Imagine this: you are homeless and living in a tent on a stretch of street in Los Angeles called Skid Row. You are desperate for food, for warmth, for any sign of human compassion, but none of those is forthcoming.

One day, a kindly-looking gentleman arrives and asks you whether you would like to come with him to get some food. You go with him, get “admitted” to some sort of medical facility, get something to eat, and then get deposited back on Skid Row right where this all started.

You see this happen to others around you but think nothing of it because at least folks are getting fed. Of course, you have no idea that this is part of an elaborate, multiplayer scheme to fraudulently drain Medicare and Medi-Cal benefits from an unsuspecting populace.

Healthcare Fraud Disguised as Charity

As you may have guessed by now, this is not a work of fiction but a real practice that ran rampant in Los Angeles. Back in 2006, the Los Angeles police started discovering patients being dumped out of ambulances on  Skid Row, some of them still wearing medical gowns.

An investigation of these events first led to 68-year-old Estill Mitts, owner/operator of a Christian Day Center on 7th Street in Los Angeles. Mitts recruited homeless people on skid row as “patients,” sent them to hospitals for “treatments” they did not require thus draining their Medi-Cal and Medicare benefits, and then sent them back to the streets.

As with most such fraudulent schemes, Mitts was not working alone. Instead, Mitts operated the recruitment center (called Assessment Center on 7th Street) that received kickbacks from three hospitals (City of Angels Hospital, Los Angeles Metropolitan Medical Center, and Tustin Hospital and Medical Center) for sending the patients in for treatment they did not require.

Federal prosecutors delayed Mitts’ sentencing so he could aid them in an investigation that eventually led to the conviction of 11 defendants, including a couple of hospital owners and CEOs in this massive fraud scheme.

It turned out that the Mitts scheme was just the tip of the iceberg. Another major investigation into the Skid Row patient recruitment scheme involved Dr. Ovid Mercene. While Dr. Mercene worked at a Los Angeles-area hospital, he routinely admitted homeless “patients” that came to the hospital from Skid Row. At the hospital, the homeless patients were often kept on a special floor away from the hospital’s “regular” patients.

From the Department of Justice:

“These ‘patients’ also were given smoking breaks while in the hospital, even though many of them supposedly suffered from respiratory diseases. After a short hospital stay where numerous unnecessary tests were typically performed, Mercene discharged the ‘patients’ to skilled nursing facilities, even though they did not require such care.”

In addition to fraudulently billing the government for nearly $2 million, Mercene did not report the nearly $700,000 in cash kickbacks for admitting “patients” to skilled nursing facilities on his tax return.

The combination of the two resulted in his pleading guilty to filing a false tax return and a 15-month prison sentence.

Bracker & Marcus LLC Client Helps Expose Years-Long Fraud Scheme

While some of these Skid Row patient fraud schemes were unearthed by criminal investigations, others were the result of whistleblowers’ complaints such as one brought by one of this firm’s whistleblowers.

In that action, the whistleblower alleged that since at least March 2011, College Vista Convalescent Hospital (CVCH) violated the federal and California False Claims Acts (FCAs) by submitting or causing to be submitted claims to the Medicare and Medi-Cal programs for:

(1) Medically unnecessary inpatient stays at CVCH by Medicare and Medi-Cal beneficiaries recruited from downtown Los Angeles’s Skid Row;

(2) “upcoding” of patient diagnoses to receive inflated Medicare reimbursements and submitting claims for physical and occupational therapy services that were not rendered; and

(3) billing for services not provided.

As the facility into which the hapless Skid Row “patients” were deposited by doctors such as Dr. Mercene, CVCH was the last stop in the fraudulent milking of Medicare and Medi-Cal benefits.

At Long Last, a Settlement

After many years of investigation, we are proud to report that the case was finally settled this year. Although the amount of the settlement was reduced due to the effects of the Covid-19 pandemic on CVCH’s business, it was nevertheless an important win.

This is a tale of egregious behavior by health care providers, providers who put their own financial well-being ahead of their own patients’ well-being. While the financial details of the civil settlement of our FCA case do not seem to correlate with the fraudulent acts, nor the ten years’ worth of work that we, and our client, devoted to this case, we will pick this fight every time.

The FCA, and the brave whistleblowers that step forward under that statute, was designed to stop this very behavior. The FCA and whistleblowers like our clients help protect taxpayer funds and vulnerable patients from unscrupulous providers like Mitts, Mercene, and CVCH.

If you know of fraudulent behavior by providers, contact a healthcare fraud attorney at Bracker & Marcus LLC, and know that we are true believers in the power of whistleblowers and the FCA.