John and David Mkhitarian found a soft spot in Medicare’s defenses against fraud: Inspectors aren’t required to visit medical providers deemed to present a lower risk of fraud and abuse.
So the cousins used exchange students to create some 70 bogus laboratories, clinics and physician practices, then enrolled the companies in the program with the stolen identities of doctors, prosecutors assert. Medicare paid out $3.3 million over about two years.
Both Mkhitarians pleaded guilty to health-care fraud conspiracy. David was sentenced in September to seven months in prison, and John will be sentenced in February.
Their case illustrates a vulnerability in the nearly $600 billion taxpayer-funded program: Vetting of new providers often is inadequate. An inspection of the Mkhitarians’ companies might have stopped the scheme before it started.
Shortcomings in Medicare’s efforts to stop fraud, abuse and waste have come into focus since April, when the Centers for Medicare and Medicaid Services, the agency that runs the program, made public medical-provider billing records for the first time since 1979. The disclosure followed a legal effort by The Wall Street Journal.