Representatives
Testimony before the United States House of 
Committee on Energy and Commerce
Subcommittee on Oversight & Investigations
....
II'
"Waste, Fraud and Abuse: A Continuing Threat to Medicare and
Medicaid"
Testimony of:
Omar Perez
Assistant Special Agent in Charge
Office of Inspector General
Health & Human Services
U.S. Department of 
.... ~I
March 2, 2011
10:00AM
2322 Rayburn House Office Building
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(': :f: Testimony of:
Omar Perez
Assistant Special Agent in Charge
Office of Inspector General
Health & Human Services
U.S. Department of 
Good morning Chairman Steams, Ranking Member DeGette, and distinguished members
SAC)
of the Subcommittee. I am Omar Perez, an Assistant Special Agent in Charge (A 
Health & Human Services' (HHS) Office ofInspector
with the U.S. Department of 
General (OIG). I am stationed in the Miami Regional Offce, and currently supervise
Agents assigned to the Medicare Fraud Strike Force. I was formerly.a member of one of
the Strke Force teams prior to my assuming the position of ASAC. I am honored to have
the opportnity to discuss OIG's efforts in combating Medicare and Medicaid fraud.
I am here this morning to tell you what our agents experience as criminal investigators on
the front-line in the fight against health care fraud. Although the vast majority of
Medicare providers are honest, my job is to focus on those who steal from the program.
My squad is actively engaged in investigating criminal health care fraud, executing
search and arrest warants, seizing bank accounts, and providing Grand Jury testimony in
the pursuit of criminal indictments.
In South Florida, Medicare fraud is not only perpetrated by independent, scattered
groups, but also by competitive, organized businesses complete with hierarchies and
opportunities for advancement. Medicare fraud is discussed openly on the streets and is
accepted as a safe and easy way to get rich quick.
Who commits this fraud? People from all walks oflife-they say it's easy money and
living lavish
it's safer than dealing drugs. I see people who never finished high school 
lifestyles, making anywhere from $100,000 to milions of dollars a year by committing
Medicare fraud. The money involved is staggerng. We see business owners, health care
providers and suppliers, doctors, and Medicare beneficiares participating in the fraud.
We also see drug dealers and organized criminal enterprises defrauding the system.
How much money is involved? Way too much! As an example, I wil tell you a little
later about an investigation I supervise in which over $200 milion was biled to Medicare
in just 2 years.
In my testimony today, I wil describe a typical Medicare fraud scheme that we
the Miami Strke Force
investigate in Miami. I wil then provide an overview of 
Miami
investigative approach from an agent's perspective. I wil share examples of 
Strike Force success stories. Finally, I wil discuss the evolution of fraud in South
Florida.
Committee on Energy and Commerce Page 1 of6
Subcommittee on Oversight and Investigations
March 2, 2011 COMMON DURABLE MEDICAL EQUIPMENT FRAUD SCHEMES PRE-STRIKE FORCE
the Strke Force, South Florida was riddled with sham durable
Prior to the start of 
medical equipment (DME) companies. Some of these companies started out as
legitimate operations with a Medicare biling number; however, they were unsuccessful
as the market was saturated with ilegitimate DME companies. As a result, these
companies were sold and, all too often, their new owner(s) had one idea in mind: steal
from Medicare.
Once in the hands of criminals, these companies no longer provided legitimate services.
these
In order to perpetrate the fraud, "nominee owners"i were recruited. The names of 
nominee owners were placed on corporate documents, lease agreements, and corporate
ban accounts. Those perpetrating the fraud then obtained lists of stolen Medicare
beneficiary information which were compiled by individuals with access to patient
hospitals, clinics, and physicians' offices. The
information, such as employees of 
IN)
criminals also obtained lists of stolen Unique Physician Identification Numbers (UP 
assigned to physicians by the Centers for Medicare & Medicaid Serices (CMS). UPINs
are essential to the completion of a Medicare claim for reimbursement. With these two
key pieces of information, the nominee owners would submit fraudulent claims to
Medicare for DME that was never provided. The types of equipment ranged from
nebulizers and corresponding medications, to incontinence supplies, to motorized
wheelchairs.
Once CMS paid the claims and deposited money into the company's ban account, it was
withdrawn within days using multiple check cashers. The idea was to deplete the account
so that once Medicare discovered the fraudulent biling, which could take 6 months to
1 year, there would be no money in the account.
TO COMBATING FRAUD
MIAMI STRIKE FORCE APPROACH 
The DME fraud schemes descrbed above were executed within a matter of months.
biling Medicare for milions of dollars, companies would change ownership, bil
After 
Medicare again for milions of dollars, close, and simply take over another company and
repeat the process in another location. By the time traditional investigative referral
methods came to frition, criminals had absconded with milions of taxpayer dollars.
The Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative,
established by Secretary Kathleen Sebelius and Attorney General Eric Holder in May
joint effort by HHS and DOJ to leverage resources and expertise to prevent
2009, is a 
HEAT is the
fraud, waste, and abuse in Medicare and Medicaid. A critical component of 
Medicare Fraud Stre Force.
i A nominee owner is an individual who is recruited and paid by the tre owner to be the owner of record
the tre owner.
for a DME company. This process occurs to protect the identity of 
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Committee on Energy and Commerce Page 
Subcommittee on Oversight and Investigations
March 2, 2011 A streamlined investigative approach was created for Strike Force investigations. The
Strike Force model is a collaborative effort between the Departent of Justice (DOl) and
HHS. Each Strike Force team includes agents from HHS OIG and the Federal Bureau of
Investigation, as well as attorneys from DOJ. The teams are supported by Investigative
Analysts, as well as CMS program experts and contractors. Miami has 10 Strike Force
teams dedicated to investigating the wide array of Medicare fraud such as HIV infusion
therapy, physical and occupational therapy, DME, home health agencies, and Community
Mental Health Centers to name a few.
The individual investigations generally follow a model that has proved highly successful
in these fraud schemes. The model includes the following steps: (1) analyze and evaluate
claims data; (2) obtain the Medicare enrollment application; (3) identify the medical
biler; (4) identify and obtain ban information; and (5) identify the "true" owner of  the
Medicare provider that is under investigation.
Analyze and Evaluate Claims Data
We now have the ability to stop the payment of a significant amount of money and catch
the criminals before they and the money disappear. Strike Force team members receive
Medicare biling data gleaned from a wide variety of CMS data systems. We analyze the
data to identify aberrant biling patterns. Before Strike Force teams were initiated, the
referrals we received contained biling data that were typically between 6 months to 1
year old. Today, the data we receive provide biling information that is only 2 to 3 weeks
old. In South Florida, as elsewhere, criminals can receive several hundred thousand
dollars in fraudulent payments within a matter of weeks. The ability to retrieve recent
data allows us to potentially obtain evidence immediately to substantiate fraudulent
activity. The claims data can help us identify important information in assessing whether
a fraudulent scheme is underway, including:
 total amount paid
. dates of service
 referrng/ordering physicians
. beneficiaries
 claim dates
 types of procedures biled
. place of service
 provider banking information, and
 ownership status.
the suspected fraudulent
This process is called developing an investigative snapshot2 of 
activity.
2 "Snapshot" refers to an excerpt of a provider's or supplier's biling history that includes total amount
biled and paid, claims denied, patient name, referrg physicians, procedural codes biled, dates of service
and place of service.
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Subcommittee on Oversight and Investigations
March 2, 2011 Obtain the Medicare Enrollment Application and Other Data
Obtaining the Medicare enrollment application is extremely important because it
identifies the registered owner, his or her financial institution, and the authorized medical
biling representative. For investigators, this information can generate countless leads to
fraudulent activity.
other co-conspirators involved in the 
Identif the Medicare Medical Biler
The Medicare biling process begins when the medical biler electronically submits the
patient's infoiTation to a Medicare claims contractor for processing and reimbursement.
The medical biler could be an employee of the fraudulent company and/or a contracted
third pary. It is important for investigators to interview the medical biler to determine
his or her level of complicity, if any, and identify who provided the biling information.
Identif the Bank Account and Financial Institution of the Fraudulent Business
provider's
the fraudulent 
A critical investigative step is deterining the true owner of 
who opened the
ban account. In many instances, the tre owner is not the individual 
Medicare checks. It is a
ban account, withdrew or transferred funds,  and/or cashed the 
significant step for investigators to identify and interview all individuals with signatory
control over these accounts.
the clinic and/or DME company
Identif the "true" owner of 
commercial databases, bank account data, and informants in
Strike Force members utilze 
an effort to identify the true owners of the company. Once the true owner is identified,
Strike Force members wil attempt to interview the true owner.
Typically, a nominee owner is paid $10,000 to $20,000 for his or her role. Our sources
have told us that nominee owners have been recruited in other countres and travel to
South Florida solely for this purose. After being paid, they return to their native
countres.
MIAMI STRIKE FORCE SUCCESS STORIES
I offer the following examples that highlight the successes of our streamlined
investigative strategy:
One of our Agents received information from a confidential source that a DME company
was submitting fraudulent claims. Though data analysis, we saw that there was an
aberrant biling spike just after a corporate change of ownership took place: $l.5 milion
company was biling for
biled in just 3 weeks. Further data analysis showed that this 
about lOO patients that another company we have under investigation was also biling for.
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March 2, 2011 With a few interviews, the Agents corroborated that fraud was taking place, and within
30 days we were able to arrest our target. Using this approach, we were able to prevent
any Medicare funds from reaching the subject's hands. After the arrest, the Agents
leared that he was using a false identity and was about to purchase yet another company.
The investigation continues.
In another example, OIG Agents received information from a confidential source that a
corporation owning several Community Mental Health Centers (CMHC) was billng
Medicare for services that patients were not receiving or did not qualify for to the tune of
$200 milion. The owner and managers of this corporation offered and paid kickbacks
and bribes to patient recruiters to recruit Medicare beneficiaries to attend the
corporation's CMHCs and allow Medicare to be biled for services purortedly provided
to them. The patients in tum were paid by the patient recruiters. Data queries were
performed, interviews conducted, and within 45 days we secured a criminal indictment
charging the center's owner and managers with health care fraud. In October oflast year,
we executed five arest warants and seven search warrants.
The information obtained in the CMHC investigation led to another indictment this year.
In February, our enforcement operation resulted in the arrest of20 individuals ranging
from physicians, therapists, clinic directors, patient recruiters, and money launderers.
Physicians purportedly falsified medical records, and clinic directors allegedly directed
part of this operation, we reached out to
the patient recruiters and money launderers. As 
seven other OIGs to assist in the arest operation using the mutual assistance program
previously mentioned by Deputy Inspector General for Investigations Roy. Utilizing this
collaborative and cost-efficient approach, we were able to arrest 60 subjects in Miami
connected to stealing milions of dollars from the Medicare trust fund. This investigation
is ongoing.
THE EVOLUTION OF FRAUD IN SOUTH FLORIDA
In many instances, criminals have shifted their schemes from purchasing legitimate DME
companies to instead establishing storefront shams. The storefronts are set up by
criminals who have the required equipment to pass Medicare onsite inspections. Once
the Medicare provider number has been issued, the individuals pick up their equipment
and all that remains is an empty storefront.
Some criminals create additional layers to shield the true owners to counter Strike Force
tactics. Prior to Strke Force operations, the tre owner was most likely an associate of
the nominee owner. Now there are many levels to their crminal enterprises; each level
the others but controlled by the same person(s).
operating independently of 
We found that criminals are now migrating to other servces within the Medicare
program to peretrate their fraud. Other services impacted include home health,
community mental health, and physical and occupational therapy. OIG is aggressively
addressing these areas. Historically, Medicare beneficiaries and physicians were not
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Subcommittee on Oversight and Investigations
March 2, 2011 typically involved in these types of criminal enterprise. Now we know that in more and
more cases both are getting paid to participate in fraud.
CONCLUSION
The investigative approach and success stories referenced today represent the dedication
and commitment of all OIG Special Agents and our collaborative partners in the fight
against fraud within the Medicare and Medicaid insurance programs. The HEAT
initiative ilustrates how combined resources, technology, and collaboration can be
synthesized to combat health care fraud to protect vulnerable Americans.
Than you for the opportnity to discuss Strike Force operations in South Florida, and
the strategies and investigative methods utilized to protect the interest of all taxpayers. I
would be happy to answer any questions that the Subcommittee may have.
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Committee on Energy and Commerce Page 
Subcommittee on Oversight and Investigations
March 2, 2011