Hypocritic Oath

California's rent-a-patient scam has reaped millions for greedy physicians, clinics and patients

The Medical Review Institute of America -- which provides second opinions to insurers, patients and doctors about medical necessity and other issues -- says facility fees should be about the same as a surgical procedure.

A "reasonable and customary" amount for the sweat-gland surgery in Southern California is $8,136, according to a board-certified reviewer at the institute.

But St. Paul doesn't have a contract with any insurance companies, and legally isn't bound by the "reasonable and customary" rules.

Fred Harper
Phoenix attorney Holly Gieszl, with her colleagues Mike Kimerer and Timothy Tweeton.
Jackie Mercandetti
Phoenix attorney Holly Gieszl, with her colleagues Mike Kimerer and Timothy Tweeton.

"Prompt-pay" laws in California also mandate that insurers reimburse all "clean" claims within 45 days or face fines. Still, Highmark did not have to reimburse Unity and the other "providers" every cent of that excessive bill, as well as literally hundreds of other claims with similarly overblown charges and suspicious medical necessity.

"This is a total scam, as bad as it gets," says Dr. John Short, managing partner of Phase 2 Consulting, a Salt Lake City health-care consulting firm and a pioneer in the outpatient surgery clinic industry. "I've never seen anything like this in my 35 years in the business. I just can't believe that the insurance industry paid these bills. These patients had no history at all with these doctors. That puts the doctors at the maximum point of vulnerability, and they should get nailed. The clinic will say, All we did was provide a service. Maybe we're a little high price-wise, but buyer beware.'"

Since April, New Times has identified 113 other Arizona residents beyond the original Onyx cell of about 12 who have undergone questionable medical procedures at Unity/St. Paul or related facilities. (Onyx fired several of the Arizona rent-a-patients and Qui Pham after learning of the scam. Others involved quit before the company could act.)

Clinic records show it billed insurers about $3 million for its part in the procedures on the Arizona patients -- including use of the facility and surgical supplies -- about $24,000 per rent-a-patient.

Despite the major Arizona connection to the rent-a-patient conspiracy, local authorities seem no closer to busting anyone now than they did months ago.

Seemingly any of the 125 Arizona patients would be excellent leads for local authorities who have been looking into the scam for more than a year.

But the California investigators familiar with the Arizona situation say state prosecutors here have prevented Department of Insurance (DOI) from moving its own rent-a-patient cases to the level of indictments and arrests.

DOI public information officer Erin Klug would confirm only "what you already know, that we have an investigation going on that subject and it's still open. That's all we can say about that. But I want you to know that our agency has had a deep commitment to fighting fraud."

But the California investigators tell New Times that a prosecutor with the Office of the Arizona Attorney General declined months ago to allow an experienced DOI investigator, Jack Geesey, to even seek a search warrant of a suspected local capper's home.

That prosecutor, Jacqueline Schesnol, allegedly told Geesey that he didn't have reason enough to justify a search.

Schesnol did not return a call from New Times seeking comment. AG Terry Goddard's chief of staff, Bob Myers, declined to comment until after he fully investigates the matter.

Highmark special investigations director Tom Brennan Jr. could have been summarizing Arizona's state of affairs when he says: "I've seen [police] agents shaking their heads wondering why certain decisions weren't being made, but it comes down to the prosecutor. You have to have a prosecutor in these types of complex but important cases willing to go the extra yard to make it work."

One of the outpatient industry's selling points is that the clinics can be less costly for all concerned, not ridiculously more expensive.

In 1970, a group of Phoenix anesthesiologists opened what health-care experts say was the nation's first outpatient surgery clinic.

By 1980, outpatient clinics accounted for about 15 percent of all U.S. surgeries. By 2002, the nation's 3,500-plus outpatient centers performed about 75 percent of all surgeries -- about seven million in all.

From 1997 to 2001, the clinics netted the highest per capita earnings in the health-care industry, according to the federal Office of the Inspector General. But the growth spurt spawned inevitable problems.

Jon Vick, president of ASCs (Ambulatory Surgery Centers) Inc., wrote earlier this year in Outpatient Surgery Magazine that lack of oversight by California regulators and the greed "of a few [outpatient clinic] operators is causing increased scrutiny of all [such clinics] in California."

Vick noted that California lacks a fee schedule and other oversight to regulate what clinics may charge patients and insurers for "facility fees."

And the Inspector General noted in a scathing 2001 report that "[outpatient] surgical centers more than doubled in number between 1990 and 2000, yet Medicare's system of quality oversight for [the clinics] is not up to the task."

It was into that milieu that Anaheim West Outpatient Surgery Center -- a predecessor of Unity/St. Paul -- opened for business in April 2001 at 408 Beach Boulevard in Anaheim. According to investigators from four law enforcement agencies, Anaheim West, too, made millions of dollars in the rent-a-patient scheme.

Civil lawsuits filed in Orange County Superior Court earlier this year provide insight into Anaheim West's management and ownership, which is much the same as that of St. Paul.

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My Voice Nation Help

It is ashamed that people themselves to be used like that. The 800 dollars compared to the thousands the clinic pocketed is nothing. They should be prosocuted also.



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