Surgery clinics targeted in national investigation

FBI: Patients recruited for unnecessary surgery

The FBI has raided three southern California surgery clinics as part of an investigation into a health care fraud scheme in which patients were recruited from 48 states to have unnecessary surgeries. This scheme stands out from others in that patients actually underwent surgical procedures, including colonoscopy with no preparation and adult circumcision. "Using data analysis, our joint efforts with [the National Health Care Anti-Fraud Association] have connected the dots between the surgery centers and insurance providers and shown that the scam is deeply entrenched and operating nationwide," the FBI said.1

The investigation involves dozens of surgery clinics and more than 100 health care providers, mostly in southern California, according to investigators.2 At press time, indictments were expected.

In the "rent-a-patient" scheme, recruiters are alleged to find and pay people to undergo procedures that they don’t need, says Bill Mahon, president of the National Health Care Anti-fraud Association in Washington, DC. These procedures include hernia repairs where there is no hernia and palmar hyperhidrosis (sweaty palm surgery). Some centers were billing seven to 10 times the customary rate, Mahon says.

"For colonoscopy, which typically is about $2,500, the typical bills ranged from $15,000 to $20,000 or more," he says. Palmar hyperhidrosis is the big-ticket item; normally, those procedures costs $6,000 to $10,000 at the most, he says. "The typical [fraudulent] bill is from $60,000-$70,000," he says. The bill for one 25-minute procedure was $73,600, of which $59,000 was billed as surgical supplies; that claim was not paid, he says. The condition of having sweaty palms is rare, and surgery is typically a last resort, Mahon adds.

In the alleged scheme, recruiters are paid to entice co-workers or others to have surgery, Mahon says. In some cases, advertisements were run on fliers or in ethnic newspapers with free numbers to call for free cosmetic surgery or other procedures, with free airfare and hotel included. Many of the patients are low-income workers and often are immigrants. Some are offered a percent of the profits from the scheme, which also is shared with the recruiters and the physicians. "Outside the center, they are being coached by recruiters on what symptoms to describe to surgeons, then undergo procedures," he explains.

Health care claims for unnecessary surgeries may total $500 million in recent years.1 The scheme typically involves large self-insured employers with somewhat generous benefits or traditional indemnity health plans that allow employees to go to out-of-network health care providers. Some policies don’t demand reasonable and customary reimbursement, which means insurers must foot the entire bill unless they can prove it was fraud.

To avoid even the appearance of fraud, consider these suggestions:

Use the correct code. The largest area of health care fraud involves misrepresentation of actual services provided, says Byron Hollis, national anti-fraud director of the Blue Cross Blue Shield Assoc. Some providers select codes based on the codes’ reimbursement, he says. "There’s a CPT code that, if you stretch the imagination, might have something to do with the procedure actually performed; that’s the code illegitimate providers use."

If you have a gray area of coding, work with your insurance company to ensure you’re using a recognized code, he advises. "That will reduce the scrutiny that any specific claim is given."

Be alert to patients coming from outside your geographic area. If you notice a large percentage of patients coming from geographic areas that necessitate extended trips or air travel, review those cases closely, Hollis advises. "There could be legitimate reasons for that." However, if you consistently see patients traveling long distances for services that are readily available in the rest of the country, or patients are offered inducements to travel long distances to have services readily available elsewhere, consider that a red flag, he adds.

Take note of unusual claims or surgeries. When providers bill seven to 10 times the customary and reasonable rates, those claims stand out, Mahon says. If you notice an unusual number of procedures, such as palmar hyperhidrosis, determine if the physician has spent sufficient time to ensure other therapies have been tried. "Or has he spent a cursory five to 10 minutes doing an examination, then said, We’ll do surgery’?" he asks.

Also, be alert to any physicians who are performing a significant number of procedures on Saturdays and Sundays, he says. Surgeries typically were scheduled on those days in the rent-a-patient scheme, Mahon says. If you allow other surgeons to use your facility on weekends, don’t assume they will be legitimate, Mahon says.

"If you’re concerned about what is going on in your center on weekends, look at it with your own eyes," he suggests. Determine if there is a significant amount of pedestrian traffic or people congregated around your center who may be telling other people what to do, Mahon advises.

The insurance payment system is built on trust between patients and providers, and between providers and insurers, Hollis adds. "When things go bad, it’s because someone violates that trust," he notes.


  1. Federal Bureau of Investigation. Operation Patient Payoff — Stranger than Fiction. Web:
  2. Fuhrmans V. FBI raids 3 California surgery clinics


  • Bill Mahon, President, National Health Care Anti-Fraud Association, Washington, DC. E-mail: over alleged fraud. The Wall Street Journal. March 18, 2004.