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Assembly to Consider Legislation to Crack Down on Medi-Cal Fraud

Crime: Losses are estimated at $1 billion a year. Bill would require providers to post $25,000 bond and bar abusers from participation.


Declaring war against Medi-Cal fraud, state officials Thursday said that legislation under consideration in Sacramento would help prevent the growing white-collar crime that costs California an estimated $1 billion a year.

"This is enough money to provide health care for every uninsured child in the state of California," said Assemblywoman Gloria Romero (D-Los Angeles), who has introduced AB 784.

Under the proposal, which will be discussed before the Assembly Health Committee on Tuesday, the state Department of Health Services would have the authority to forbid providers from participating in the Medi-Cal system if they have abused it in the past, officials said. Providers would also be required to put up a $25,000 bond as collateral against overpayments. Romero and state Controller Kathleen Connell spoke in front of the offices of Sol Medical Supply in Monterey Park, a firm that closed after Connell's office withheld a portion of Medi-Cal payments in February.

Connell's office acted after the small storefront business billed $100,000 in Medi-Cal claims in three months, raising suspicions of state auditors. Sol refused to submit receipts for the medical supplies allegedly purchased for its customers, according to Connell's office.

The state controller's office believes business owner Karine Atikyan has family and business ties to two other Medi-Cal providers under investigation for possible fraudulent claims. Angel Medical Supply in Montebello is owned by Naira Dallakyan, the sister-in-law of Atikyan, said a spokesman for Connell. Samuel Ovakimian, owner of V&S Medical Supply, also has business ties to Atikyan, according to Connell's office.

Audits in 1997 of Angel and V&S showed that the two providers, which have since closed, had submitted $800,000 in suspected improper claims, Connell's spokesman said.

Atikyan, reached at her home in Montebello, referred questions to to her sister because she said she spoke limited English. Her sister, who identified herself only as Kristine, said Atikyan temporarily closed her business because her Medi-Cal payments were halted. Atikyan conducted a "100% normal" business, her sister said, and denied any claims of fraud.

Atikyan's attorney, Daniel Behesnilian, declined comment.

The FBI is investigating the three providers, Connell said Thursday.

Current state law lacks the necessary tools to prevent and crack down on Medi-Cal fraud, Connell said. "They can grow out of one operation that we find is fraudulent into another one the next day," she added. In the last three years, the controller's office has audited more than 200 Medi-Cal providers. Of those, about 70% were referred to law enforcement agencies for prosecution, she said. The audits showed that $350 million was lost to fraud, according to Connell.

A joint task force has been established by the offices of the controller, the state attorney general and the U.S. attorney general to crack down on Medi-Cal abuse.

The state legislation calls for the department to license activities of people who receive per-patient referral fees for those they send to Medi-Cal providers.

The law would give auditors greater legal authority to access records that validate payments.

"Existing regulations do not provide state agencies with sufficient tools to uncover or prevent fraudulent billings," said Romero. "To put an end to this abuse, we must have the enforcement powers to investigate and to prosecute suspicious cases."

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