Welcome to the new Outpatient Surgery website! Check out our login FAQs.
Inside the Rent-a-patient Scam
About 5,000 healthy patients were recruited nationwide and flown to California, where they underwent surgeries that were billed at excessive amounts to their insurance companies.
Andrew Cushman
Publish Date: October 10, 2007   |  Tags:   News

It's early on a Saturday morning in Southern California and Andres Sanchez is eyeing the doctor who is about to cut into him for no reason. As he reclines on the table, so far from home, for hernia surgery on his perfectly healthy stomach, Mr. Sanchez tries to focus on the $800 he was promised for lying about his condition. Imagine the desperation abject poverty can create for poor immigrant workers trying to survive on $200 a week. Facing those odds, Mr. Sanchez, and 5,000 others like him, became willing pawns in what authorities are calling the most unethical insurance scam ever uncovered.

Like a living cadaver
Owners of several California surgery centers allegedly performed unnecessary surgeries on thousands of healthy patients from 45 states in an attempt to bilk $97 million from insurance companies. About 5,000 healthy patients were recruited nationwide and flown to California, where they underwent surgeries that were billed at excessive amounts to their insurance companies. Prime targets were those whose insurance plans didn't require pre-approval for the procedures performed or for out-of-network care.

After a two-year investigation by the Orange County District Attorney's Office, the three people running the Unity Outpatient Surgery Center in Buena Park are in custody, charged with 46 felony counts including grand theft, conspiracy, insurance fraud and tax evasion. Authorities say Tam Vu Pham, 39, his wife, Hoang Ngo, 38, and Lan Nguyen, 48, allegedly paid $1 million to middlemen who traveled the country recruiting patients for unnecessary outpatient surgery. These middlemen flew "patients" like Mr. Sanchez to the clinic and coached them on what to say before undergoing such procedures as colonoscopies, upper gastrointestinal procedures, hemorrhoid surgery, surgery to correct sweaty palms and pain management, say officials. During a five-month stretch last year, one rent-a-patient reportedly endured a circumcision, removal of sweat glands, a nose operation, a colonoscopy and an endoscopy. According to a published report, Unity billed Blue Cross/Blue Shield $41,278 for a colonoscopy that usually costs between $500 and $1,000.

"This is one of the most egregious frauds we've seen in a long time," says Byron Hollis, national anti-fraud director for Blue Cross Blue Shield. "Some of the folks involved have stepped over a new threshold in subjecting a patient to the risk of physical harm."

Unity allegedly collected $14.2 million of the $97 million it billed to insurance companies from August 2002 to April 2003, often using addresses of shell corporations to disguise its billing. For their time and trouble, the patients, many of whom had numerous operations performed over a relatively short time, received $300 to $1,000 in under-the-table cash payments or credit toward cosmetic procedures.

"This is the biggest insurance scam we've ever dealt with," says Orange County District Attorney Tony Rackauckas, who has worked 30 years in law enforcement. Mr. Rackauckas says he expects more arrests, but he wouldn't comment on the number of surgery centers involved.

Attempts at ripping off insurance companies are far from rare. What makes this case so incredible is the blas? attitude these patients-for-hire showed in letting their bodies be sliced and diced like a living cadaver.

"As a patient involved in this scheme, you'd have to be out of your mind," says Michael Goldberg, MD, the chief of anesthesiology at Cooper University Hospital in Camden, N.J. "The idea of having unnecessary surgery for money is like a movie. It's totally unethical and it might be assault."

Anatomy of a scam
Here's how the scam played out, according to court records. The middlemen - or "cappers" - were rewarded with commission-based cash payments based on the number of healthy patients they recruited. In addition to recruitment, cappers scheduled the patients' appointments, coached them on what to tell their attending physician and frequently provided transportation to and from the surgery center where the procedures were performed.

"The cappers are training the patients as far as what to say, so the doctors are led to believe the patients. But the doctors probably knew what was going on." says Mr. Rackauckas, who wouldn't comment on whether anesthesiologists and surgeons conspired in the scam.

"Certainly the physicians and facilities involved are violating a cornerstone of our healthcare system," says Mike Costello, director of investigation support for the National Health Care Anti-Fraud Association. "It's a system built on trust, and they are violating their portion of that trust. The patients involved are also violating that trust by receiving services they don't medically need."

California has become a hotbed for the rent-a-patient scam, insurers say. One reason is the state's prompt-pay law that requires insurers to pay claims in 30 days to 45 days, allowing little time to investigate a claim for fraud before payments are made.