In October 2003, owners of L&M Diamond Jewelry Optical were convicted of stealing $2.98 million from Medi-Cal by filing claims for eyeglasses that were lost, stolen or destroyed. They billed for as many as 12 pairs of glasses per year per person. Owner Mila Sigal was sentenced to three years in state prison and ordered to pay $2.88 million in restitution, in addition to $100,000 she had already paid.

How did they get away with this between 1995 and 2001?

Aparently they found a loophole in the Medi-Cal system. Policies are not always implemented correctly in claims payment systems, and standard reports may assume that they are. This case was found not by the claims payment system or fraud detection reports. It was found through a beneficiary survey that revealed that patients had not received glasses that L&M billed in their names.

Even if you have policies that should prevent this kind of abuse, you need to check that nobody is abusing a loophole in the way your claims payment system implemented the policies. You should also run reports that check for providers who are routinely billing right up to the allowed limit. If most providers usually do not bill up to the service limit, but a few almost always bill up to the service limit, this could indicate abuse. Check with their patients to see if the services were actually delivered.

In a white-paper, “Algorithm for Eyeglasses Fraud,” I describe one way to find fraud like this. E-mail me, and I’ll send you the article.