Houston Riverside General Hospital specialized in the kind of medicine its better-heeled brethren did their best to avoid: treating the poor, the mentally ill, the drug-addled.

So it's no surprise that the 95-year-old nonprofit — formerly known as Houston Negro Hospital — shared the same broken finances as the people it served. Most patients couldn't pay their own way, leaving Riverside to survive off the rock-bottom reimbursement rates of Medicare and Medicaid.

At one point, it was losing $10,000 a day. That's when executives decided to cauterize the wound with the hot poker of fraud.

In 1996, the state of Texas accused Riverside of padding fees and billing for drug-rehabilitation services it never provided. Texas canceled $1 million in contracts and demanded that the hospital repay another $763,000. It also urged the feds to audit Riverside's Medicare and Medicaid payments.

Yet charges of fraud weren't enough for bureaucrats to close the spigot fully. The money continued to flow. It would take another eight years before the state had finally had enough. In 2004, it moved most of its drug-treatment contracts to more trusted providers, slashing Riverside's funding by 75 percent.

Unfortunately for the taxpayers, Riverside CEO Earnest Gibson III had friends in influential places. Congresswoman Sheila Jackson Lee, D-Texas, demanded an investigation of the cuts, calling on Gov. Rick Perry to restore the money. Perry, who had appointed Gibson to the Board of Regents at Texas Southern University, was happy to oblige. By the time it was over, Riverside emerged with another $3 million.

It wasn't until 2011 — 15 years after the initial accusations — that law enforcement got serious. That's when the feds nailed administrator Mohammad Khan, who confessed to enriching the hospital via a kickback scheme.

He'd been paying “recruiters” $300 a head to bring Medicare patients to Riverside's six psychiatric clinics. They arrived by the van load for daily therapy sessions they rarely qualified for, or received. Medicare picked up the $116 million tab.

When the scheme was discovered, the Center for Medicaid and Medicare Services (CMS) finally halted the hospital's payments. But in the eyes of Jackson Lee, a meager $116 million theft was hardly cause to rush to judgment. Her husband, Elwyn Lee, once served on Riverside's board. So the congresswoman again rode to the hospital's rescue.

“Even if more harmful acts prove to be true,” she wrote to CMS, “an entire institution should not be penalized by the acts of one person.”

In Riverside's case, that “one person” would abruptly multiply. Investigators discovered that, since 2005, the hospital had been swindling the feds to the tune of $22 million a year. Kahn ratted out CEO Gibson as his co-conspirator, and the feds also nabbed Gibson's 35-year-old son, Earnest IV, who ran one of the psychiatric clinics and was charged with billing nearly $700,000 for care that “was not medically necessary and, in some cases, not provided,” according to prosecutors.

Kahn has pleaded guilty. The Gibsons and five others await trial on charges of fraud, conspiracy and money laundering. And by this time, Jackson Lee had no choice but to dial down her patron sainthood. She refused to comment for this story.

Another member of Congress is happy to talk. Kevin Brady, R-Texas, has been trying to draw attention to health care fraud in Houston since entering office in 2009. It seems that CMS, the agency charged with protecting Medicare dollars, had failed to notice that the city's private ambulance services were robbing the agency blind.

That year, companies in Harris County, Texas, billed Medicare $62 million for emergency shuttles. By comparison, New York City received $7 million for the same services. Brady's concerns went ignored until 2011, when a Houston Chronicle series dragged the scam into the light.

Think of the Medicare program as a bank that never bothered to buy a safe. Everyone from HMOs to drug dealers has been caught robbing it time and time again, stealing the kind of money that makes the sequester look like pocket change.

While the credit card industry uses data-mining techniques to flag fraud within minutes, CMS has allowed the most obvious schemes to run for years, rarely the wiser.

“Washington has long bragged that Medicare only has a 2 percent administrative overhead,” Brady says. “But with that, we've paid a steep price in far too much fraud.”

Given how often such blatant thievery goes undetected, no one's sure how much fraud there really is. Conservative estimates place the bill at $100 billion annually. The more adventurous peg the figure closer to $300 billion — three times what the feds spend on education.

It has left federal health care little more than an unlocked home, where street punks and gangsters, doctors and even states walk right in and help themselves to whatever's inside.

All you need is the government and your imagination

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The stealing has become so sweet that Medicare fraud threatens to overcome drug dealing as America's favorite quick-riches pastime. Street criminals can easily pull in $25,000 a day without carrying a gun. Throw in modest sentences for getting caught, and it's the criminal equivalent of saccharine.

Take Cuban expat Armando Gonzalez, who served five years for dealing crack. When he got out, he started several outpatient psychiatric clinics in Miami with a scheme similar to Riverside's.

Gonzalez paid assisted-living facilities kickbacks to bus in residents with retardation or dementia. The clinics would bill Medicare for services the “patients” weren't eligible for or didn't receive.

By the time the feds started sniffing around in 2008, Gonzalez had already made off with $28 million, enough to fund a personal fleet of 17 luxury vehicles.

He closed shop in Miami, only to reopen in North Carolina. When he was finally arrested last year, Gonzalez had been planning to expand into Tennessee.

Then there's Armen Kazarian, kingpin of Los Angeles' Armenian mob. The feds say his gang stole the identities of doctors and patients while setting up fake clinics across the country. They knew nothing about medicine, sending Medicare fake bills that showed eye doctors doing bladder tests, obstetricians testing for skin allergies and dermatologists billing for heart exams.

Medicare paid out $163 million before the FBI nabbed Kazarian and 73 henchmen. Kazarian was sentenced in February to just three years in prison.

Not all schemes are this flamboyant. Some simply employ sleight-of-paperwork. A Detroit podiatrist billed Medicare $700,000 for performing toenail removals that amounted to little more than toenail clipping. Two Miami doctors billed back rubs as physical therapy, taking in $57 million.

Some are so brazen that they advertise on TV. Remember those late-night Scooter Store ads, promising to get you a motorized wheelchair “at little or no cost to you”?

In 2007, the San Antonio company behind the ads agreed to pay $4 million in civil fines and to forfeit another $43 million for advertising one scooter but delivering a more expensive model on Medicare's dime.

Executives didn't learn their lesson. The Scooter Store soon was caught again, this time for overcharging Medicare by as much as $87.7 million between 2009 and 2011, according to an audit. But CMS agreed to a spectacularly lenient settlement, allowing the company to repay just a quarter of that figure.

The feds would only get tough after CBS This Morning aired an investigation illustrating how the company browbeat doctors into writing unnecessary prescriptions for scooters. They raided Scooter Store headquarters in February. It appears that the company had finally been barred from federal health programs.

Fraud blossoms in the sunshine and heat

Warm weather attracts mold, mosquitoes and retirees with government benefits. So it's no surprise that Miami is the epicenter of health care fraud.

It's not just the senior population conveniently warehoused in group homes and assisted-living facilities. There are also large immigrant communities that shield their own, and quick access to countries without extradition treaties.

Then there's the culture of fraud that stinks to the very head of Florida government.

During the 1990s, Republican governor Rick Scott was CEO of the hospital company Columbia/HCA. As the feds later discovered from the largest fraud case in Medicare history, the company seemed more organized-crime outfit than health care provider. Columbia billed for tests that weren't ordered, submitted false diagnoses to increase reimbursements, paid kickbacks to doctors for patient referrals and billed for home visits that people didn't qualify for or receive.

The smoking gun was the two sets of books Columbia kept. One detailed all Medicare submittals. The other noted which were fraudulent, allowing Columbia to keep enough reserves to pay penalties, should it ever get caught. A whistle-blower estimated that fraud alone accounted for more than one-third of the company's profits.

When the whip came down in 2003, Columbia settled for $2 billion in fines for “systematically defrauding federal health care programs.” Scott claimed ignorance, though it's hard to believe that a self-described hands-on executive wouldn't know where a third of his company's profits came from.

He was eventually fired — but with the velvet landing accorded to disgraced CEOs. Scott walked away with nearly $10 million in severance, stocks worth $300 million, and a $1 million-a-year consulting contract.

Only two lesser executives got jail time. Lead FBI agent Joe Ford would later regret allowing the company to simply pay away its sins: “People need to go to jail.”

Still, fraud knows no party, race or gender. Indeed, the allegations against the family of state Rep. Daphne Campbell, D-Miami, could script a health-fraud installment of The Klumps.

Campbell ran 10 group homes until the state canceled her Medicaid contract in 2006. Four people died in her facilities that year, including one developmentally disabled female patient who had also been raped. Inspectors found rodent feces and general squalor.

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Meanwhile, Campbell's ex-con husband, Hubert Campbell, has been accused by two former partners of defrauding the state's Medicaid program.

Not to be eclipsed, their 28-year-old son, Gregory Campbell, has been accused of submitting nearly $300,000 in false Medicare billings while operating adult group homes. He's been charged with felony theft, organized fraud and Medicaid fraud.

But the feds never fully grasped the scope of all this stealing until 2007, when it stumbled upon the novel idea of scrutinizing its bills rather than just paying them.

At the time, the Justice Department was mostly tackling medical-equipment scams involving wheelchairs, hospital beds, respiratory devices and the like.

These were simply schemes. Providers don't need a license, and lax oversight allows them to pop up overnight, bill Medicare for hundreds of thousands of dollars, then disappear just as quickly — only to re-emerge elsewhere under a new name.

Hank Walther was a federal prosecutor at the time, soon to lead the feds' Medicare Fraud Task Force. He feels they were allowing their adversaries to run scot-free.

“My 4-year-old kid could prosecute these cases,” he says of the equipment rackets. “They're really easy, and there are plenty of them. A lot of this other stuff — home health, the ambulatory cases, even the mental-health cases — each time we got into those new areas, there was a constant refrain from law enforcement and the U.S. Attorney's Office saying, 'This is too complicated.' ”

The feds started teaming prosecutors with detectives, the same approach used to break down organized crime. They began to hunt providers, whose fraud ran to the tens of millions compared with the $1 million to $2 million paydays from equipment scams.

In 2010, Walther helped take down American Therapeutic, the country's highest-billing mental-health center. The company was cycling addicts, alcoholics and Alzheimer's patients through its six clinics. Patients' diagnoses were changed so they would qualify for expensive group therapy. In the end, owner Lawrence Duran received an unheard-of 50 years in prison, a sign that judges finally had begun to acknowledge the magnitude of these swindles.

“It's like Whac-a-Mole,” Walther says. “You knock one down, but now there's a bigger one somewhere else, and it's different. But once you figure it out, it rains on the back end with bad guys and money.”

When the check arrives, Minnesota gets alligator arms

For 29 years, David Feinwachs was general counsel to the Minnesota Health Association, a trade group for the state's hospitals.

Like many states, Minnesota pays HMOs to administer its Medicaid programs. But Feinwachs noticed something odd. While actual providers had seen their reimbursement rates frozen for more than a decade, the HMOs were hiking their management fees 10 percent a year just for playing middleman.

So Feinwachs started examining the HMOs' finances. “Because they're nonprofits, nobody ever looks at them,” he says. “It's the perfect cover because everybody goes, 'They're nonprofits. What's the problem?' ”

He soon found that they'd turned Medicaid into a cash cow, making it several times more profitable than their private insurance. But when Feinwachs asked for more data on their costs, the state blocked him, claiming it was proprietary information.

He was outraged. “You can't take tax-funded programs, turn them over to vendors and claim that what happened to the money is a trade secret.”

Still, the HMOs were rattled. Their trade organization reached out to Feinwachs' boss in an attempt to silence him.

To soothe his concerns, Feinwachs was invited to sit in on a conference call in 2010 between the hospital association and Karen Peed, who oversaw the state's Medicaid contracts. “If you can't keep a secret, you have to leave the room,” he claims Peed announced during the call. Then she proceeded to explain how Minnesota was rigging Medicaid reimbursement rates.

Think of Medicaid programs as akin to a restaurant bill, where states are supposed to split the tab with the federal government. But through creative accounting, Minnesota had figured out a way to pay only for the garlic bread, sticking the feds with the rest. (Peed's boss, Minnesota Department of Human Services commissioner Lucinda Jesson, declined our interview request.)

While it may be unseemly for one agency to fleece another, it's not illegal. When the state outsources its deceit to private insurers, however, it quickly tilts from bureaucracy to fraud.

Feinwachs warned his boss, who confronted Peed. She reportedly claimed it was no different from the cost-shifting used by hospitals, where people with insurance are charged more in order to compensate for patients on public assistance. The big difference, of course, is that you only pay hospitals when you use them. Every taxpayer in America was getting snipped by Minnesota's duplicity.

“It's like comparing panhandling to bank robbery — one's annoying, the other's a crime,” Feinwachs says he told his boss. “After that, things got increasingly tense.”

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After Feinwachs refused to back down, two months later, he was fired for insubordination.

But he'd already raised too much hell for the HMOs to feel safe. In 2011, UCare, one of those HMOs, chose to make amends. It dropped $30 million on the state's doorstep like an orphaned baby — with little explanation.

Minnesota claimed it was a donation. But the feds smelled a rat, believing it to be from Medicaid overpayments.

The move was so mysterious that Congress summoned UCare CEO Nancy Feldman to explain. She admitted that Minnesota was pumping up its Medicaid reimbursements to cover losses in a state program that Medicaid doesn't reach.

Worse, Republican governor Tim Pawlenty had canceled that program a year earlier. Neither the state nor the HMOs bothered to tell the feds they were still covering losses from a program that no longer existed.

As multiple investigations continue, Feinwachs remains unemployed. He now spends his time agitating for reform.

“The interesting thing about health care fraud is that our government always goes after low-hanging fruit,” he says. “If they were storekeepers, we'd put in surveillance systems and armed guards to catch kids stealing gum from around the cash register. Meanwhile, we have people backed up to our warehouses with semitrailers loading the merchandise, and we're oblivious to that.”

Well, not everyone is oblivious.

The guys who showed up

Housed in a featureless building north of Miami, the HEAT Task Force is a government anomaly: It actually turns a profit. For every dollar it spends on investigation, it uncovers $8 in fraud.

From the moment you enter the office, you notice something's different. The cubicle plantation is eerily quiet. Most agents are on the street, working more than a dozen cases apiece.

HEAT is short for the windy governmentese of Health Care Fraud Prevention and Enforcement Action Team. It has branches in nine cities where the stealing is most prolific — places like Los Angeles, Houston, New York, Dallas and Baton Rouge, La.

Since 2007, the HEAT Task Force has charged 1,480 defendants with $4.8 billion in fraud. More than half of those indictments came out of the Miami unit. Special agent in charge Christopher Dennis says, “A lot of the schemes are typically started here — vetted, proven here — and farmed out to other parts of the country.”

There's no shortage of targets.

Agent Reginald France, a first-generation Haitian-American built like a linebacker, takes a reporter on a tour of the fraud hotbed of Hialeah. Strip malls line boulevards like concrete-and-metal kudzu. An agent who wishes to remain anonymous rides along, his square jaw and disarming manner reminiscent of wrestler-actor Dwayne “The Rock” Johnson. He offers a reporter $1 for every mall he can spot without a medical business.

It isn't easy.

There are doctors, physical therapists and mental-health clinics in every direction. Mom-and-pop pharmacies sit just doors down from Walgreens yet still out-bill the national chain, thanks to prescription fraud. Adult day care centers specialize in physical therapy for Medicare beneficiaries.

“They bring in these Zumba dancers,” cracks the Rock. “These young girls are Zumba dancing away, and these old guys are looking at it, and, yeah, they're getting some kind of therapy.”

Medicare recipients are crucial to these schemes. While it's possible to simply steal patients' information, those schemes are easier to detect.

“That's the bread and butter of the fraudster — the fact he can pay somebody to participate in the scheme,” Dennis says. “If you have a willing participant, you then eliminate the ability to tie the fraud to you. That person is going to lie for you because they conspired with you.”

Recruiters typically pay beneficiaries to use their Medicare numbers, offering them a combination of cigarettes, booze, pills and money. Cash payments can reach $2,000 quarterly. All recipients have to do is sign a sheet confirming that care was received.

For the patient, it's a low-risk play. Nobody wants to put an 80-year-old grandmother in front of a jury. Prosecutors wouldn't recoup much even if they did. And since Medicare can't be revoked by law, there's little downside to bartering your number away for a carton of Kools.

This makes the beneficiaries key to unraveling the plots, and necessitates a careful, respectful touch. Many of the Rock's tips come by way of recipients he's encountered in previous cases.

The Rock savors breaking down liars. “You keep them talking, and after a while, their house of cards starts to crumble,” he says. “They're looking up and noticing that I'm not writing down anymore. You give them the look — 'I'm not stupid' — the same look their mother and my mother gave us.”

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Dr. Oxy and Detroit's fraud beach

Imagine one of Martin Scorsese's overhead tracking shots. Only instead of zooming in on his favorite goodfella, the camera zeroes in on Michigan's Monroe Pain Center, not far from Toledo.

It pans the surrounding strip mall, parking lots filled with license plates from Kentucky, Tennessee, even Florida. That's how far people were willing to drive for a Las Vegas Cocktail.

The cocktail mixes Xanax, Soma and Vicodin for a powerful opiate high. Monroe was its unofficial retailer. It was led by Oscar Linares, a doctor from the Dominican Republic, who also worked at the University of Toledo Medical Center. Sometime in 2008, he started to lead a double life.

The office went from seeing 40 patients a day to as many as 250. Over two years, Linares prescribed 5 million doses of narcotics. Traffic grew so heavy that he hired a parking lot attendant. Workers got bonuses when the patient count topped 200 in a day.

The cost to Medicare: $5.7 million.

Linares rarely examined his patients. One undercover cop didn't see the doctor until his 10th visit, and only then via a television monitor. Linares' workers simply gathered patients' information and had them sign blank forms that would be filled in later. Then a guy who used to work at home-improvement retailer Lowe's would hand out the scrips.

When the clinic was raided in 2011, police seized $214,000 in cash, a yacht and the 55-year-old doctor's fleet of cars, which included a Ferrari Spider and a Bentley Continental.

Linares was charged with unlawful distribution of prescription drugs and Medicare fraud. He has pleaded not guilty and is awaiting trial.

A more durable fraud thrives a half-hour north, in Detroit's Cass Corridor. Amid this stretch of poverty and ruin emblematic of the city's decay lies a peculiar oasis agents call “the beach.”

It's situated near several shelters, which provide a steady flow of beneficiaries. Recruiters drink beer and sit on beach chairs — hence the name — wrangling people into vans that shuttle “patients” to doctors, home-health agencies and mental-health clinics.

The doctors are the stars of this operation. They not only bill Medicare and Medicaid but also use the power of prescriptions as currency to pay accomplices. It's a multi-ring circus with the doctor at its center, kickbacks flowing in all directions to pharmacies, patients and recruiters.

“A recruiter will identify a physician and work out a deal, saying, 'I'll bring you so many patients,' and the recruiter will pay a physician $10,000 to $15,000 to write scrips like crazy, pad after pad for a week,” one Detroit HEAT agent says.

“When you have a dirty doctor writing 500 scrips for Oxycontin a month, you have to have a pharmacy that is going to fill them. If a pharmacy sees a Dr. ABC's scrip 500 times a month, they will call and ask, 'What's up, doc?' The recruiter plays a role here, too, and says, 'I'm taking care of the pharmacy.' ”

The scheme has even spawned subspecialties, such as “quality assurance” experts. They're typically former doctors from overseas who read through patient charts to flag anything that might prevent Medicare from paying.

Since fraudsters realize that red flags rise when there's a billing spike from one company, they'll incorporate seven or eight to spread the grift. Some even launch check-cashing businesses to launder their money.

“Now we're seeing people who aren't doctors open these clinics and hire other dirty real doctors to 'work' in the clinic,” the Detroit agent says. “Almost every day there's a new thing.”

The bureaucracy that didn't work (until just recently)

Much of the ease with which the treasury is raided can be blamed on CMS, which bleeds like a hemophiliac, thanks to a strategy known as pay-and-chase. Since its inception, Medicare has operated with a “pay claims, ask questions later” ethos.

This might have been appropriate in the idealistic 1960s, when doctors served as the new program's virtuous gatekeepers. Fraud was such a secondary concern that it wasn't even officially made a crime until 1996.

But that carcass is so inviting today that prosecutors have adopted an unofficial threshold: People need to steal at least $500,000 before they're charged.

“All of these prosecutions are great,” Louis Saccoccio, CEO of the National Health Care Anti-Fraud Association, says. “We have strike forces, but the prosecutions just tell you we have a big problem because that means the money's already out the door. So the focus now is starting to shift to prevention.”

Enforcement started to pick up during the second term of George W. Bush, then accelerated under Barack Obama, who expanded the task forces and made fraud fighting a pillar of the Affordable Care Act, otherwise known as Obamacare. CMS was given greater discretion in suspending payments and screening providers before they entered the system. Penalties and prison time also were increased.

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But excuse U.S. Rep. Michael Burgess' skepticism. The Tea Party Republican from Texas has heard such talk before.

The former gynecologist is willing to concede that progress has been made. Yet the sheer size of the task makes crime fighting difficult. Medicare contractors process 4.5 million claims a day. Even Republicans admit that CMS is undermanned.

“There was a famous case here in Dallas, where a Nigerian woman had been busted,” Burgess says. “As she was going off to jail, it was discovered that she had several other provider numbers. They discovered that she was receiving checks at the same post office box. It never occurred to anyone that, 'Hey, anything that goes to P.O. Box 9058, that's a red flag.' We were probably paying for her defense.”

Even more shocking is the case of New York state. Its centers for people with mental issues were charging the feds $5,000 per day per patient. Arizona, by comparison, charges $200 a day.

The reimbursements were based on a changing formula that CMS kept approving, even as payments skyrocketed. New York's estimated overcharges: $15 billion.

This time, CMS discovered the state's gouging on its own. But six years later, it's still negotiating a remedy. CMS now plans to let New York phase out its overbilling, essentially allowing the state to steal a little less each month. (CMS officials declined to be interviewed for this story.)

More obvious improvements still elude the agency — even such basics as changing a beneficiary's Medicare number when his is stolen or used in a fraud. Others wonder why CMS hasn't mimicked the credit card companies, which flag suspicious behavior within minutes.

“I sent my staffer to Chick-fil-A with my personal credit card to charge $100 of sandwiches for our office for lunch,” Burgess says. “So I'm called off the floor of the House to answer a phone call from my credit card company, saying, 'Hey, someone is trying to charge $100 worth of sandwiches.' Why can't they do that?”

Obamacare has allocated $100 million to CMS to create such a system, employing data analytics to mine for suspicious claims. The new, proactive stance includes a spiffy command center in Baltimore linked to field agents. In its first full year, the system identified or prevented $115 million in fraud. But while Obamacare provided CMS with “seven new tools” to fight fraud, as Burgess notes, four years after the law passed, CMS has managed to enact just one.

“At this rate, some point before my natural death, maybe we'll have done half of them,” the congressman says.

Though nearly everyone agrees that the government is moving in the right direction, $100 billion continues to walk out the door each year.

“This is a lucrative business, and business is good,” Feinwachs says. “The only problem is that you and I are funding it.”

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