Hundreds of people have used the shroud of corporate secrecy under shell companies to help steal hundreds of millions of dollars from Medicare. In places such as Miami, shell companies remain prime tools in perpetrating fraud where the fraud rings merge stolen patient and physician data under the veil of a shell company and then bill Medicare as rapidly as possible. Other shell companies are often layered on top to mask the fraud.
Shell companies take many shapes:
— Some act as fronts to launder profits
— Some pay kickbacks to patients and physicians who sign off on bogus medical claims
— Some, under the form of billing companies, structure a buffer between sham clinics and Medicare
— Some pay kickbacks to those willing to sell their Medicare ID numbers so that the shell company can bill the government
The goal of the shell companies is to bill as much as possible before authorities catch on, a tactic known as a “bust-out” scheme. Improper payments in 2010 resulted in $48 billion in losses to Medicare, which equates to 10% of payments the Medicare program made.
Intentionally submitting false corporate information constitutes fraud in every state. However, the incorporation laws vary from state to state, making forming fake businesses easy. States do not check the validity of corporate records when a company incorporates. The FBI states that in Florida, almost every Medicare fraud scheme involves shell companies.
CMS has done a poor job at combating shell companies due to its lack of resources. In fact, less than 5% of all payments were subjected to audits. The healthcare reform law though, allocates $350 million over the next 10 years to fight fraud in the Medicare and Medicaid programs and imposes stiffer sentences for scam artists.
CMS is installing new fraud-fighting computer analytics to check physician backgrounds and starting in January 2012, the locations of providers will be checked by “geo-spatial mapping.” Additionally, new providers will be subject to automated enrolment screening. Their names will be checked against databases that include the federal government’s banned contractor lists, state and federal criminal dockets, and state licensing records.
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