Md. says worker siphoned off funds

Money allegedly taken from kidney program raises auditing concerns

May 13, 2007|By Jennifer Skalka | Jennifer Skalka,Sun reporter

For 27 years, Donna M. Lam of Dundalk led the life of a career civil servant, for much of that time helping to make sure that the bills of end-stage kidney disease patients were paid.

But state prosecutors now allege that for the past dozen years, Lam has been serving herself -- siphoning off $1.7 million in Medicaid payments from the Kidney Disease Program of the Maryland Department of Health and Mental Hygiene.

Since 1995, according to documents filed by the attorney general and department inspector general's office with the Baltimore County Circuit Court, the former claims processor allegedly conducted an "illegal billing scheme" by creating fake patients and providers, depositing money into bank accounts she created for those companies and then withdrawing cash.

She used the money "to purchase goods, services, real and personal property," says the complaint filed by Maryland Attorney General Douglas F. Gansler, who has announced several major fraud cases in recent weeks.

The state is asking for a civil judgment of $5 million each against Lam, 50, her husband, Wilson A. Lam, 52, and at least two other unidentified individuals who participated in or were "unjustly enriched" by the plan, according to the complaint. No criminal charges have been filed in the case.

State officials said the episode reveals a major flaw in the state's auditing system that is not readily repaired.

Though Medicaid is audited every three years, the Kidney Disease Program is one of thousands of smaller programs that do not necessarily get a thorough evaluation.

"Our mandate is to audit every agency once every three years. It is not to audit every program," said chief legislative auditor Bruce A. Myers. "I would need a thousand people over here to do that."

Nationally, Medicaid fraud is a complicated and rampant problem. Patrick Burns, a spokesman for Taxpayers Against Fraud, a Washington nonprofit, said it is difficult to gauge the amount of money that taxpayers lose as a result of such crimes.

"Fraud within the renal care world is huge," Burns said, adding that much of it is perpetrated by providers who bill for services that aren't provided and pad charges.

Donna M. Lam did not return repeated calls for comment and did not come to her front door, though it was open, when a reporter visited her home. She previously declined to comment when reached by a Sun reporter.

It was not clear from documents filed with the court if she and her husband have hired a lawyer.

Lam's last day with the Health Department was April 18, according to Karen Black, an agency spokeswoman. Court documents say Lam was terminated.

"It's an ongoing investigation, so I'm really restricted about what I can share," Black said.

Through spokeswoman Raquel Guillory, Gansler declined to be interviewed.

"We have filed a civil complaint," Guillory said. "We are pursuing that, and we'll work with the Department of Health and Mental Hygiene to obtain all of the information necessary to ensure that the Lams are held accountable and to discover the extent of this scheme."

The civil complaint lists five counts against the Lams: unjust enrichment, civil fraud, breach of fiduciary duty, civil conspiracy and detinue, which means the state charges that the defendants are unlawfully detaining state property.

The Kidney Disease Program was founded in 1971 and, according to Black, is providing financial assistance to 2,400 Maryland residents.

The program's fiscal year 2008 budget is about $9 million. Since its founding, it has provided about $250 million to individuals receiving home dialysis or treatment in a certified dialysis or transplant facility.

A patient must require chronic maintenance to be eligible to apply. Two-thirds of the program's clients do not qualify for Medicaid, according to Black. For those who do qualify, the program offers to cover items such as over-the-counter medications that the basic Medicaid package does not typically allow, she added.

Donna M. Lam is listed on the program's Web site as responsible for physician claims. She is one of 10 people who appear to work for the kidney program.

"Fraud is difficult to prevent in general if someone is really familiar with what's going on" in a program, Myers said.

An affidavit filed by Pamela T. Owens, a corporate compliance officer who works for the office of the inspector general, states that Lam created at least 15 fictitious health providers in the program's data system that used "some variation of Ms. Lam's name, the name of a member of Ms. Lam's family, or that pay state funds to a P.O. Box used by one of those name variations."

Owens, who interviewed Lam on two occasions, states that Lam submitted false invoices for patient services. Sometimes she used the names of deceased patients to file fake claims to those fake companies, seeking reimbursement from the Kidney Disease Program -- which functions "as a payer of last resort for severely debilitated patients including those seeking dialysis," Gansler wrote in the complaint.

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