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Nursing Home Horror

Nursing Home Horror
The Dark Side of Fraud

04/20/07

Elderly woman's hands holding a caneThe 88-year-old woman at Claywest House nursing home near St. Louis was totally reliant on staff for her care. There was nothing she could do about the ants crawling all over her. Or the waste she helplessly waited in during the weeks leading up to her death.

She’d been in good standing, her bills covered, at least in part, by the federal Medicare program. The problem at Claywest and at two other area nursing homes was poor staffing. And as investigators would later learn, the shortage wasn’t an oversight. It was built into the system—a decision that led to horrific conditions at the nursing homes between 1998 and 2001 and federal charges that the homes and their upper management were padding their balance sheets on the backs of helpless residents in their care.

“They were all trying to make a buck,” said Alan Peak, a supervisory special agent in the white collar crimes unit of our St. Louis field office, where the case was investigated in conjunction with local Health and Human Services inspectors. The probe revealed criminal conditions at the nursing homes—residents suffering from bed sores, malnutrition, beatings, neglect—all the result of their management company’s directives to cut costs. Meanwhile, managers rewarded themselves handsomely for their efficiency.

“Service was so bad and so neglectful that patients were essentially being charged for worthless services,” said Special Agent Wade Beach, who worked the case. “They were running skeleton crews who couldn’t get around to all the patients.”

The fraud prosecution is one of the first of its kind. While systematically cutting back on service at the nursing homes, management continued to collect money from Medicare and Medicaid for services they knew were inadequate, or in some cases not performed at all. The management company and its CEO, as well as the nursing homes, pled guilty last fall to fraud conspiracy charges. In February, the CEO was sentenced to 18 months in prison, and the nursing homes were each fined $180,000. The company president was sentenced April 20 to two months in prison for his role. U.S. Attorney Catherine L. Hanaway said the rulings showed the commitment to fight fraud, “especially the kind that hurts our most vulnerable citizens.”

Victims in the case put a human face on what may seem like mundane crimes—insurance and health care fraud. But each year they take their toll on all of us in the form of higher premiums and costs. Fraud costs the insurance industry as much as $80 billion a year, and the National Insurance Crime Bureau estimates it raises the yearly cost of premiums by $300 for the average household.

Some common examples of insurance fraud in health care include “upcoding”—billing for plastic surgery when a patient only received stitches—and billing for services not provided, as was the case in St. Louis. The FBI investigated 233 insurance fraud cases last year, resulting in 53 indictments and 54 convictions. We investigated 2,423 health care fraud cases last year and secured 534 convictions.

Cases come to light a variety of ways. In St. Louis, where three agents work health care fraud full time, the FBI is on a task force that includes U.S. Attorneys, the Department of Health and Human Services, major insurance providers and two dozen other interested parties. Leads to the FBI might come from providers or government agencies who see red flags (a trend in upcoding, for example), or even from employees who spot illegal activity.

In St. Louis, the red flags waved in the direction of the top management. “Because of the direction to administrators not to provide adequate staffing, patient care was horrific,” Agent Peak said.

The egregious nature of the case made closing it all the more rewarding.

“Family members of the people who received sub-standard care,” said Agent Beach. “I think this gave some closure to them. This doesn’t make up for what happened, but I think they appreciated that justice was served as a result of the investigation.”

Resources:
- White-Collar Crimes stories
- 2006 Financial Crimes Report to the Public