Surgical Strike

Following a New Times story on rent-a-patients, California authorities raid several health clinics

Authorities in Orange County, California, raided two surgical clinics after a New Times story revealed that the clinics were part of a health-care insurance scam that also involves workers for a Phoenix hazardous-waste firm.

Armed with search warrants, investigators with the Orange County District Attorney's Office executed the predawn raids last week at outpatient clinics and other locations suspected of engaging in fraudulent "rent a patient" schemes ("Rent a Patient," Paul Rubin, April 24).

In the scam, patients underwent unnecessary, sometimes perilous medical procedures in return for cash payments by "cappers" -- middlemen who recruit those patients for their own piece of the lucrative action. Several patients are employees at Onyx Environmental Services, a national hazardous-waste treatment, recovery and disposal firm with a plant at 56th Avenue and Jefferson Street.

These five rent-a-patients have now retained a lawyer.
Jackie Mercandetti
These five rent-a-patients have now retained a lawyer.

The California clinics have been billing the health-insurance carriers -- Blue Cross in the examples cited by New Times -- for thousands of dollars more per procedure than would be considered reasonable under any criteria. But Blue Cross routinely (and unjustifiably, according to sources in and out of the insurance industry) has been approving the exaggerated claims, paying out hundreds of thousands of dollars in the last six months for the Onyx employees alone.

An investigator with the Orange County District Attorney's Office confirms that the Unity Outpatient Surgery Medical Center in Buena Park -- a focus of the New Times story -- was a prime target of the multi-agency raid. The investigator, who asked not to be identified, says police confiscated more than 200 boxes of medical and other documents from Unity and a related clinic called Anaheim West.

The investigator says that Unity's medical director and president, Dr. Michael Chan, allegedly ended his relationship with the clinic a few days after the article was published. Neither Chan nor Roy Dickson, a Yorba Linda, California, attorney who has been representing Unity, returned phone calls from New Times seeking comment.

No charges have yet been filed in the rent-a-patient scams, nor have there been any arrests, the investigator says. "I was expecting one company, one [middleman] and one clinic when I started to get into this," he says, "but it's mushroomed beyond my belief."

The investigator says Unity closed for business a few days after the New Times story appeared. But he adds he's sure the clinic soon will "morph" into a new entity:

"What we expect is for them to get a new medical director, maybe create a new corporate name with new tax ID numbers . . . It's a cat-and-mouse game, with implications for a bunch of people."

One of those people, Qui Pham, of Glendale, lost his job in the wake of the New Times story. Pham was a shipping and receiving supervisor at Onyx before his termination. Six "rent-a-patients" identified Pham as the middleman who reportedly paid them an average of $800 in cash after each medical procedure they underwent.

Pham, who denied any wrongdoing in an interview for the first story, couldn't be reached for comment this time.

Greig Seidor, Onyx's chief legal officer and vice president in charge of the Law and Compliance Department, confirms Pham was fired shortly after the onset of an internal investigation that was launched after New Times contacted the company for comment.

"We are still in the process of doing a complete investigation," says Seidor, who flew to Phoenix from Onyx corporate headquarters in Lombard, Illinois, shortly after the story was published to personally oversee that investigation. "We have some serious decisions to make, and a lot left to learn, and I'm going to leave it at that for now."

One of Onyx's key decisions will be what to do with the rent-a-patients still employed by the company.

Many of those employees have found themselves in hot water of their own because of their increased involvement in the scam. Orange County Superior Court records suggest that 11 Arizona rent-a-patients -- all of them current or former Onyx workers -- have cashed checks from Blue Cross totaling more than $400,000 since last September.

Those checks were supposed to go to the Unity clinic.

Remarkably, Unity and another Southern California clinic sued the Arizona rent-a-patients in Orange County Superior Court for breach of contract, fraud and other counts. The suits opened a public-records road map to the case.

Here's how the checks got into the patients' hands instead of being sent directly to the clinics: The Onyx employees are covered by a generous Blue Cross/Blue Shield PPO, or preferred provider option, that allows them to seek medical care from doctors outside the "network." But the policy also calls for insurance reimbursement checks to be issued directly to the patients when they seek out-of-state care for a medical procedure. It's up to the patients to sign over the checks to their health-care providers.

But several rent-a-patients -- some of whom have undergone repeated medical procedures at Unity and other Southern California clinics -- said that they cashed the checks in part because they were angry at the doctors who operated on them unnecessarily.

Some of the rent-a-patients have retained the Phoenix law firm of Kimerer & Derrick to represent them in the civil case, and in whatever other legal matters may arise.

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