Office of Statewide Prosecution

Statewide Grand Jury Report

September 3, 1996
(This document has been re-formatted for the Internet)


We, the members of the Thirteenth Statewide Grand Jury, are continuing the task of investigating fraud committed against the State of Florida. For the past eight months we have concentrated on fraud within the Medicaid Program. In April we issued a report concerning fraud committed by durable medical equipment providers. This report concerns theft and fraud committed in the context of medical clinics, which are physician providers and health care professionals operating in a group setting. Once again, we are seriously concerned about the lack of front-end procedural controls in the Medicaid program to prevent fraud. This failure has led to the creation of a “pay and chase” situation, whereby the providers are paid first and questions are asked later. The State of Florida cannot continue to do business in this fashion. This report, to be read in conjunction with our first report, contains specific recommendations for infusing integrity into the system before taxpayer dollars are distributed under the program.


The Medicaid program, which is state and federally funded, was created in 1967 in order to provide medical services to low - income and disadvantaged persons. Florida joined the Medicaid program in 1970, and now spends $6.7 billion every year serving 1.6 million recipients. More than 100 million claims are paid each year to some 80,000 medical service providers in Florida’s program. There are 68 different provider groups under the program. The largest of these is the physician provider group in which 40,000 physician providers are currently enrolled. Of these, approximately 6,500 operate in a group setting of two or more health care professionals. In Fiscal Year 1994-1995, approximately $431 million dollars was disbursed to physician providers under Florida’s Medicaid program. Florida’s Medicaid program is implemented both legislatively and by administrative rule. The Agency for Health Care Administration (hereinafter, the “Agency”) is responsible for managing Florida’s Medicaid program. It promulgates rules under which the system and its participants must operate. The Agency sets the qualifications for enrollment into the system. It enters into contracts with medical providers to provide services and agrees to pay fees associated with the services according to a fee schedule. The Agency contracts with a “fiscal agent” to enroll providers, process claims, and issue payment to providers. Because federal dollars are disbursed, the federal government maintains a regulatory role over many aspects of the Agency’s Medicaid program management functions. According to program rules, a “provider” must be fully and properly enrolled in the program before receiving authority to request and receive Medicaid funds. A “provider” is defined in the Medicaid Provider Reimbursement Handbook as any entity, facility, person, or group who is enrolled in the Medicaid program and renders services to Medicaid recipients and bills Medicaid for services. Both providers and recipients are given identification numbers, which serve as the keys to the accessing the system. The Agency has the authority to revise provider qualification requirements and modify or terminate provider contracts. Medicaid claims may be made either in writing or via electronic communication with the fiscal agent. The claim must include the provider’s name and Medicaid identification number, as well as the recipient’s name and Medicaid number. Claims may be submitted only for certain specified medical procedures which are authorized by a physician listed in the provider enrollment file. The claim must specify the billing code authorized for the specific services provided, as set forth in the Medicaid Provider Handbook and fee schedule. The Agency reserves the right to withhold payment if the billings are not made according to its rules or if fraud is detected. The Agency is responsible for detecting fraud and abuse within the system. When fraud is suspected, the Agency may suspend payment to the provider until the allegations are resolved. Allegations of criminal conduct must be referred to the Attorney General’s Medicaid Fraud Control Unit for investigation. This unit may refer the cases for criminal prosecution and/or institute civil enforcement actions to recoup the stolen money. If convicted, the providers or recipients may be fined, imprisoned, and/or barred from further participation in the system. Administrative fines and penalties may be sought in some instances.


During the course of our inquiry, we heard testimony from managers, policy-makers, investigators, and legal counsel with the Agency. We studied portions of the Medicaid Provider Handbook and fee schedule. We reviewed provider enrollment applications and agreements. We also heard from investigators with the Attorney General’s Medicaid Fraud Control Unit and investigators with the Florida Department of Law Enforcement. We had the benefit of testimony from medical providers, clinic personnel, and equipment dealers. We have examined a multitude of fraudulent schemes perpetrated by unscrupulous members of the medical community and associated personnel, as well as by non-medical providers bent on taking advantage of the Medicaid program. We have issued 19 indictments charging 40 individuals and 2 business entities with Medicaid fraud. The Statewide Prosecutor has filed criminal charges against another 10 defendants. More than half of the defendants were operating in physician provider groups; six of them are licensed medical doctors. The methods of fraudulent operation range from simple forgery and misrepresentation by single individuals to complicated schemes involving the creation of “ghost operations”, kickbacks, patient brokering, and money laundering. The schemes involve any combination of the following events: (1) billing by non-existent providers; (2) billing by providers not at all affiliated with the alleged prescribing physicians; (3) billing by clinics which no longer employ the physicians listed on the provider application, or for that matter, any physician; (4) billing for services which were not provided, or which were not authorized by physicians as medically necessary; (5) fraudulent mis-coding to obtain fees for services which are not compensable under the program; (6) billing for payment under procedure codes which produce a greater financial benefit than the actual procedure code allows (“upcoding”); and (7) billing for services under a series of procedure codes, instead of the single authorized code (“unbundling”), for a greater financial benefit from the program. The evidence convinces us that fraud against the Medicaid system is easily accomplished. The evidence also convinces us that much of this fraud could be prevented


Stricter scrutiny must be given to provider applications before enrollment. Provider billings must be thoroughly analyzed before payment is made. Physical inspections of the premises must be conducted. Licensure and employment status of physicians must be verified. Convicted felons and financial “dead-beats” must not be allowed to participate in the program. Providers terminated from one part of the program must not be allowed to re-enroll as a provider in any other part of the program. Providers terminated from the Medicare program or from a Medicaid Program in another state must not be allowed to participate in Florida’s program. Any changes in the ownership, financial status, or criminal history of the provider must be reported to the Agency and acted upon immediately. Physicians and recipients must be contacted to verify that the services billed were in fact rendered. There must be sufficient auditing mechanisms in the computerized claims process to prevent payment of fraudulent claims.


We have learned that the Agency has recently implemented some of these anti-fraud concepts. We have received testimony that the Agency has imposed stricter controls in the enrollment process for all new providers, and has re-enrolled select groups (durable medical equipment, home health care, and transportation providers) under more stringent requirements. According to the Agency, the re-enrollment process in the medical equipment field alone resulted in a significant elimination of fraudulent operators from the system. We are concerned that these common-sense approaches to fraud prevention have not yet been applied to physician providers operating in a group setting. We are told that this will occur in the near future, despite alleged objections from the medical community. We encourage immediate action toward re-enrollment of these providers in particular and all providers in general. We have heard testimony that the Medicaid Program was originally designed to attract as many health care providers as possible, and that subsequent revisions to the program may have been stalled for fear that legitimate providers would leave the system. However, we believe that a provider-friendly philosophy has evolved from these premises that is often inconsistent with fiscal responsibility. There could be no more convincing evidence than what occurred in the re-enrollment of durable medical equipment providers. Criminals and con-artists have obviously heard how easy it is to be enrolled as a provider, how little verification of applications and claims is conducted, and how fast claims can be electronically processed. They have flocked to the State Capital with their hands out. Every dollar that is given to them is one less dollar that goes to the truly needy in this State. We urge the Agency to expeditiously address our concerns. We ask that the Agency report to us at our next session regarding its progress or on the existence of any roadblocks to the implementation of these suggestions.

THIS REPORT IS RESPECTFULLY SUBMITTED to the Honorable Philip J. Padovano, Presiding Judge of the Thirteenth Statewide Grand Jury, this _____ day of _______________, 1996.

Thirteenth Statewide
Grand Jury of Florida

I, MELANIE ANN HINES, Statewide Prosecutor and Legal Adviser, Thirteenth Statewide Grand Jury of Florida, hereby certify that I, as authorized and required by law, have advised the Grand Jury which returned this Report, this ______ day of _____________________, 1996.

Statewide Prosecutor
Legal Adviser Thirteenth Statewide
Grand Jury of Florida

THE FOREGOING Report of the Thirteenth Statewide Grand Jury was returned before me this _______ day of ____________________, 1996, and is hereby sealed until further order of this Court, upon proper motion of the Statewide Prosecutor.

Philip J. Padovano
Presiding Judge
Thirteenth Statewide
Grand Jury of Florida