Federal Investigation Uncovers Massive California Healthcare Fraud Scheme Involving Organized Crime
A recent federal investigation into Medicare fraud has revealed a scheme of alarming magnitude, directly implicating organized crime in California. The fraud, estimated to involve over $30 billion in dubious claims, primarily centers on phony home and community-based service providers across Los Angeles County. Criminal syndicates from abroad are playing a significant role in this troubling operation.
Dr. Mehmet Oz, who served as the administrator of the Centers for Medicare & Medicaid Services during the Trump administration, recently visited Southern California to assess the situation. In a video that has gained attention online, he highlighted an astonishing concentration of hospice facilities, asking, “In this four-block area in Los Angeles, there are 42 hospices! So either there are a lot of people dying here or you’ve got fraudulent activity that is so good that everyone wants to get in on it!” This question underscores the peculiar landscape of healthcare services in an area riddled with deceit.
Dr. Oz’s findings illustrate a troubling truth: numerous healthcare providers exist only on paper. He described many of these so-called hospice offices as devoid of actual medical services. “They just got an address they could claim was a hospice,” he explained, “and then they ran the business claiming people were at home getting services, which they really weren’t.” The gravity of this situation is enhanced by the nefarious methods these groups employ.
At the heart of the scheme lies a complex web of shell companies that submit bills for services that were never rendered. Investigators have identified various foreign crime groups—particularly Russian and Armenian mafia organizations—as key players. These gangs manage to bribe doctors to provide false patient prescriptions and certifications, enabling them to exploit federal funding meant for the most vulnerable members of society.
Dr. Oz emphasized the sheer scale of the issue by stating, “These are Russian, Armenian gangs, mafia that are leading a lot of these efforts.” He indicated that these organizations have manipulated a staggering 100,000 patients, convincing individuals to surrender their Medicare information, allowing for further fraudulent activities.
The financial consequences are stark and significant. Authorities uncovered a case where $16 million was illicitly obtained through false hospice claims. Remarkably, one ringleader received a prison sentence of only two years, leading Dr. Oz to lament, “It’s a good trade-off for a lot of folks.” He pointed out that Los Angeles alone accounts for an astonishing $3.5 billion in fraudulent claims related to hospice and home care services. As U.S. Attorney Bill Essayli noted, “What’s happening in Minnesota pales in comparison to the level of fraud that we believe is occurring in California.”
The situation in California is alarming enough that the Department of Health and Human Services is exploring the possibility of similar fraud practices spreading to other states. Recently, federal officials froze over $10 billion in child care program funding across several states, including Colorado and Illinois, due to serious fraud concerns. This raises additional alarms about the extensive nature of the fraud epidemic, extending beyond healthcare to impact various public programs.
The fallout from these fraudulent activities affects more than just government finances. As this deceit thrives, those who genuinely require care—elderly individuals, veterans, and patients with terminal ailments—stand to suffer the most. “The real people who need the money are losing,” Essayli remarked.
State leaders have faced backlash as the investigation unfolds. Governor Gavin Newsom and Attorney General Rob Bonta have been criticized for their perceived inaction. Essayli remarked, “He has reigned over more fraud than I think we’ve ever seen in American history.” In defense, Newsom argued that federal authorities are politicizing the inquiry, claiming crime rates in California remain historically low.
The hospice fraud scheme is not a new phenomenon; previous reports have identified suspicious hospice providers registered with little to no verifiable medical activity. Federal prosecutions are increasing, with five defendants recently sentenced for their roles in a $16 million Medicare fraud scheme involving fake hospice businesses. Examples include Mihran Panosyan, who received a 57-month sentence and $4.68 million in restitution, underscoring the legal ramifications for those involved.
Another stark example is Normita Sierra, 71, who operated two hospice businesses in West Covina, falsely billing Medicare for $4.8 million over four years. Sierra’s case highlights the exploitation of both patients and the system, as she targeted non-terminal individuals while offering kickbacks disguised as “girl scout cookies.” Currently facing a decade in prison, her deceit exemplifies the broader issue.
The infiltration of organized crime into the healthcare system is troubling. Authorities recently apprehended thirteen members of Armenian crime families who faced serious charges, including fraud surpassing $83 million. These groups engage in healthcare fraud and commit serious crimes like attempted murder and kidnapping.
As this crisis unfolds, the Centers for Medicare & Medicaid Services have begun scrutinizing payments tied to non-citizen care. Dr. Oz highlighted, “We’ve already identified about $1.3 billion of federal dollars spent to take care of illegal immigrants.” This indicates a systematic exploitation of federal healthcare programs meant for eligible individuals.
The federal government is ramping up efforts to combat this pervasive fraud. New task forces are set to receive additional resources, and initiatives utilizing data analysis to identify suspicious billing practices are being implemented. Licenses for sham hospice providers are already being revoked as authorities take steps to restore integrity within the system.
Dr. Oz summarized the urgency of this matter, stating, “This is organized. This is mafia activity that’s been overlooked for too long. That’s going to change.” The need for decisive action is clear. The coming months will reveal whether the federal crackdown can successfully dismantle these criminal enterprises and safeguard the healthcare system for those who depend on it most.
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