The Twin-Cities Machine

BOB WEIR

Medical clinic fraud is a complex business. A typical clinic employs owners, doctors, office managers, clerical staff, marketers and transportation staff. Machine Medical Clinic (MMC) had all of these employees and then some. MMC seemingly came out of nowhere and grew to a high-volume, high-dollar clinic in the Twin Cities of Minneapolis and St. Paul in a very short period of time.

Jim Johnson, M.D., was a licensed medical doctor who worked at reputable medical clinics for most of his long career. Johnson was a small man who was very soft spoken and always seemed to be nervous and looking over his shoulder. But late in his career Johnson decided to leave his employer and start his own medical clinic.

Igor Dimitrov was a Florida resident, originally from Moscow, and a partner in a clinic management company, TP Management, with another individual. He moved from Miami to Minnesota to start a joint venture and expand his operations with chiropractors and medical doctors in the area. Igor had a very direct and intimidating personality, which he used to coerce individuals into doing what he wanted, when he wanted it.

Running a Machine

Johnson established Machine Medical Clinic and was the registered owner, according secretary of state records. Medical clinics in Minnesota are required to be owned and operated by licensed medical professionals. MMC marketed itself as a one-stop shop for all the medical needs of residents in central Minneapolis. The clinic employed multiple chiropractors, physical therapists and massage therapists along with Johnson, who worked as a general practitioner.

After a few successful years in Minneapolis, Johnson decided to expand and opened a second clinic in St. Paul. However, this new location was not central as the Minneapolis clinic, and most run-of-mill patients would have difficulty accessing it. It nevertheless employed as many therapists, doctors and staff.

Igor had formed TC Management in Florida a few years before he moved to Minnesota. At the time, medical clinic management companies were focusing heavily on Minnesota due to the ease of medical coverage from the personal injury protection (PIP) portion of an automobile policy. This coverage was very lucrative for medical carriers; the legislature in Minnesota required a minimum of $20,000 in PIP coverage per person in the vehicle. The ease of accepting medical claims and payments made fraudulent schemes very popular, challenging to catch and essentially had few repercussions for the perpetrators.

The Team Versus the Machine

Jasmine Collins and I were coworkers in the Special Investigative Unit (SIU) at Holm Insurance Company. We frequently collaborated on investigations and discussed what cases should be pursued. We were a very good team. Jasmine had top-notch analytical skills and the patience necessary to complete medical clinic investigations. She and I complimented each other very well, as my skills were stronger in the interviewing and confrontational aspects of investigations.

One winter day Jasmine asked me for my opinion on a medical clinic she was looking into. She said some of our internal claims representatives told her that a new clinic called MMC had opened and was billing at a very high rate. She did some background screenings on the clinic and found it was recently incorporated. She then ran an internal report to see how many times MMC showed up in records and was alarmed at what she saw. This is when she came to me. We both had an extensive history of dealing with medical clinics, and we were astounded by the number of our policyholders who were using MMC.

Our next step was to begin reviewing some of the medical claims. I started with one patient, then two and then three. A pattern was already beginning to emerge and continued as we kept looking at claims. We saw a lot of low-impact car accidents involving minorities. The treatment for each person was very similar, according to the medical records. The accident victims went to see Dr. Johnson, who then ordered chiropractic, physical and massage therapy for each patient. One initial treatment, called spirometry, stood out to me. It is a test of lung functioning conducted by having the patient, in simple terms, blow into a tube — a highly unusual test for a low-impact motor vehicle accident. Finally, we noted some of the “same old lawyers” representing these policyholders.

Jasmine and I discussed the case with our supervisor and decided to open an investigation and pull all of MMC's claims into the investigation unit to handle.

Ambulance Chasers, Runners and the Mob

All of MMC's claims were transferred to me to handle through the conclusion of the investigation, and Jasmine was going to be co-leading the case. The first order of business was to protect our rights and obtain legal representation, so I sent the files to our best external legal counsel, Shana James. Shana was a petite woman but she had a lot of spunk and fire. She was relentless, and I had never seen her lose an argument. She was a born attorney who loved a good battle of wits. I informed Shana of the issues Jasmine and I had identified, and together we determined that the best investigative method for this case was to request examinations under oath (EUO) from our policyholders. An EUO is similar to a deposition but does not occur during litigation; it is a requirement under an automobile policy, and the person being interviewed is sworn in under oath and a court reporter records the interview.

Shana immediately began requesting the EUOs and setting up dates for the policyholders to come in and give their statements. She sent requests to the policyholders who visited MMC and received mixed responses. The individuals who had traditional — dare I say reputable — lawyers who were unaffiliated with the clinic industry were gracious about providing information and documentation. Conversely, we also had to deal with some ambulance chasers who knew us. When Shana sent them letters requesting the EUOs, they filed for arbitration. At least we knew to expect it; it was all part of the game. And they knew we would ask for the arbitration to be denied because the claims exceeded the allowable arbitration value. In our industry, it was the regular song and dance.

A common technique used by certain attorneys was to waive thousands of dollars in claims to keep the case in arbitration. This technique only supported our theory they were not valid claims. If a patient's treatment was necessary, why would he or she waive so much money? One potential reason could be the cost to litigate — arbitration was much more affordable. The second and more common reason was that plaintiffs' attorneys in insurance disputes are much more successful in arbitration than in district court. In arbitration, the odds of getting another plaintiff attorney as the arbiter are well above 50 percent. We continued our background screening on Johnson's clinics and employees, patiently preparing the case without alerting Johnson or TP Management to the investigation. Management and staff at the clinics had no idea who we were, making it easier to drive or walk by.

Jasmine and I discussed with legal counsel if we had the ability to gather information understate statutes that allow an insurance carrier to ask for specific information from other insurance companies if there is reason to believe fraud is occurring. Shana agreed, and we began gathering data from other carriers. In addition, agents with the National Insurance Crime Bureau (NICB) contacted me and began asking questions about MMC. Involvement of NICB agents was typically an indicator a clinic was an industry-wide problem. It also usually meant that law enforcement was being engaged.

Jasmine was contact by Joe Hancock, a law enforcement agent, a few months after NICB contacted me, and he asked for information about the MMC case. Although the authorities did not provide us with many details, we learned it was beneficial that MMC management was unaware of our identities. Not only did it provide Jasmine and me with autonomy to be near the clinic, but Joe told us it was also a safety issue. He warned us to be careful with the leaders of the clinic, particularly those working for TP Management, because the funding was coming from “questionable” sources. Law enforcement was interested in MMC as a money-laundering operation. At this point, my supervisor instructed Jasmine and I not to step foot in the clinic without his approval. He told us we were potentially dealing with . . . the mob.

As Jasmine and I continued reviewing documents from a safe distance, we noticed many of MMC's managers (nonmedical professionals) maintained active addresses in other states. This seemed odd in itself, but then I noticed one particular local address appeared on a number of employees' personnel documents and motor vehicle records. Jasmine and I decided to visit this address. We drove by in morning, around 9 A.M. The house was completely dark, the garage door was shut and a couple cars were in the driveway. We made another pass to get the license plate numbers and then left. All in all, we were in the neighborhood under five minutes. As we put the pieces together, we realized the house was a staging ground for the alleged perpetrators and a place for them to stay when they were in town.

Another pattern we found was that the vast majority of MMC's patients were minorities from low-income neighborhoods, as were the drivers employed by MMC to transport drive patients to and from the clinics. One aspect that did not make sense was the distance that patients traveled to visit the clinics. In any part of the Twin Cities, someone looking for treatment could find all of MMC's services within five to ten miles of his or her home. However, these patients traveled 20 to 30 miles to go to MMC. This was our initial indication that MMC's drivers were actually runners — individuals who purchase police reports, contact people involved in accidents and offer to drive them to a clinic for free. Doctors and clinic managers pay the runners based on the number of people they bring into the clinic; they are willing to pay up to $1,000 per person as long as they treat them a specific number of times.

Interviews

For each policyholder, Jasmine and I completed a medical record and treatment review. We found that the exams and follow-up visits were very extensive, which was important for us to note because we like to explain the tests to patients and see if they were actually completed. If a doctor does not complete a thorough initial exam, it brings the entire treatment plan into question.

While Jasmine and I worked our way through reams of documents, Shana was able to schedule some EUOs. Typically we start EUOs by asking general questions about an insured individual's medical treatment, and then we follow the tangents that arise from their answers. Several patterns emerged during the EUOs. The first was the patients could not describe their exams and follow-up treatments to the extent that the medical record reported. Second, not all treatments claimed on the bills were actually administered. As we continued our interviews, patients kept contradicting the treatments on the bills. At this time we learned that MMC's employees were starting to leave the clinic. Jasmine went into tracking mode to locate them so we could interview them.

Only two former employees agreed to speak with us, but they provided a lot of information. The first was a man named John who worked as a physical therapist at MMC. The second was a very confident woman named Kathy who clearly did not take guff from anybody. She was massage therapist. They both said they started working at MMC assuming it was a legitimate business but quickly learned there were unethical practices occurring. They each commented on a man named Igor — they said that after they put in their notice, Igor threatened that they would be hurt if they spoke to anyone about how MMC was run. Jasmine and I suspected that all the employees who left were similarly threatened. Kathy and John also confirmed our suspicions that Johnson was not the actual owner of MMC; he was being told what to do, and “the Russians” were running the place. They explained that Igor's team of managers did not live in the Twin Cities but visited often to check on the clinic. Kathy also confirmed that the transportation company was in fact a runner organization.

Medical Mill

In each case submitted to arbitration, we requested a EUO of the policyholders and Johnson. In most arbitration cases, we end up with a plaintiff attorney who ultimately says no to all of our requests, but we needed only one arbitrator to grant us the deposition of Johnson, and eventually we were successful. Johnson still had no idea who we were, but now he had to answer questions about his background, the treatments he was giving, what symptoms would lead to the treatment and the ownership structure of his clinics.

During the deposition, Shana questioned Johnson about how medical records were developed and treatment plans were determined. Johnson said he administered all of the initial exams and treatments, including the lung testing; however, he did not do a good job of explaining why the patients required lung testing. Our lawyer asked Johnson if the policyholders sustained any chest injuries or had breathing difficulties that required the use of spirometry, and Johnson admitted that they did not.

Johnson told us that he had purchased a medical records system that provided him with standard formatting of medical records. The e system allowed him and his associates to cut and paste standard medical record comments and formats. What this meant was each patient was treated the same and had no originality or differentiation. It was the definition of a medical mill — where all treatment and records are the same.

Next Shana asked Johnson to verify that all the treatments he billed for had actually been administered to the patients, and he confirmed that they had. We showed him transcripts of patients stating that they did not receive some of the treatments and tests on their bills. Johnson said the patients were wrong and must not have understood their treatments. We told him that we had explained every treatment to the patients we interviewed and they had denied receiving such treatment. We told Johnson that his clinic appeared to be a machine through which patients were processed with the exact same treatment simply to make money off the insurance companies. Johnson of course denied this.

Out of Sight, Not Out of Mind

It was a normal, cold day in January, and I really didn't want to go in the field. When I got to the office I heard rumors that Johnson's St. Paul clinic had closed overnight. Policyholders called me with questions about what to do now that the clinic was closed. Jasmine and I bundled up and headed out to the St. Paul clinic to see what was happening. Sure enough, on the door was a sign saying the clinic had closed, with no forwarding address or instructions for patients.

A few weeks later, the Minneapolis clinic closed as well. This time we didn't even bother to go and look. Instead, we validated the date it closed and made sure we did not receive any medical bills after this date. Holm Insurance denied all the claims from the two branches of MMC, and we placed Johnson on a list of doctors to track going forward. The case was closed, and Jasmine and I moved on to other assignments.

Holm Insurance maintains a list of medical providers that we track on a quarterly basis using internal and external systems and share with other insurance agencies. We receive reports showing new and old medical clinics that we received claims from. With these reports, we could look at the medical bills and records to identify doctors. If we had previously investigated a doctor who reappeared later on a tracking report, the investigator who completed the initial investigation was notified. In addition, we tracked people using background search engines. We would run queries by name and Social Security number to see if a new address showed up to see where they moved. Perpetrators who evaded justice once almost always pop up later if we're patient and steady about tracking them.

That summer I received a call from an investigator at Interstate Insurance Company in Minneapolis who was investigating a clinic. He said, “What was the name of the guy you looked at last winter with the two clinics?” I told him it was Johnson, and he said, “I found his new clinic; I am staring the door.”

I quickly asked for his location, grabbed Jasmine and we headed straight over. We found an unmarked door, so we walked around to the back of the office building and saw some guys walking in with computer equipment. About ten minutes later we saw Johnson walk out of the office. He looked at us, threw his arms in the air and we were able to lip-read his exclamation — “You have to be kidding me!” His new clinic never opened.

The Big Picture

From our investigation, we were able to piece together the story behind MMC. Igor and his cohorts had moved to Minnesota and recruited Johnson to run a medical mill and pose as the owner. The Russians funded the lease of the building, the medical equipment and even the payroll, presumably with dirty money that they needed to launder. Together with Johnson they hired the employees, found the ambulance chasers and runners and determined how much to pay runners for bringing in patients.

Johnson was responsible for treating patients but was given a directive from Igor that each patient had to receive a predetermined treatment plan. Their formulaic treatments ensured that MMC would receive the full $20,000 in patient benefits in four to six months.

MMC's unwritten mission statement was to churn through as many patients as possible, doing the least amount of work and billing the insurance companies excessively. Igor and TP Management handled the paperwork, and they unbundled medical charges to bill for higher rates, billed for treatments the patients did not receive and billed for patients the clinic did not see.

In total, Holm Insurance Company had about 100 claims from Johnson's two clinics with a combined exposure of $2.8 million. The company had paid less than $100,000 in claims before the investigation began, and management chose not to pursue a recovery. In addition, each of the claimants was entitled to lost wages and other benefits, which totaled $5.6 million; we paid less than $50,000 toward these claims and again chose not to pursue recovery.

A few months after the closures of MMC, I ran into Joe Hancock, the law enforcement officer who worked on the case with us. He indicated we had “run them out town,” and at this point the police investigation into Igor and TP Management was closed. He said that that no one had been charged at the time and would not comment further on the money laundering or ties to the mob. He did, however, mention that he found “business papers” that Igor kept. One page had the license plate and a description of the car Jasmine and I were in when we made our very short trip to the staging house. The house had looked empty when we drove by, but someone had been watching us.

About the Author

Bob Weir, CFE, is a 1998 graduate of the University of Wisconsin-Stout. Following college, he began his professional career with a national insurance company where he handled injury claims and later was placed in the Special Investigative Unit. During his time in this role he investigated injury claims, property damage, homeowners' claims and medical clinic fraud. He transitioned to a new company and role in 2007, where he completed internal audits and financial investigations. His current role, which began in 2012, is in sourcing operations where he negotiates logistics contracts. Mr. Weir became a CFE in 2010 and continues to maintain his active status.