Los Angeles Hospitals Accused Of Using Homeless 'Patients' In Insurance Fraud Scams

Earlier this year we noted a story about an LA hospital caught dumping a paraplegic homeless patient on the sidewalk without a wheelchair. At the time, everyone assumed the hospital was stuck in a bad situation—they couldn’t keep a patient forever after treating him, and he had no physical address, so what were they supposed to do? It turns out incidents like this, which one LA-based reader said “happens all the time,” may not be so ‘innocent’ after all:

Hospitals in Los Angeles and Orange counties submitted phony Medicare and Medi-Cal bills for hundreds, perhaps thousands, of homeless patients—including drug addicts and the mentally ill—recruited from downtown’s Skid Row, state and federal authorities allege.

City attorneys began investigating after receiving reports back in 2006 that hospitals were dumping homeless patients on Skid Row streets. What they found, they say, was that some hospitals were using conditions such as dehydration, yeast infection, and exhaustion as reasons for keeping homeless patients in beds for “as long as three days” in order to maintain full patient loads and collect money from the government.

Agents arrested Rudra Sabaratnam, CEO of City of Angels hospital, and Estill Mitts, operator of a Skid Row health assessment center, FBI spokeswoman Laura Eimiller said. They were in federal custody and were scheduled to be arraigned Monday.

The city attorney’s office said it filed a lawsuit against the corporate owners of the three hospitals — along with Sabaratnam, several doctors and others — in connection with the alleged scheme.

Representatives of the hospitals did not immediately respond to calls seeking comment. Los Angeles Metropolitan and the Tustin hospital are owned by Pacific Health Corp., and Los Angeles-based Intercare Health Systems owns City of Angels.

“FBI: LA hospitals used homeless in medical fraud” [Associated Press]
(Photo: Getty)

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  1. The_Gas_Man says:

    What’s “Skid Row”

  2. Drug addicts and mentally ill people in Skid Row? I don’t believe it.

  3. I’d like to see the numbers broken down. Not that I don’t believe it — I do believe it — but hospitals can hemorrhage money when maintaining a full patient load if they’re all on state aid. (Or all with an insurer who got too good a deal.) I’m always interested in the numbers behind these scams, because the accounting involved must be really slick.

    (We just had a local billing scam by an ambulatory surgery place come out as part of a lawsuit it filed against a local hospital for impeding competition. Note to scammers: Do not file lawsuits accusing others of price fixing when you are, in fact, doctoring your own accounting records AND ISSUING MEMOS ABOUT IT.)

  4. WarOtter - I went to Japan and all I got was this tumor. says:

    Did anyone ever see ‘Sublime’?

    Really has very little to do with the topic, just made me think of it.

  5. DashTheHand says:

    I remember learning about Skid Row in the documentary “Little Shop of Horrors.” I believe its a place you go where the cabs don’t stop, the food is slop, and the hop-heads flop.

  6. fostina1 says:

    and thats why the state employees may be going to minimum wage. sickens me

  7. womynist says:

    Unfortunately the homeless end up using the ER instead of having a Primary Care Practitioner, due to lack of insurance and other resources. I understand that the hospitals can’t keep the patients forever, but they should be linking them to hospital social workers who can develop a plan or exit strategy. I don’t know what the laws in CA are, but here in NH it is illegal for a hospital to release a patient into homelessness. They are legally obligated to contact shelters/welfare offices for resources. Of course, they release people into homelessness anyway, but at least there’s a law.

  8. ThinkerTDM says:

    I don’t understand what the fuss is all about. Making money is good, right?

  9. RhymePhile says:
  10. @DashTheHand: Ha ha ha. I started singing that in my head as soon as I typed the words. Glad someone else went there as well.

  11. B1663R says:

    @The_Gas_Man: an 80′s metal band with hits such as 18 and life. i guess they hang out in the LA area…

  12. ARP says:

    1) The hospital cannot turn away persons seeking medical help.
    2) Many are homeless or uninsured (and the liberal in me hates to admit that at this hospital, many are also illegal aliens), so they can’t pay their bills.
    3) Like many federal programs, its probably insufficiently funded, so they “invent” sick people with minor ailements to keep larger patient counts and collect more money. Since they are minor issues, the costs to keep them there is probably less than they receive= more money.

    …or maybe they’re just greedy. Probably a bit of both.

    BTW- Many school districts do something similar, but opposite (stay with me). They try to encourage as many students as they can to come to school for the first few weeks. Once student count is established and they get state/federal funding, they stop caring and let them leave/drop out. They don’t force them, they just don’t try to stop it.

  13. AshleyKeen says:

    This kind of causes me to raise my eyebrow, only because I lived with a nurse that works in an inner city hospital for about a year and she would come home most nights saying that another one of their “frequent flyers” had been in. (ie, homeless coke addict OD’s, gets rushed to emergency, gets treated, gets out of the hospital, OD’s, rinse, lather, repeat) If the hospital is abusing the system, I think you’ll find that in most places the abuse happens both ways.

  14. ARP says:

    BTW- I don’t kmow LA very well and excuse my naivete- Is it really called Skid Row? It would be a really poorly named place to live if they finally gentrified and “went condo”

  15. Shark1998 says:

    Not surprised that they are trying to get some money out of the Government. But can you really blame them?

    Why shouldn’t they after treating hundreds of illegals everyday who simply skip out on the bill and leave the tab to be paid by the hospital. It’s the Governments failed immigration policy that causes this, so why not charge or get the money back from the Gov.?

  16. Coles_Law says:

    Wow. They just flat-lined tthe needle on the morality meter. Especially with the whole giving unnecessary meds thing. I feel for hospitals-they get stuck with countless no-pay cases, I’m sure, but that doesn’t justify this.

  17. ARP says:

    @Coles_Law: I agree, but I’ve been wondering- what’s the solution? Is it simply cracking down on the hospital? They’re facing an impossible situation, too many no-pay patients and not enough money.

    Do we start turning people away unless a triage nurse says its serious enough? In that situation, you might make it worse.

    Do we turn them away completely unless they have money or insurance?

    Do we start requiring people to prove citizenship? How? I know a lot of US citizens who speak spanish, polish, etc. and don’t carry around a folder full of immigration papers, they’re citizens.

    Do we finally accept the dreaded UHC (Universal Health Care)?

  18. jamar0303 says:

    “Do we finally accept the dreaded UHC (Universal Health Care)?”

    Why not?

  19. Trai_Dep says:

    @jamar0303: Following your brilliant logic, the US should zero out the entire military budget. And while we’re at it, our “intelligence” services. Right?

  20. katylostherart says:

    @jamar0303: ditto.

  21. katylostherart says:

    @Trai_Dep: how is it you equate universal healthcare with a 3 trillion dollar bill for a war in a country we shouldn’t be in?

    this is a hospital sucking money from the government while probably not giving the patients they supposedly had actual treatment and then throwing them out into the street once they got the aid. and because of these patients’ mental health problems this is probably a lather rinse repeat process going on perpetually.

    what’s your brilliant logic? screw everyone who can’t afford it and let hospitals bilk the government for money because they’re that desperate for funding?

    what’s your life worth and do you have that amount in your bank account?

  22. SexierThanJesus says:

    @WarOtter: Terrible movie. But yeah, I thought the same thing too.

  23. Elvisisdead says:

    @ARP: Not true on any count.

    The EMTALA statute:

    * imposes an affirmative obligation on the part of the hospital to provide a medical screening examination to determine whether an “emergency medical condition” exists;

    * imposes restrictions on transfers of persons who exhibit an “emergency medical condition” or are in active labor, which restrictions may or may not be limited to transfers made for economic reasons;

    * imposes an affirmative duty to institute treatment if an “emergency medical condition” does exist.

    Additional regulatory provisions

    The regulation [42 CFR 489.24(a)] adds the following:

    The person who does the examination must be specifically determined to be a “qualified medical person” by the hospital bylaws. The hospital must make the designation in its bylaws or rules and regulations. The regulation also provides that the person must “meet the requirements of 42 CFR 482.55″, although that rule really has no substantive requirements.

    Another section [42 CFR 489.20(q)(1)] requires that the hospital post a conspicuous sign which notifies patients and visitors of the right to be examined and to receive treatment. The sign must be in a form approved by the Secretary of Health and Human Services.

    The 2003 regulations define a “dedicated emergency department” as a state-licensed ER or a place where medical services are provided on an urgent basis, without the need for an appointment, including (significantly) hospital-based ambulatory care centers. At a DED, any request for medical treatment triggers EMTALA obligations. See paragraph 14 below for a discussion of presentations elsewhere.

    The 2003 regulations permit an abbreviated assessment by a qualified medical person for patients not presenting for examination or treatment, whose presentation is not likely to involve an emergency medical condition.

    Under the 2003 regulations, a person presenting for the dispensation of medications at his physician’s direction does trigger EMTALA obligations, because he may have a medical condition which needs evaluation. A person being brought in by law enforcement personnel for blood alcohol testing may or may not trigger the obligation, depending on the circumstances.

    I quote from EMTALA.com, as I’m too lazy to look up the cites in the US Code.

    For #2 – having worked at Harris County Hospital District (the #3 public hospital system in the US), I can tell you that over 40% of the patients seen were cash-paying, and not medicaid/medicare eligible. Translate: illegals. That figure comes directly from the CEO. Hospitals now compete for medicaid/medicare patients, because they are guaranteed payments. Homeless folks are usually covered.

    For #3 – Hospitals don’t routinely “create” sick people. If they do, they’re subject to Federal audit, civil monetary penalties, possible criminal indictment, and possible exclusion from the Medicare/Medicaid system. Clearly, I can’t say it doesn’t happen, but it is specific and rare for a hospital system to fraudulently file for reimbursement – they have too much to lose by doing so. Only the aggressively stupid do it (see Harris County Hospital District) It is much more common for private practice professionals to do it. Even more common are the filthy DME suppliers.

    I’m not trying to be a jerk. Just asking that you understand the situation before forming an opinion.

  24. katylostherart says:

    @Elvisisdead: actually most of my friends and i are cash-paying and not eligible for medicaid or medicare. we’re all american citizens by birth. the few immigrants i do know are legally here and have insurance through various means. the charter oak health plan just went into action a month or two ago, about the time i got insurance. having insurance means i’m not eligible for the charter oak plan.

    i’m still going to end up being cash paying and not eligible for medicare, medicaid and now charter oak because i’ll have $1000 left on a deductible i can’t really pay. but if i get cancer i’m ok for at least a year.

    poor, but just not poor enough. there are quite a lot of people that are just in that gap between government aid and employer/other paid insurance. i doubt that 40% was all illegals. i doubt even most of that 40% was illegal. a check of social security numbers or something would probably be a little more revealing. (and yes i realize those are faked too but they’re not generally presented at hospitals if they are)

  25. @Eyebrows McGee: It’s not really that slick of accounting work. It seems to me like they’d just have some homeless person hold down a bed for three days and collect money for “treating” them for various ailments.

  26. revmatty says:

    Good thing this whole private health care system hasn’t led to profit driven companies to do immoral and illegal things in pursuit of more money.

  27. Elvisisdead says:

    @katylostherart:You can doubt all that you like, but the figure is, indeed, valid. Do you think the hospital system doesn’t ask for ID/SSN on intake? If you’re cash paying, they want a way to track you down if/when you can’t pay the entire bill.

    I agree that there are people in your situation, but they don’t make the trip to the public hospital system. They will go to a physician or a private hospital. At HCHD – it was illegals. A majority of those were at the community clinics rather than the actual ER at one of the hospitals, but still illegal. Like it or not, they are a population that needs to be served, and one that has to pay out of pocket.

    The root of the problem is that folks in your situation (regardless of status) generally wait until they can’t work before they go to the doctor. By the time they show up, they’re in bad shape. They’ll take kids who are sick, but the adults don’t show until they’re really bad. I’m not saying universal health care is the answer, but some level of preventative services should be. It’s way cheaper to pay for an antibiotic script than it is to treat pneumonia.

  28. Elvisisdead says:

    @White Speed Receiver: They pay for SSNs to bill under. They load people up by the busload and have them come to a location and fill out all of the paperwork. They give them a minimal amount of cash and drop them back off. The people are real, the paperwork is real, but the services are never provided. It was most likely submitted electronically to CMS and Medi-Cal for reimbursement. I would bet that the people never stepped foot in the facility. Some dirtbag went to them, got the forms filled out, and went back to the facility. Faked up the billing, and sent it off. No records to back it up, no nothing. Just a fake billing.

  29. Valhawk says:

    @revmatty: Oh look your making sweeping generalizations with little to no real information to back them up. Its a tragedy that this happened, but people need to realize that this is a small minority of hospitals doing this. A vast majority are on the level.

    This always happens. People blame the actions of a few bad apples on the the group as a whole. It happens with doctors, lawyers, cops, politicians, contracters, dentists, every profession. People need to grow up and realize that just because a few people are immoral and evil not everyone is.

  30. organicgardener says:

    Here in California the illegals using up our resources is the main reason there isn’t enough money left for anything else (like paying state workers more than minimum wage)!

    A friend of mine visited his wife in the local hospital recently and there was a Mexican woman in the next bed. That woman’s husband was there and they began having a conversation in Spanish, not realizing that my friend spoke perfect Spanish. She asked him how much it was going to cost, and he told her, “Don’t worry, I gave them a fake name & address.”

    My friend immediately went to hospital administration and guess what: they said THEY COULDN’T DO ANYTHING ABOUT IT! Really! Furthermore, they said that they make up the cost of treating illegals and uninsured people who don’t pay by jacking up everyone else’s bills (as if we didn’t already know that).

    It just makes me sick.

  31. @Elvisisdead: Well that’s even classier. They don’t even put a roof over their head for a day or two? That’s just wrong.

    It’s becoming more and more obvious that ethical actions will get me nowhere in accountancy. Maybe it’s time to grow a goatee, buy a cape, and start working at an HMO.

  32. Trai_Dep says:

    @katylostherart: I took Jamar’s comment to mean that since there’s isolated cases of fraud in a state-run health care program, universal care is impractical.
    Then again, it was hard to parse what he meant, so I could have that wrong. Perhaps Jamar could clarify?
    If that IS what he meant, I was pointing out how absurd his suggestion was: Pentagon fraud exceeds literally billions (a year) yet these people think the solution is to give them even MORE of our tax money.

    Umm, we’re on the same side of this issue. :)

  33. ARP says:

    @Elvisisdead: Perhaps you misunderstand my comments. You said I was wrong on all counts

    I don’t know why you cited the statute: In #1 I mentioned that they can’t turn people away. [I left out for emergency conditions- my bad]. Which is what the statute essentially says. How is that wrong?

    #2 I mentioned that many are illegals. I don’t know why you disputed this. Or are you disputing the non-payment part? Please advise.

    #3 The “invent” sick people comment is from the story, so I was not implying that all hospitals do this. More that I understand the reasoning.

    I don’t think you’re a jerk, but please don’t say “you’re completely wrong” and then repeat much of what I say as correct. I apologize for my part for not being more clear in certain areas. But point out the specific areas please. We’re not in a presidential election :)

  34. I work (part-time, on-call) for an ambulance company that may be eventually caught up in this. If this is what I think it is, it isn’t going to be pretty, as this may get many other providers caught up.

    Basically, this is what would happen from our end: We would get a call from a certain “case manager” who would have us pick up somebody from a homeless shelter, and take him/her to one of these three hospitals (bum run in EMT lingo). Going to City of Angels or LA Metro weren’t too out of the ordinary as they are nearby to the shelters (within 5 miles). Taking the “patient” to Tustin, however, was a whole other story. Tustin is about 35 miles away, and in another county (Orange). You easily bypass a dozen hospitals on your way to Tustin from downtown LA. Since Medicare/Medi-Cal usually only pay the mileage for trips to the “nearest receiving” hospital, making a 35 mile trip to an ER in the LA area should stick out like a sore thumb when the claims are processed. When I brought it up to my superiors, I was told not to worry about it. Then I started hearing from the EMTs that the patients were walking to the ambulance on their own, and that they weren’t really complaining about anything so they didn’t know what to put down on their paperwork. I dropped it since it didn’t happen too frequently when I worked and I almost always “didn’t have anyone available” when he called. Now this happens and I’m glad I won’t be caught up in it, I hope.

  35. @White Speed Receiver: But having the bed occupied costs money whether you’re treating them or not. It’s not as simple as putting people in beds and not treating them.

  36. @Eyebrows McGee: Actually, it is. The hospital is incurring expenses with empty beds, too. If they can have someone in the bed and claim to have treated them, it is much less costly than actually having to treat them. You’ll also make more money that way then having an empty bed or having to use supplies and labor (Doctors) with this type of fraud.

  37. LostAngeles says:

    @ARP: The funny thing about Skid Row (and downtown L.A. in general) is that it’s right next to nice office buildings and expensive lofts. There’s like no economic gradient in that area. You’ve got 6-figure lofts less than a stone’s throw from low-income housing.

  38. GrumpyMD says:

    I’m not sure what benefit there would be to the hospital to keep these homeless people in the hospital just to occupy beds.

    Hospitals receive insurance money for the DRG under which patients are admitted. For instance, if you are admitted for congestive heart failure, medicare will expect that the average CHF patient will be admitted for 3 days and discharged. The hospital will get a fixed amount of money for the admission. If the patient stays over the expected time, the hospital will eat the extra charge for the room and staffing.

    So, despite the statement in the article:

    “hospitals were using conditions such as dehydration, yeast infection, and exhaustion as reasons for keeping homeless patients in beds for “as long as three days” in order to maintain full patient loads and collect money from the government.”

    It doesn’t make sense. Hospitals make money when patients are discharged quickly, because they keep the full DRG regardless of how long patients are in the hospital. The longer patients remain in the hospital, more staffing is needed to care for patients, and beds needed for more critically ill patients are needlessly occupied.

    The theory put forth by ELVISISDEAD is the most reasonable way by which the hospitals were illegally billing the government

  39. @White Speed Receiver: Yeah, I teach medical ethics, including cost distributions, and my husband does medical litigation, including billing fraud. Not so much.

  40. @Eyebrows McGee: I’m looking at it from an accountant’s viewpoint. You’ll obviously have better insight on what they’d have to pull it off in your world, but in my world this would be easy enough to do.

  41. HeartBurnKid, creepy morbid freak says:

    @GrumpyMD: It’s no theory. My mom is on Medi-cal (she’s on disability), and was once asked through a “friend of a friend” to participate in this type of scam for 25 bucks. Thankfully, she refused.

  42. GrumpyMD says:

    @HeartBurnKid, creepy morbid freak:

    Right, so the insurance was billed, but patients were not seen and were not admitted to the hospital like Elvisisdead suggested.

    But unlike the article, patients were not “kept” in the hospital to fill beds. Because like I explained, that loses money for the hospital.

    Good thing your mom has a moral compass.