Feds bring alleged widespread Medicare fraud, Operation Brace Yourself, into court.

Federal prosecutors charged 24 people including doctors and owners of medical equipment companies in a $1.2 billion scam on Tuesday, April 9, 2019. The alleged fraudulent operation involved prescribing patients unnecessary knee, back, shoulder and wrist braces and charging the costs to Medicare in what prosecutors call the biggest health care scam ever charged by the Department of Justice.

How the Scheme Worked

The complex and highly orchestrated scheme spanned from telemarketing networks in Latin America and the Philippines, where call centers would convince Medicare beneficiaries to get free or low-cost braces, to owners of medical equipment companies, who paid kickbacks and bribes to doctors to write unnecessary prescriptions. Doctors indicted in the scheme would often write prescriptions for patients without even speaking to them.

The FBI, the IRS and 17 U.S. attorney’s offices carried out the massive investigation, implicating as many as 130 medical equipment companies and spanning across multiple states.

“The taxpayers should be outraged by this,” Gary Cantrell, an investigator with the Health and Human Services inspector general’s office, said in an interview with NBC News. “These are losses to the Medicare program that we all, as taxpayers, fund.”

The defendants used international shell companies to conceal their profits, spending them on exotic cars, yachts and lavish real estate throughout the world. Miami businessman Philip Esformes, who runs a network of nursing homes and assisted-living facilities, was found guilty on more than 20 charges in connection to the scandal. Esformes bribed doctors to operate in his facilities where patients would be given inadequate care that was charged to the U.S. government Medicare program. Esformes gained more than $37 million from the scheme and used proceeds to buy himself luxury goods like a $360,000 watch.

Vulnerabilities in Medicare

IRS criminal investigations chief Don Fort said the scheme exploited the “systemic flaws in our health care system.” Federal prosecutors have uncovered more than 4,000 Medicare fraud cases since 2007. The public-private hybrid model of American health care allows private actors to lobby or bribe government officials in the absence of sufficient oversight. Philip Esformes, for example, bribed a regulator to inform him about inspections ahead of time.

President Trump recently appointed Sen. Rick Scott, R-Fla., to lead the GOP’s platform on health care. Scott was CEO of Columbia/HCA, a health care company that pleaded to 14 corporate penalties for defrauding Medicare and Medicaid in what the DOJ then called the biggest health care scandal in U.S. history. Scott’s company had to pay the government $1.7 billion for fraud, leading observers to criticize President Trump’s pick to craft health care policy.

“White-collar crime is not victimless,” Sherri Lydon, U.S. attorney for the district of South Carolina, said at a press conference. “All taxpayers will endure the rising cost of health care premiums and out-of-pocket costs as a result of fraud on our Medicare system.”

The Government Accountability Office warns that elderly and low-income recipients of Medicare and Medicaid are particularly vulnerable to fraud schemes.

“This largest ever health care fraud conviction highlights the awful toll criminal schemes take on federal health programs,” said Health and Human Services Office of the Inspector General Special Agent in Charge Shimon R. Richmond. “Even beyond the vital dollars lost, though, Esformes exploited and victimized patients by providing inadequate medical care and poor conditions in his nursing homes. Along with our law enforcement partners, we will continue the fight against such parasites.”

Philip Esformes used some of the proceeds from the Medicare scandal to bribe the University of Pennsylvania’s basketball coach to help his son get into college.