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In early 2010, Medicare paid $135,000 to a discount pharmacy in Hialeah, Fla. for drug prescriptions written by four doctors.

There were only a few problems. First, two of the doctors were dead. A third doctor was alive, living in Portland, Ore., but he never wrote the prescriptions. The fourth doctor was a few months into a three-year prison sentence, according to federal court records, for conspiracy to commit Medicare fraud.

In October, Renier Vicente Rodriguez Fleitas, 60, owner of Pirifer Phamacy and Discount and a former lieutenant colonel in the Cuban military, pleaded guilty to conspiring to commit health care fraud. He is currently serving a 37-month sentence.

According to his attorney, Rodriguez was simply a homeless person serving as a straw man for more organized criminals who used his name to set up the pharmacy and divert money from Medicare.

“He was given rent and food to sign some documents to be president of the company,” lawyer Sabrina Vora-Puglisi said, adding that the organizers also paid for a plane ticket to Cuba.

By Medicare fraud standards, the payout to the Hialeah pharmacy was a tiny drop in a massive bucket. But authorities say the case illustrates how criminals are stealing doctors’ identities — some of them already deceased — to commit Medicare fraud, a problem that Attorney General Eric Holder estimates costs taxpayers $60 billion a year.

Sham suppliers of wheelchairs, oxygen equipment, and other durable medical equipment have long been the poster children for Medicare’s fraud problem, particularly in South Florida. But a new government watchdog report suggests that the Medicare Part D prescription drug program that went into effect in 2006 is also highly vulnerable to fraud, waste, and abuse.

According to a U.S. Department of Health and Human Services Office of Inspector General (OIG) report released last week, the Centers for Medicare and Medicaid Services are not checking to make sure that prescriptions paid by the health insurance plans that contract with Medicare are written by real doctors.

The new report, based on 2007 data, said invalid physician prescriber numbers are so common in Medicare records that the program cannot identify the doctors who prescribed the most oxycodone and Ritalin. Both are highly addictive and frequently trafficked on the street.

The OIG also said the Centers for Medicare and Medicaid Services could not indentify the second-highest prescriber of methadone, a drug used to treat heroin addiction that is also sometimes diverted to street markets. The new report, which supplements a similar effort published by the OIG last June, focuses just on drugs with potential for abuse, which are known as Schedule II.

Medicare, which contracts with more than a 1,000 health insurance plans across the country to provide prescription drug benefits to seniors, requires the plans to submit data on who the prescribing doctors are for all the prescriptions that are filled, but has yet to establish rules requiring that the information is correct. Health care fraud experts said some of the prescriptions are likely valid, written by doctors whose prescriber numbers have been improperly recorded, but other prescriptions likely reflect pure fraud. Given the state of the records, though, they say it’s difficult to know which is which.

Sen. Tom Carper, the Delaware Democrat who requested the OIG investigation, was troubled by the results. “Just as the disturbing as the potential misuse of taxpayer dollars is the threat that these vulnerabilities pose to American communities struggling with illegal drug use,” Carper wrote in a prepared statement.

Kirk Ogrosky, a former top federal health care fraud prosecutor who is now a partner at the Washington law firm Arnold & Porter said, “Any pattern of inaccurate prescriber information on claims for Schedule II drugs is alarming because of the street market for drugs like oxycodone, methadone, and Ritalin.”

Ogrosky added that while some of the problem may be chalked up to bad record keeping, it would be easy to figure out how much represented actual fraud by comparing error rates for frequently trafficked drugs to other kinds of prescriptions.

To fix Medicare’s record problem, the OIG suggested CMS start systematically checking the prescriber numbers and rejecting invalid health plan records for Schedule II drug prescriptions. After initially rejecting the proposal, the agency agreed to begin requiring valid doctor numbers and flagging bogus numbers, agency spokesman Peter Ashkenaz said.

In the past, Ashkenaz said the plan operated “with the belief that everybody is honest. When we indentify ways of finding who the bad actors are, then we take the steps to tighten it up.”

The OIG has warned Medicare about invalid physician identifier numbers several times.

As far back as 2001, the OIG reported that Medicare paid $91 million for durable medical equipment orders associated with invalid or inactive physician identifiers. Some $8 million of that was later proven to be for claims associated with physicians who had died prior to the dates of service.

In the June 2010 report, the inspector general first sounded the alarm about invalid prescriber identifiers in Medicare’s Part D prescription drug plan. The report flagged a number of the top invalid identifiers culled from 2007 data. Among them was ZZ4567890, which an OIG spokesman recently told the Center for Public Integrity was used almost exclusively by Medco Health Solutions, a Medicare Part D sponsor based in Franklin Lakes, New Jersey that runs the country’s largest mail order pharmacy operation.

Contacted for comment, Scott Helmus, chief operating officer of retiree solutions at Medco, acknowledged that the firm used invalid prescriber numbers.

Helmus said the invalid number was assigned when prescriptions did not include a physician number Medco’s computer system recognized. “When a prescription comes in and it is entered into our system, we attempt to match the doctor information against our master list,” Helmus said. “Recently, if we couldn’t get a match, we used that ZZ–whatever-it-is number.”

Asked how Medco knows those prescriptions are not fraudulent, a Medco spokeswoman said its pharmacies have many safeguards. “There are a variety of factors that go into prescription authorization,” wrote spokeswoman Melissa Mackey, including calling doctors to verify they wrote the prescription. It is unclear, however, why Medco did not include valid physician numbers in the prescription data it sent to Medicare administrators.

Since the 2010 OIG investigation, Helmus said Medco had taken action to correct the issue by flagging invalid provider numbers. The process will be finished “in a month at most,” he said.

Mark Caverly, chief of the liaison and policy section of the Drug Enforcement Administration’s Office of Diversion Control, said the root of the problem probably resides with individual pharmacists. “Pharmacists are gaming the system, it sounds like,” Caverly told the Center, by pushing through fake prescriptions. “It’s not surprising that they have come up with a system to override the safeguards.”

Not all of the fraud vulnerabilities that plague Medicare Part D involve invalid prescribers, say investigators.

It’s just as easy, they say, to steal a doctor’s prescriber number. One of the easiest stops for would-be fraudsters is online, where a free National Provider Identifier directory is available. For a fee, net surfers can also gain access to Drug Enforcement Administration prescriber numbers from a website run by a private company in partnership with the U.S. Department of Commerce.

The American Medical Association has fought against public access to physician identification numbers, but so far its complaints have gone nowhere.

Dr. Ardis Hoven, chairman of the AMA, said the doctor ID websites put physicians at great risk. “The federal government is aware of the current misuse of these numbers by criminals and the AMA has urged immediate steps to limit access to these numbers,” Hoven told the Center in an e-mail.

But Luis Scheker, the Portland dermatologist whose identity was used by Rodriguez’s phony Miami pharmacy to bill Medicare, said fraudsters could just as easily get DEA numbers from prescription pads. Scheker said he is unsure how his number was stolen.

Soon after moving to Portland in 2009, Scheker said he contacted insurance companies because he was receiving refill requests for Florida patients he did not recognize. “One of the insurers sent me a list of 20 or 30 names that I had never seen,” he said. “It’s very lax. Anyone with a little information can call in a prescription.”

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