Federal officials say they have taken down the largest Medicare fraud scheme investigators have ever discovered: a $375 million dollar home healthcare scam operating in the Dallas, Texas area.

The alleged “mastermind” of the fraud, Dr. Jacques Roy, is charged with certifying hundreds of fraudulent claims for Medicare reimbursement, and pocketing millions in payments for services not needed, or never delivered. Prosecutors say the 54-year-old Dr. Roy, who was arrested today and could be sentenced to life in prison, operated a “boiler room” to churn out thousands of phony Medicare claims and recruited homeless people as fake patients.

“Today, the Medicare Fraud Strike Force is taking aim at the largest alleged home health fraud scheme ever committed,” said Assistant Attorney General Lanny Breuer. “According to the indictment, Dr. Roy and his co-conspirators, for years, ran a well-oiled fraudulent enterprise in the Dallas area, making millions by recruiting thousands of patients for unnecessary services, and billing Medicare for those services.”
The government charges that Dr. Roy was planning to take the money and run. He allegedly hid much of his Medicare money in an offshore account in the Cayman Islands, and in documents filed in court today, the government charges that Dr. Roy was planning to change his identity and flee the country to avoid prosecution. In a motion opposing bail for Dr. Roy, prosecutors claim that he had created a false Canadian identity under the name Michel Poulin, had a copy of a book called “Hide Your A$$ET$ and Disappear,” and a guide to yacht registration in the Caymans.

Dr. Roy’s scam was clever, wide-ranging, and very, very profitable, according to prosecutors. He allegedly exploited the Medicare regulation that requires a doctor to “certify” that Medicare services are legitimate – that they are needed and are being delivered to the patient. Dr. Roy allegedly sold his certification as “a commodity” to nearly 500 home health care companies in Texas, certifying patients for Medicare services regardless of whether they needed them or received them. In return, the government charges, Dr. Roy would receive a portion of the fraudulent Medicare payment.

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Between 2006 and 2011, according to the 13-count indictment unsealed today, Dr. Roy certified more Medicare beneficiaries for home health services and had more patients, than any other medical practice in the United States. He allegedly even had a “boiler room” where employees worked all day signing his name on Medicare claims. Roy’s company, Medistat Group and Associates, received hundreds of claims per day, and Dr. Roy allegedly instructed employees in the company’s “485 Department,” named for the “Plan of Care” form, to sign his name by hand or affix his electronic signature. Since 2006, according to prosecutors, Medistat Group and Associates has “certified more than 11,000 unique patients from over 500 home healthcare agencies in the Dallas-Fort Worth area.” Medistat and the home health care agencies billed Medicare for more than $350 million and Medicaid for more than $24 million for these patients.

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Seventy-eight companies associated with Dr. Roy will have their Medicare eligibility suspended immediately as a result of this indictment, the Justice Department says, and six associates of Dr. Roy’s alleged scheme were also charged as co-conspirators. Operating under the company names Apple of Your Eye, Ultimate Care and Charry Home Care, among others, the associates allegedly fed a steady stream of fraudulent clients to Dr. Roy to be certified as Medicare eligible. In some cases, the indictment charges, Medicare patients were recruited by offering cash and groceries in return for signing up for home health care. These fraudulent “patients” were then allegedly certified by Dr. Roy for services. Some of those recruits didn’t even have a home to visit, according to sources close to the investigation: they were recruited from homeless shelters.

For example, the indictment charges that Charity Eleda of Charry Home Health services “visited The Bridge Homeless Shelter” in Dallas to recruit Medicare patients. She allegedly sat in a parked vehicle outside the shelter, and hired recruiters to send prospects to her car. She allegedly paid the recruiters $50 per new “patient.” “Any treatment that Charity Eleda provided was either in her vehicle, in the courtyard of the Bridge, or on a park bench,” said the indictment.
Dr. Roy’s business manager, identified in the indictment as J.A., allegedly recorded phone calls with Dr. Roy in which he objected to working with the coconspirators to drum up phony business, and suggested that the company “invest in legitimate marketing” to attract business instead. According to the indictment, Dr. Roy responded, “I’ve done enough marketing to know it’s b___sh__, and I don’t want to do it.”

Federal sources say investigators have been looking into Dr. Roy’s operation for years, and he was suspended from the Medicare program in 2011. But according to documents filed today, Dr. Roy found a way around the suspension by creating a new company, “Medcare HouseCalls,” and working through his associated companies.

Last summer, investigators searched his home and found evidence that Dr. Roy had stashed some of money he alleged stole from Medicare in a secret account in the Cayman Islands. There was also evidence that Dr. Roy had created a false identity for himself — he had a fake driver’s license and a birth certificate in the name of Michel Poulin, and applications for Canadian citizenship. Investigators also found bank deposit slips from Cayman Island banks, a guide to yacht registration in the Caymans, a book titled “Hide Your A$$et$ and Disappear: A Step by Step Guide to Vanishing Without A Trace,” and a copy of “The Offshore Money Manual.”

Over a two-year timeframe, from 2009 to 2011, there was a 19-percent increase in questionable claims referred to the National Insurance Crime Bureau (NICB), according to an NICB report released today. NICB member insurance companies forward claims for closer review and investigation as to possible fraud to the not-for-profit organization, which focuses on preventing, detecting and defeating insurance fraud and vehicle theft through data analytics, investigations, training, legislative advocacy and public awareness. A single claim may contain up to seven referral reasons.

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In its 2011 questionable claims (QC) referral reason analysis, the NICB examined six referral reason categories of claims: property, casualty, commercial, workers’ compensation, vehicle and miscellaneous referred in 2011, with those referred in 2009 and 2010.
According to the report, in 2009, there were 84,407 QCs referred to NICB from its member insurance companies. In 2010, that number increased to 91,797. In 2011, that number increased again to 100,450—a record level. This represents a 9.4-percent increase from 2010 to 2011.

Within the casualty category, “faked/exaggerated injury” and “excessive treatment” posted the highest number of 2011 referrals with 17,581 and 8,485 respectively. In the workers’ compensation category, “claimant fraud” received the highest with 2,085 referrals. In the vehicle category, “questionable vehicle theft” logged the most referrals in 2011 with 11,451 and—after posting 2,182 referrals in 2010—a 450 percent increase from 2009—“auto glass fraud” saw the steepest decline across all categories dropping to 817 referrals—a decrease of 1,365 from 2010.

“We are encouraged by the trend in auto glass questionable claims,” said Joe Wehrle, NICB president and CEO. “Our efforts to publicize this problem and to make insurers, law enforcement and the American public more aware of the potential fraud in the auto glass repair arena is hopefully having an impact. As we see trends showing an increase in questionable claims in a particular segment of insurance coverage, we can focus our efforts on investigating some of those claims and putting a stop to the criminals that are taking advantage of insurers and the public.”

JEFFERSON CITY A workers’ compensation company created by the state to help small businesses doled out millions of dollars in bonuses and perks to its executives, Missouri Auditor Tom Schweich said Monday.
Schweich also confirmed that a federal investigation is ongoing into $8,000 in political contributions made by the company — Missouri Employers Mutual Insurance — to the state Democratic Party, first reported last September by The Kansas City Star.

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The audit found that, because of its federal tax-exempt status, the company has saved an estimated $50 million in taxes and amassed a more than $160 million surplus.
But while reaping the rewards of being a tax exempt “independent public corporation,” the Columbia, Mo.,-based firm does not comply with Missouri’s open records laws and is compensating employees at rates in excess of public-sector agencies, Schweich said.
“Basically, they claim they can have their cake and eat it, too,” he said.
Officials for the company maintain that it is not a traditional public agency and defended its spending.
“The state law that created us says we’re an independent public corporation, but not a state agency,” said James Owen, chief executive officer. “That’s in the statutes.”
Company officials also insisted that its compensation and expenses are “reasonable and necessary.”
The audit found that, in 2010 alone, the company spent more than $300,000 for an all-inclusive retreat to Hawaii; $80,000 for tickets and tailgating at University of Missouri athletic events; $80,000 on such functions as golf outings and retreats, and $17,000 for St. Louis Cardinals tickets — some of which went unused.
Company executives received other perks, including the use of company automobiles, five weeks paid time off, and paid dues for professional societies and athletic clubs.
The insurance company also paid $1.58 million in severance benefits to four former executives and employees who resigned or were terminated in 2009 and 2010. Such payments would be illegal if the company was a public-sector entity, the audit said.
Schweich would not divulge the names of executives who had received severance packages. And he would not reveal which former top executive received $8,000 to cover personal legal fees.
“Even if it’s a private entity, we believe several payments would be considered excessive and unreasonable,” he said.
Owen countered that those expenses “in an operation of our size … would be deemed by an auditor as immaterial.” But he added that the company has set up procedures to make sure those types of expenses don’t happen again.
Company officials said they uncovered the questionable practices Schweich cited in the audit through an internal investigation and turned that information over to his office.
The General Assembly set up the company in 1993 to spark competition and lower workers’ compensation premiums for employers, especially small businesses. The state provided a start-up loan of $5 million, which was repaid in 1999 with interest.
Schweich said the General Assembly now must determine whether Missouri Employers Mutual should continue to maintain its tax-exempt status and, if so, whether there should be restrictions on employee compensation and if it should be subject to the state’s Sunshine Law.
Sen. Jim Lembke, a Lemay Republican who chairs the Senate Governmental Accountability Committee, filed legislation last month that would require the company to transition into a private mutual insurance company by January 1, 2014.
The company began attracting attention after its former chairman, Doug Morgan of St. Louis, was indicted on unrelated federal bank fraud charges last April. Former company board member Karen Pletz was named in a separate 24-count federal indictment last March alleging theft, fraud and money laundering while president of the Kansas City University of Medicine and Biosciences.
Both Morgan and Pletz died last year.
In June, the insurance company fired its chief executive officer, former Missouri Gov. Roger Wilson, without explanation, although the audit noted that Wilson “resigned.”
By September, sources revealed to The Star that the FBI had launched an investigation into an $8,000 donation to the state Democratic Party to determine whether it was actually made by a St. Louis law firm and reimbursed by either Wilson or by Missouri Employers Mutual at his direction.
Schweich said he could not comment on the donation other than to confirm a federal investigation is ongoing. Wilson could not be reached for comment Monday. Last fall, he declined comment on the FBI probe.
In response to that controversy, the company agreed to a one-time audit by Schweich’s office.
Owen said the insurance company has asked that the $8,000 donation be returned “and it’s still in process.” Owen would not reveal who had been asked to make the reimbursement.
As part of the audit, Missouri Employers Mutual released minutes from the past two years of its board of directors meetings, but they were heavily redacted to exclude what company officials called “confidential, proprietary, personnel and attorney-client privileged information.”
Spokesperson Jennifer Peck said by email that she assumed any references to donations or political contributions “would have been redacted for one of two reasons: attorney-client privilege and/or confidential personnel matters.”