In mid-November, more than 200 FBI agents and insurance industry investigators packed into a banquet room at Tampa's Marriott Waterside Hotel.
They came to hear what an FBI supervisory agent and a prominent insurance investigator had to say about a stunningly successful health-insurance scam centered inside Southern California outpatient surgery clinics.
The presentation was part of a cutting-edge training conference sponsored by the National Health Care Anti-Fraud Association. New Times first revealed the scheme in a story published earlier this year ("Rent A Patient," Paul Rubin, April 24).
That story described how insurance companies had become fodder for a lucrative scam in which doctors at California clinics perform medically unnecessary and grossly overpriced surgical procedures on willing Arizona patients. For their efforts, those patients are paid cash -- usually $800 per procedure -- for allowing their bodies to be used as instruments for fraud.
Now, months later, law enforcement and insurance-fraud investigators are calling the rent-a-patient scam one of the nation's most significant ongoing health-care frauds.
"This has become one of the largest initiatives that we've undertaken in several years," FBI special agent Dan Martino told the Tampa gathering.
A burly, confident 32-year FBI veteran, Martino said it's rare for his agency to discuss ongoing investigations publicly. But he reiterated that cooperation with the insurance industry is imperative if they want to crack the rent-a-patient ring.
"This is a conspiracy between surgery centers, doctors, office personnel, billing services, cappers' [patient recruiters] and patients," Martino said. "Nobody has died yet, but I give it just a matter of time until it happens. It doesn't get any worse than this when you're looking at [a lack of] medical necessity.
"There's all kinds of free money floating around. We have these egregious patients . . . they're thieves, like the clinics. Then the clinics and docs submit their big bills and some insurers just pay. Some companies have set up red flags and some still have not.
"We have a national crime problem here, and we're trying to come up with a solution that will help the victims -- the insurance companies and the American public that have to pay higher premiums."
Specifically, Martino said his task force is targeting more than 100 doctors and about 25 Southern California clinics as part of a multi-state investigation that includes patients from 44 states.
He added that the top five states from which the clinics have recruited patients through cappers are California, Texas, Utah, Minnesota and Arizona.
Martino estimated the rent-a-patient conspiracy has cost consumers and insurance companies up to $300 million in the last two years.
The continuing New Times investigation also has uncovered new information demonstrating that the magnitude of the conspiracy fraud far surpasses that described in April. That story unfolded after a handful of employees from a Phoenix hazardous-waste plant approached the paper with astounding tales of deception, greed and danger.
Since then, the paper has interviewed dozens of people, obtained internal documents from the most prominent of the targeted Southern California clinics -- St. Paul Outpatient Surgery Center, in Buena Park -- and obtained records involving rent-a-patients from insurance companies and other sources around the nation.
New Times interviewed 16 claims adjusters, all of whom conceded they are just starting to realize the extent of the Southern California surgery scam. The adjusters have provided similar accounts of how the holders of so-called "golden" health-insurance policies (and their family members) travel west from around the nation to undergo an array of medical procedures ranging from sweat-gland surgery to colonoscopies.
St. Paul's own documents indicate that about 2,000 patients from 45 states have undergone surgical procedures at the clinic since it opened for business as Unity Outpatient in early 2002 (the name was changed to St. Paul shortly after publication of the first New Times story).
About 75 percent of the clinic's business has come from out of state, even though almost any procedure performed there could have been done within a few miles of the patients' homes, and at a fraction of the cost. The patients' employers included such companies as Pepsi-Cola, Frito-Lay, the Purdy Corporation, and the Nutrilite division of Amway.
The clinic billed insurers more than $60 million during a 15-month period that ended last July. Of that remarkable sum, records show St. Paul collected about $15 million from insurers, which has left about $45 million in unpaid bills.
But many insurance investigators agree that if it hadn't been for ineffective billing practices, St. Paul would have collected much more. Industry vigilance has been lax.
St. Paul's internal documents also demonstrate that, until recently, employees and administrators at 48 of the nation's insurance companies rarely questioned the medical necessity or excessive cost of the procedures completed on the rent-a-patients.
It seemed not to matter to adjusters that dozens of out-of-state residents were -- every month -- flying to California for procedures of dubious medical necessity.
Agent Martino told the Tampa gathering that a constant in the scam has been that the rent-a-patients all have been adults -- the majority of them men between the ages of 25 and 35 -- who consent in writing to whatever medical procedures are about to be performed on them.
But New Times recently uncovered a case involving two teenagers -- ages 14 and 16 -- and their mother, who traveled from North Carolina to Southern California for a series of procedures. Doctors performed sweat-gland surgery on the trio to alleviate their alleged problems with excessive perspiration -- even though those problems never had been documented back home.
The mother also underwent a dilation and curettage (D&C) procedure -- again, she'd never complained of gynecological problems before.
And all three allowed themselves to be subjected to a battery of tests for everything from carpal tunnel syndrome to vertigo to heart palpitations during their weeklong visit. The doctor supervising those tests had pleaded guilty late last year to felony health-care fraud -- he was working at the clinic while awaiting sentencing and now is serving a prison sentence.
The amount billed for services to the family? Almost $350,000.
During his presentation to the Tampa gathering, Martino flashed a copy of a handwritten note on a big screen. Found last year on the wall of a break room inside a Texas factory, it said:
"Those of you who have Aetna, Cigna, Blue Cross/Blue Shield or any PPO medical insurance plan and would like to make 4K-5K in California! NO WORK INVOLVED! HURRY! DON'T HESITATE!"
At the bottom of the page was a suspected capper's cell phone number, with instructions to call any time, day or night.
Despite the talk inside law enforcement circles about breaking the rent-a-patient case, no one yet has been brought to justice for his or her role in the scheme. That includes the surgery centers' owners, doctors and other medical personnel, or the patients themselves.
That lack of criminal or civil sanctions goes beyond law enforcement. The California Medical Board, for example, has yet to punish any of the doctors who continue to perform assembly-line procedures on patients, most of whom they meet for the first time on the day of surgery.
Despite no official action other than the execution of a search warrant on the Unity (now St. Paul) clinic in early May, those investigating the case say that the crooked California surgery clinics have scaled back their operations.
For one reason, they say, insurance-claims adjusters have become much stingier at authorizing reimbursement checks. The investigators also suggest the clinic's owners may just be lying low because they know that law enforcement authorities have them in their sights.
"This outpatient surgery scheme and pharmaceutical fraud are our two major national initiatives right now," says Tim Delaney, the Washington, D.C.-based chief of the FBI's health-care fraud unit. "It's a completely enclosed circle of crime, and it's been successful in part because doctors just are more brazen than they were 10 or 15 years ago about putting themselves in that circle and putting patients in harm's way. It's no secret to the people involved in this conspiracy that we are looking hard at this."
Ken Faustine, director of special investigations for CIGNA, told the Tampa conference last month that "we still pay a few of these bogus bills because you got to get burned to figure it out.
"But I've figured out a strategy for how to deal with the Southern California clinics that we've flagged -- don't pay them. We definitely are somewhat aggressive about that."
Faustine, a former IRS investigator, had a terse answer to a question about why so many insurance companies paid the California clinics so readily: "Don't know. I'm not."
He estimated that his company has stopped about $40 million in payments to the Southern California clinics in the last year.
One reason, he said, is he assigned eight investigators full-time to the rent-a-patient scam.
"Look," Faustine told the audience, "we wouldn't have caught on when we did if the clinics weren't so greedy and charged so much. If they could prove to me that their procedures are necessary and aren't grossly overpriced, we'd pay. That doesn't happen."
In April, New Times described how the Valley residents had become rent-a-patients in Southern California.
The group worked at Onyx Environmental Services, a self-insured Phoenix hazardous-waste plant. Onyx is an international firm with a liberal health plan that allows for easy "out of network" access to medical care, often without mandatory pre-authorization from Highmark, a Pennsylvania-based Blue Cross company that administers the plan.
All of the Arizona rent-a-patients were first-generation immigrants to the U.S., from Cuba, southeast Asia and Mexico. They made weekend treks across the desert during the second half of 2002 and into this year for what they admitted were medically uncalled-for surgeries. The procedures included circumcisions, hernia repairs, colonoscopies, septoplasties, and other procedures, often more than one on a weekend.
Several of the Onyx employees told New Times that the man who had recruited them was a supervisor at the plant named Qui Pham. They claimed Pham would pay them in $100 bills after their surgeries, usually about $800 per procedure. (Pham has denied being a capper and told New Times months ago that he'd never been to California. He could not be reached for comment for this story.)
In turn, the Southern California medical providers -- the clinic, doctors and testing laboratories -- billed Highmark for services rendered. The bills from Unity, in particular, routinely were many times higher than the norm in the outpatient industry.
A typical example: The Unity clinic billed Highmark more than $60,000 in "facility fees" after doctors performed sweat-gland surgery on a 22-year-old Glendale man who worked at Onyx. That sum included a $48,000 claim for "surgical supplies."
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.
"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.
The day-to-day responsibilities of running Anaheim West fell to the Lincoln Management Group, a corporation owned by three individuals and two entities, Sorrento Equities and Ocher County Clinics. Sorrento and Ocher own 40 percent each of Lincoln.
Records filed with the Nevada Secretary of State indicate that Sorrento's president is Huong Ngo. Her husband is Tom Vu, who served as Anaheim West's business manager and now is running St. Paul, according to several law enforcement sources.
Earlier this year, a co-owner of Ocher County Clinics from whom Vu had become financially estranged wrote in an affidavit, "I am informed and believe that Tom Vu is one of several aliases used by this person."
In response, Vu filed his own affidavit alleging that he had invested $300,000 to improve Anaheim West's facility. Vu said that as that operation burgeoned, he had recruited Dr. Daniel Rose to be medical director at an offshoot clinic in nearby Buena Park. (Outpatient clinics in California need a "medical director" to operate legally.)
First called St. Francis Outpatient Surgery Center, the second clinic opened in early 2002 at 5730 Beach Boulevard -- the current location of St. Paul.
"Under our management, the business had been thriving," Tom Vu wrote last March. "As of June 7, 2002, the facilities fees were being collected at a rate of about $2 million per month."
Vu claimed that the clinic had operating expenses of about $400,000 monthly, adding, "Not all of the remainder was profit, because we spent generously on advertising and marketing, which is why business was as good as it was."
He estimated that, by June 2002, Anaheim West and the new St. Francis clinics had more than $46 million in uncollected billings out to the insurance companies. Vu didn't say how much the clinics had been reimbursed by the insurers.
But that month, according to Vu, Lincoln Management's other faction allegedly changed the locks at the Anaheim West clinic and shut out Vu and his associates.
Vu's affidavit claimed that "the coup was more consistent with an intent to loot the surgery center by seizing the [outstanding billings] than to keep it operating as a going concern."
That "going concern," say criminal investigators familiar with the case, was the rent-a-patient scam.
The Vu faction soon focused its attention on the St. Francis clinic. Records obtained by New Times show that, within months, St. Francis -- which changed its name to Unity in mid-2002 -- was doing fabulously well.
Like they'd done at Anaheim West, doctors completed most procedures at the new clinic on Saturdays. That's because most of the patients -- the rent-a-patients -- were arriving from out of state after finishing their own workweeks.
According to the Arizona patients interviewed by New Times, their recruiter (the "capper") would fax their health-insurance cards to the clinic a few days before they drove over to Orange County, usually in a rented van.
That in itself is a telltale sign of fraud, says Becky Busch, president of Medical Business Associates, which is located in Oakbrook, Illinois. Says Busch, a certified fraud examiner and a registered nurse:
"A health-insurance card is like a credit card, and it has elements that are considered protected information under federal law. The actual solicitation of the card -- when the clinic got it -- is critical. Those clinics and those doctors need to know before the patient goes out there whether he or she is going to be useful to them."
By mid-2002, Unity was churning out the surgeries with increasing frequency. A sampling of the clinic's records indicate that between July 5, 2002, and August 24, 2002, alone, 33 patients from Arizona underwent 60 surgical procedures there.
The clinic then billed various insurance companies -- Blue Cross/Blue Shield of Red Bluff, California, most prominently during that stretch -- more than $1.2 million, about $20,000 per procedure and $36,000 per patient.
Of that amount, the insurers remitted all but about $250,000. (The doctors and laboratories billed separately. Their fees and rates of collection were not available.)
Unity's records also show that in October 2002, the Onyx capper himself, Qui Pham, underwent unspecified surgery at the clinic. Unity sent Highmark Blue Cross its bill for $57,735.
Highmark reimbursed that amount in full.
An unexpected turn of events in the fall of 2002 had a crucial impact on Unity Outpatient's rent-a-patient scheme.
Highmark's health-care plan for the Onyx employees had called for reimbursement checks to be sent directly to patients, instead of to the out-of-network clinics and other medical providers.
But at least 12 of the Arizona patients decided to cash those checks themselves, rather than turn them over to Qui Pham as they'd promised. Those rent-a-patients cashed more than $400,000 in Highmark checks earmarked for Unity during the final months of 2002.
Last January, Unity's attorney, Roy C. Dickson, sued the Onyx employees (and, in one case, the wife of an employee) for fraud, breach of contract and other alleged wrongdoing.
The irony of the Orange County lawsuit -- that a clinic whose foundation was built on financial gluttony was suing patients for expressing their own form of greed -- wasn't lost on Phoenix lawyer Holly Gieszl, who wound up representing six of the defendants.
"That these guys went after my clients after luring them out to undergo utterly unnecessary surgeries for the almighty dollar is just about laughable," says Gieszl, a veteran health-care attorney. "It was also unintentionally kind of Mr. Dickson to open up the public record by filing this unfortunate action."
Dickson -- who did not return three calls seeking comment -- has had a checkered record with the State Bar of California.
Records show that in October 2001 the Supreme Court of California placed him on four years' probation for having "intentionally or recklessly failed to perform, with competence, the legal services for which he had been employed." The high court canceled its six-month suspension order after Dickson agreed to attend weekly counseling sessions for substance-abuse problems.
Last April 28, a few days after New Times published its first story on the rent-a-patient scam, clinic records show that six members of Unity's board of directors met at the clinic. Among the six were Huong Ngo -- wife of clinic chief Tom Vu.
At the meeting, the board voted to try to sell the uncollected medical billings -- then estimated at "having a face value in excess of $45 million" -- to a company that specializes in such collections.
Such companies buy accounts receivable at a discount, and gamble on being able to collect enough from debtors to make the deal profitable. For the seller, it's a time-tested way to raise immediate cash.
The day after that April 28 meeting, California Secretary of State records show Unity petitioned to change its name to St. Paul Outpatient Surgery Medical Center.
The paperwork listed Martha Madrid as the clinic's agent for service of process. Dr. Madrid has been listed as anesthesiologist in dozens of surgical procedures at the clinic. She currently is St. Paul's medical director.
Madrid did not respond to requests for comment.
On May 2, the Institute for Medical Quality, a subsidiary of the California Medical Association, "terminated" St. Paul's accreditation, according to a spokesperson for that agency.
The following day, investigators from the Orange County District Attorney's Office and the FBI executed search warrants at the Unity clinic and other locations. The other locations included the old Anaheim West clinic (which was closed for business, but at which boxes of records were stored) and the residence of Unity/St. Paul clinic chief Tom Vu.
Unity shut its doors for a few weeks after the raid, then reopened with its new name, St. Paul.
In the weeks that followed, attorney Dickson continued to shop St. Paul's $45 million-plus in outstanding billings to firms around the nation.
"You should be aware," Dickson wrote to a potential buyer last June, "that it is the utopian desire of all major insurance companies to corral all of the doctors, hospitals and surgery centers into their usually [sic] and customary' contractual web. Fortunately for many providers, which includes Unity and all of its accounts receivable, they are not in-network' providers.
"Consequently, those providers are not required to accept payment on their claims based on the usual and customary' guidelines. That phrase (and its attendant monetary collection limitations) is totally inapplicable and unenforceable against doctors, hospitals or surgery centers that are not within the particular insurance company's contractual network of providers."
Dickson's letter concluded, "In other words, and in that regard, the subject accounts receivable are more valuable."
Clinic records show Unity/St. Paul billed insurers $20.7 million in the first quarter of this year, with doctors performing medical procedures on 665 people.
Billings for the second quarter -- the time frame during which the New Times story was published and Orange County authorities executed their search warrant -- dropped to $5.8 million, with 205 patients undergoing procedures.
Though Unity/St. Paul's proposed deal with the accounts receivable company didn't pan out, records indicate that the clinic finally did sell an unknown amount of its uncollected billings to a Florida firm in late August
That firm, Strategica Southwest Financial Group, has been sending demand letters to insurance companies and administrators around the nation.
"The [medical] procedures for this claim were done by a California provider and are covered under California law," Strategica vice president Ben Seeley wrote to a North Carolina firm, Piedmont Administrators, in an October 15 letter that demanded the reimbursement of $66,115.
"To keep [your California] license you must abide by their laws. Failure to do so can lead to revocation of your license and damages for your actions."
A claims adjuster for Piedmont tells New Times that her company has no intention of paying any money, because the medical procedure done at St. Paul was medically unnecessary.
That's exactly what CIGNA investigations director Ken Faustine says he told someone at Strategica a few weeks ago.
"I said as directly as I know how that we just aren't going to pay bogus claims, and that the St. Paul claims are bogus," he says. "They are rent-a-patient claims, pure and simple."
Last July, 39-year-old Jill Smith and her two teenage children flew from their home in North Carolina to Southern California, where they stayed for more than a week.
Like the former Onyx employees in Arizona, Smith's health-care policy allowed her to seek "out of network" medical treatment wherever she wished, without pre-authorization.
She and her children, 16-year-old Bobby and 14-year-old Michele (New Times is not using the mom or kids' real names), first endured a battery of medical tests -- everything from nerve conduction and sleep studies to tests for carpal tunnel syndrome and vertigo -- at an outpatient surgery clinic in Orange County called Premier Wellness.
Those tests turned up nothing serious, according to results of the tests obtained by New Times.
But on July 19, two days after sitting for those tests, doctors performed a D&C on Jill Smith. The gynecological procedure diagnoses or treats abnormal uterine bleeding.
A few days after that, all three -- mother and children -- underwent sweat-gland surgery, a sophisticated procedure designed to curb excessive perspiration in the hands. They did so even though their medical records indicate no prior complaints about over-sweating, nor use of prescription drugs to try to curb their alleged problems.
Within weeks after the Smiths' returned to North Carolina, a slew of California medical providers started to submit bills for reimbursement to Penn Western Benefits, of Greensboro. That company administers medical benefits provided by self-insured businesses -- in this case, the hosiery mill where Jill Smith then worked.
Penn Western oversees the health-insurance benefits of 70,000 people, which makes the firm relatively small in the industry. And it doesn't have an investigations unit. But its lack of size often allows one person to track an insurance claim from start to finish, as contrasted with larger insurance companies.
The medical bills from Southern California for the Smiths landed on the desk of Penn Western claims consultant Cathy Brady.
The total billed for mother and children: almost $350,000.
Along with the bills, St. Paul sent a letter dated July 30 from the Accreditation Association for Ambulatory Health Care, a credentialing organization based in Wilmette, Illinois. Written to St. Paul medical director Martha Madrid, the letter said the association had voted to award the clinic a six-month accreditation.
But Brady says she soon became very suspicious of the staggering claims, especially when she saw the inexplicably distant site of the surgeries and the lack of proof of their medical necessity.
"We're not in the business of rejecting valid claims," Brady says, "just the opposite. But this was the rent-a-patient scam that I had read about. I told a guy at the California Department of Insurance fraud unit what was going on. He said, It seems more like an insurance coverage issue than anything else.' He was wrong. This was about a criminal enterprise."
Adds Brady, whose two brothers are in law enforcement and whose late father was a police sergeant, "I'd love to be a police investigator working on this scam because it's amazing on so many levels."
Brady's own sleuthing led her down many paths over the next several weeks.
She says she phoned Premier Wellness, the Westminster, California, clinic where the trio had undergone myriad tests from July 17 to July 21.
Brady says a woman at the clinic told her the Smiths had been "very, very sick" when they'd arrived from North Carolina, and had needed the tests on an emergency basis.
On July 17, Jill, Bobby and Michele Smith reported to Premier Wellness for what the on-duty doctor, Kevin Tien Do, later indicated were "checkups."
Dr. Do's summary of Bobby's medical condition, which New Times obtained, said that the boy had complained of "dizziness, headache, lightheadedness and chest palpitation, chest pain and jaw numbness. . . . Patient also complains of abdominal pain and indigestion, diarrhea and constipation and fever."
Do also noted 14-year-old Bobby's complaints of "restless legs" and assorted other maladies.
But the doctor jotted down nothing in Bobby's chart about complaints of excessive sweating.
Do's summary of 16-year-old Michele was akin to her brother's, with the addition of "headache constant, dull aching" to the mix.
Again, nothing about perspiration came up in his report of Michele's physical condition.
Do wrote that Jill Smith "is here for experiencing lower back pain for three months. Pain has been more constant, dull, sharp, with occasional radiation to leg. Complains of leg cramp, leg pain, numbness/tingling. In addition, patient has been complaining of occasional shortness of breath, chest pain (dull), worse with exertion, dizziness, room-spinning, falling, fatigue, insomnia."
That was it. Smith apparently made no complaints about sweating too much, nor about any gynecological problems.
That day, the three underwent testing for all manner of things -- heart palpitations, abdominal pain, sinus problems, dizziness and giddiness, headaches, vertigo, carpal tunnel syndrome, and others.
Total billed by Dr. Do to Penn Western Benefits for the visit -- about $80,000.
The next day, July 18, records show that Dr. Joong Kim completed his own history and physical of Jill Smith at the St. Paul clinic on Beach Boulevard.
On Saturday, July 19, Dr. Kim performed a D&C on Smith at St. Paul, allegedly because of her troubles with excessive menstrual bleeding. The clinic later sent a $34,000 bill to Penn Western for that procedure, almost all of it for "facility fees."
Joong Kim billed Penn Western $1,700.
Brady wrote to herself a few months later that Dr. Kim's preoperative notes had been "very sketchy." She added that the doctor should have ordered other tests and placed Smith on hormone therapy before doing a D&C.
Remarkably, just hours after Smith's D&C, during which she had been rendered unconscious with a general anesthetic, she returned to Premier Wellness. There, she underwent a "sleep study" monitored by Dr. Do for alleged apnea problems.
That bill: $6,183.
The next day, Smith returned yet again to Premier for an EEG test that added another $1,200 bill to the pile.
On July 24, records show that Dr. Ward Houck met with Jill Smith and her children at his Los Angeles office. That day, Houck noted in writing that Bobby's excessive sweating had been causing him great distress:
"His hands make his schoolwork difficult with smearing of his paperwork, tearing of pages, difficulty with writing as well as use of a computer. He enjoys athletics but has difficulty with his hands and their ability to grip. His favorite sport is basketball and he has a problem with the ball slipping.
"Socially, he avoids holding hands with girls and has often been teased by other students about his hands being wet all the time. He must change his clothing often due to his axillary sweating, and he ruins his socks and shoes due to his plantar sweating. He also notes excessive odor. He has tried topical agents, including Drysol for several months on the advice of his family physician, with little to no relief."
Houck's report on 16-year-old Michele's symptoms were almost word-for-word, with two exceptions:
"Her favorite sport is softball, and she has a problem with gripping the bat and has even had bats slip from her hand while swinging. Socially, she avoids holding hands with her boyfriend and has often been teased by other students about her hands being wet all the time."
The next morning, July 25, Dr. Houck performed back-to-back sweat-gland surgeries on Bobby and Michele Smith at Valley Multi-Specialty Surgery Center in Reseda. St. Paul's owners had started to rent space at the Valley clinic in the aftermath of the search warrant raids last May.
Houck billed Penn Western $15,300 for the two sweat-gland surgeries. He did not respond to a call for comment from New Times. Dr. Phani Paruchuri billed another $3,200 for performing general anesthesia on the children.
But the bills from St. Paul (actually listed as Valley Multi-Surgery Center) dwarfed those of the doctors -- $132,000 -- including about $57,000 in surgical supplies for each child.
The next day, Saturday, July 26, Dr. Robert McKenna Jr. examined Jill Smith at St. Paul clinic. McKenna, a partner of Dr. Houck, later sent his examination notes to Cathy Brady.
The notes said Smith "has a history of palmar hyperhidrosis [sweaty palms] that greatly interferes with social and work activities. She packs and ships boxes that slip from her hands. Her wet fingers destroy paperwork. Her supervisors have complained about the damage from the sweat. . . . She avoids shaking hands due to the embarrassment of her sweaty palms."
McKenna concluded: "Severe problem with hyperhidrosis despite medical management. The patient is a good candidate for surgical treatment."
The doctor's notes say he'd discussed the benefits and possible side effects of the sweat-gland surgery, summarizing his discussion, "Most patients have compensatory sweating in other sites. In five percent of these cases, the compensatory sweating may be severe. Those patients may be unhappy with this occurrence."
(Some of the Arizona rent-a-patients told New Times about their own continued problems with the "compensatory sweating." Though the surgery usually does succeed in drying sweaty palms, it typically also creates new areas of excessive perspiration, such as on the torso or legs.)
Smith's medical records indicate that McKenna performed her sweat-gland surgery on the day he'd met her, July 26. He later billed Penn Western $7,800. (McKenna did not respond to a request for comment.) Dr. Stephen Kim billed $1,200 for his role as anesthesiologist.
St. Paul billed Penn Western $66,000 for providing the space and surgical supplies for Smith's latest operation.
Cathy Brady's investigation revealed that Kevin Tien Do, the doctor in charge of the original July 17 examination and rash of tests, had pleaded guilty to health-care fraud months earlier, and was scheduled to report to prison October 15 for a year behind bars.
Court records show that, months earlier, in December 2002, Do had pleaded guilty to the felony in U.S. District Court for the Eastern District of California.
Do was convicted of "renting out" his medical license number to non-doctors, who then submitted phony reimbursement billings to the government. As part of his plea bargain, he had agreed to repay the federal government more than $366,000 in restitution.
But the doctor's guilty plea didn't lead to a suspension of his license to practice medicine, and that's why he legally was able to examine and perform tests on Jill Smith and her children.
In fact, California Medical Board records show the board still hasn't officially sanctioned Do, though the 1991 graduate of the University of Southern California School of Medicine is in prison.
Daniel Linhardt -- the assistant U.S. attorney who prosecuted Kevin Do and is chief of the office's health-care fraud task force -- says he's frustrated with the medical board's lack of action.
"We don't even tell that [medical] board anymore when we've convicted one of their doctors of something, because they don't do anything," says Linhardt. "I had no idea that any of this was happening down south. No one from the insurance companies has reported this rent-a-patient stuff to us. We can't just guess at it."
Rajpah Dhillon, an assistant California attorney general, said last week from Los Angeles that Kevin Do's file had just landed on his desk.
"I'm sure I'll go for an interim suspension," says Dhillon, who works with the California Medical Board. "We just got the information on the federal conviction, and I'm the last guy on the train."
Dhillon adds that there's nothing to stop him or anyone from reporting a Medical Board case to criminal authorities.
"If you have the evidence, it would be the right thing to do," he says.
Last September, Cathy Brady and Penn Western decided to reject all the billings from the California providers on the myriad insurance claims.
On September 17, Brady wrote to Dr. Gerald Edds, the president of AAAHC, the accreditation organization:
"I would like to bring a situation to your attention concerning [St. Paul]," she wrote. "I am enclosing some information regarding a rent-a-patient' scam that involves multiple providers in the Orange County, California, area."
Brady went on to describe the case of the three Smiths, noting that "there is an investigation in progress by the District Attorney in Orange County. . . . I felt obliged to inform you of this situation."
A spokesperson for AAAHC tells New Times that St. Paul no longer has the association's accreditation.
Jill Smith's employer laid her off within weeks after she returned from Southern California. Cathy Brady says the action was part of factory-wide cutbacks, and apparently was unrelated to the woman's fraudulent medical procedures. Smith did not continue her health-care insurance with COBRA coverage.
Brady says she doesn't know how the Smith children are doing.
Meghan Altobello contributed to the computer-assisted portion of this story.
E-mail firstname.lastname@example.org, or call 602-229-8433.
Get the This Week's Top Stories Newsletter
Every week we collect the latest news, music and arts stories — along with film and food reviews and the best things to do this week — so that you'll never miss Phoenix New Times' biggest stories.