients should have been monitored by a healthcare professional in case they had adverse reactions to the injections. I was also informed that the government would not have paid those claims had they known the patients injected themselves and that the locations of service were falsely recorded. I telephoned Agent Badge and told him what I had learned. He then called the program integrity officials from his agency and received the same information. Some agencies and insurance companies have different rules, so it was important for us to get clarification from the experts at our respective agencies.

In the days that followed, I attempted to quantify the potential dollar loss based on the patient files and claim forms I reviewed. I began adding up all the dollars for the false claims where there was no supportive documentation or false information. I also included the few instances where the experimental treatments were miscoded. But as I continued reviewing the claim forms, I found something even more alarming.

In addition to billing for injections, Dr. Shamrock billed extremely high prices for “preparing and mixing” the antigens in the syringes. Supposedly, each patient had his or her own unique master serum. Injections were billed at about $50 each, but mixtures were billed for thousands of dollars each!

The real money Dr. Shamrock made came from the falsification in the number of antigen mixtures made. To avoid detection, she billed for lots of injections — and made an extra $50 for each fictitious injection.

I also knew that the insurance regulations required patients to pay copayments when they received treatment. Providers are not permitted to waive the copayments. So circumstantial evidence of fraud was established by the lack of patient billings for copayments. Interestingly, Dr. Shamrock had no qualms submitting false claims to insurance companies, but she never sent her patients false bills for the copayments. I suspect she knew darn well that the patients would have been lining up at the door to complain if she tried to defraud them too.

My next question was: How many syringes could be filled with each mixture? Agent Badge and I issued more administrative subpoenas to Dr. Shamrock's office for the supportive documentation for preparing the mixtures.

Guess what? She didn't have those either. We also asked for the doctor's office appointment and sign-in books and found that the patients who were billed as if treated on certain dates did not have appointments and did not sign in on those dates. The evidence was getting stronger. I started to wonder if there was any legitimate business going on inside the doctor's office.

Badge and I decided we needed to interview some of the doctor's employees. We started by interviewing former employees. Badge and I alternated who would be the lead interviewer while the other took notes. One of the former administrative employees told us, “A few years ago we got into trouble with an insurance company for not having supportive documentation, and I told Dr. Shamrock to stop billing for services that we hadn't provided. But she wouldn't listen to me and we kept on doing it.” Badge and I glanced at each other; the case against Dr. Shamrock was getting even stronger.

Agent Badge and I also interviewed Dr. Shamrock's current office manager, Katy Lincoln, at her home on a weeknight. She essentially said the same thing as the former employee. Badge and I decided to try to get additional evidence and asked Katy if she would consent to record a telephone conversation with Dr. Shamrock. She was initially hesitant but finally agreed. Before Katy called Dr. Shamrock, we told her what topics to cover.

In the recorded conversation, Dr. Shamrock said she knew miscoding the treatments was not appropriate. She also admitted she knew the doctor's office was sometimes paid for treatments not provided. But Dr. Shamrock never went so far as to admit that she directed the false claims to be generated.

After returning to my office, I made a copy of the recording, secured the original as evidence and later had a transcript made.

A few days later, Badge and I flipped a coin to determine who would get to interview Dr. Shamrock. I won. Interviewing the doctor was interesting to say the least. I didn't tell her we had a recorded conversation of her admitting knowledge about the false claims because that would have immediately implicated Katy Lincoln as an informant.

When I asked Dr. Shamrock about the missing documentation to support the billings, she blamed an office flood. When I asked why she let patients inject themselves away from the office, she said they preferred it that way. When I asked how she determined the dates that injections were given, she initially said she just guessed but later said the office computer automatically entered the dates. When I asked why she didn't collect copayments from her patients when they were treated, she said her patients couldn't afford to make the copayments.

In short, Dr. Shamrock claimed every mixture and allergy injection billed for was accurate to the best of her knowledge. And when asked why she miscoded the use of experimental allergy treatment to give the appearance that she used an FDA-approved method, Dr. Shamrock said, “That treatment works! It's not my fault that the FDA takes too long to approve good medicine.”

Presenting the Facts for Justice

Agent Badge and I brought our collective case to the federal prosecutor's office. In total, the losses were approximately $500,000. The criminal prosecutor declined to accept the case, saying it would have been stronger if Dr. Shamrock said on the recording that she personally directed the false claims to be submitted. Badge and I knew that prosecutors cannot accept every case that comes across their desks, so next we briefed the civil prosecutor, who accepted it without reservation. Using the Federal Civil False Claims Act (Title 31 USC 3729) would potentially allow for treble damages — three times the amount of each false claim.

Dr. Shamrock claimed she did not have the assets to repay. However, she eventually sold a second house and some other property to pay for some of the losses. Rather than debarring or suspending Dr. Shamrock from doing future business with the government, the affected agencies decided to put her on a well-monitored performance and compliance plan, which subjected her to regular audits and other stringent requirements to ensure that this type of activity would not occur in the future.


Lessons Learned
During this case I learned (or relearned) the importance of paying attention to details and of conducting thorough and all-encompassing examinations and investigations. Identifying other affected agencies and working as a team is always important. Each part of every investigation should be well planned and well documented. Conducting thorough interviews and collecting evidence helps make solid cases when wrongdoing does occur.
Fraudsters, as well as most other criminals, usually find ways to rationalize their wrongdoing. In Dr. Shamrock's case, she thought she knew more than the FDA about what was safe for patients. Living beyond one's means is a red flag of possible fraudulent activity — Dr. Shamrock was a prime example of that. Investigators, examiners and auditors should always be on the lookout for billings without supportive documentation when investigating other types of healthcare fraud.


Recommendations to Prevent Future Occurrences
Many patients have only few concerns:
Most people trust their doctors. When a doctor tells a patient that the treatment will not cost the patient anything, few argue or ask questions. Others who suspect possible insurance fraud might turn a blind eye to it as long as their quality of care is good and they are not personally losing any money. Investigators, examiners and auditors should be mindful that it might be difficult for patients to tell the complete truth about all they know because it could go against their own financial best interests. Some patients may also fear that they could get charged with wrongdoing for false claims submitted by their doctors.
Identifying and proving healthcare fraud includes the use of several different investigative techniques:
The physical evidence might include:
Proving fraud beyond a reasonable doubt (in a criminal case) or by the preponderance of the evidence (in a civil case) is not an easy task. When conducting investigations and examinations, all possible evidence that can legally be obtained should be pursued and collected. Interviews should be conducted whenever possible, and all facts should be included in written reports.

About the Author

Charles Piper, CFE, CRT, is the owner of Charles Piper's Professional Services located in West Tennessee. He serves as a Certified Fraud Examiner, licensed private investigator and national consultant. Mr. Piper previously served for more than 30 years in law enforcement, including 20 years as a Federal Special Agent and Criminal Investigator.