FeatureNOVEMBER 16-30, 2011 NewsCentral 3

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BY TRAVES J. TRITTENStars and Stripes

Retired Master Chief Bruce Wright began h a v i n g s e v e r e stomach pains in September.

After two trips to a Philippine hospital near his home in Angeles City, doctors gave him a troubling diagnosis

His gallbladder had grown polyps and could become cancerous. Filipino doctors wanted to remove it the next day.

Wright, 50, said he signed a waiver and refused to have the operation because he could not afford to pay the upfront surgery costs — a practice Tricare requires only in the Phillippines — despite having earned medical coverage after 26 years in the Navy.

“I live month to month. It’s the reason I’m over here; I can live month to month,” he said. “I have to put that [operation] off until I can collect enough money.”

The demand for upfront payment -- part of Tricare’s attempt to crack down on rampant fraud -- has led to a dangerous burden for veteran retirees, they say.

“A lot of guys know they’re sick but they won’t go to the hospital because their money is slated for other things,” said Jim Tyler, director of the Subic Bay Retired Activities Office in Olongapo, which supports local veterans. “They won’t find out what’s wrong and they die.”

Tricare acknowledges that the Phillipines system is one of its most dysfunctional and troubled — so much so that the agency decided in September to scrap the program and start over, according to interviews with beneficiaries, a Department of Defense investigation and Tricare’s own assessments.

Most of the current problems are rooted in fraud that began to surface more than a decade ago when 11 beneficiaries and providers were convicted of bilking Tricare and U.S. taxpayers out of $1.2 million. Then, in 2008, a Philippine hospital was shut down after cashing in more than $100 million in fake Tricare claims.

Today, the Phil ippines remains the top focus of Tricare’s fraud department, which has seen billed health care services balloon from $15 million in 1999 to $59 million in 2009, even as the number of beneficiaries remained the same, according to the agency.

T h e s y s t e m i s a l s o hampered by out-of-date provider lists, access issues and repeated Tricare rejection of routine claims, including emergency care, according to some among the 8,000 retirees and dependents who are covered.

Michael O’Bar, deput y ch ief of T r icare pol ic y and operations, said the P h i l i p p i n e s h a s b e e n par t icularly chal leng ing because it has one of the largest overseas ret iree populations spread across remote areas and a wide array of health care providers that are difficult to monitor.

“ W e h a v e h a d a n ongoing, large volume of c o m m u n i c a t i o n w i t h b e n e f i c i a r i e s i n t h e Philippines,” he said. Tricare v iews the exper imental system “as a significant means for us to address a number of those concerns.”

In the coming months, Tricare will hire a contractor to create the network of hospitals that will charge the standard 25 percent co-pay to retirees and bill the agency for the remaining 75 percent of Tricare-covered medical care.

Retirees will be required to use those facilities before claiming benefits, although O’Bar said the agency would offer waivers in some cases, including emergency care and treatment that began before the network’s creation.

O’Bar said the network should be up and running by next spring. It will remain in place for a three-year trial period and then be reviewed by Tricare.

It is unclear which hospitals will be included and which areas of the Philippines will have providers, according to O’Bar, and that concerns some retirees.

Chad Clark, a retired 1st class petty officer who lives in Jaen, said retirees are

concerned that remote areas such as Cebu, Davao and Mindanao could be too far outside a closed network to access providers.

Clark lives about 60 miles north of Manila. He said he also worries the new system will not provide a practical way to get covered treatment for his insulin-dependent diabetic wife, who is a Tricare dependent.

“I need something relatively close that I can use,” Clark said. “If they go to this closed system, I think it is going to be the biggest mistake they will ever make.”

OUTDATED LISTSTricare has tried to crack

down on fraud but the effort has often fallen short or come at the expense of retirees.

Around the former U.S. Navy base at Subic Bay, scammers often attempt to recruit dependents or widowed spouses to f ile fraudulent Tricare claims, and clinics offer retirees free health care in return for filing inflated claims, said Jerry Minor, a retired Navy corpsman and volunteer administrator at a small cl inic that ser ves some veterans.

“They are trying to fight the fraud and I understand that. I see it day after day,” he said. Retirees “don’t know who to trust or where to go.”

The Philippines is the only place in the world where Tricare requires all doctors to be certified through an on-site visit and anti-fraud background check before paying out claims, according to the agency.

But its overseas contractor, International SOS, failed to conduct proper checks on Filipino doctors — medical credentials were overlooked and physical addresses not confirmed — in nearly 45 percent of examined cases, according to a September report by the Department of Defense Inspector General.

“As a result … they do not have adequate assurance that ‘cer t i f ied’ medical providers actually exist or that beneficiaries always receive medical care from licensed medical professionals at accredited facilities,” the

report found. Tricare said it modified its contract with ISOS in February to improve the certification process and now requires proof that doctors are educated on Tricare policy and anti-fraud measures.

The agency “has also established regular site visits to the contractor’s office to conduct performance reviews of the certification files,” it said in a written statement to Stars and Stripes.

The agency’s list of certified providers posted online is outdated, inaccurate and lacks telephone numbers and, in some cases, medical specialties, said Ken Fournier, a retired chief petty officer with 20 years of Navy service who lives in Palawan.

“We get a lot of claims denied because the provider is not certified,” said Fournier, who worked as a private investigator before retiring and has since helped other retirees with Tricare claims. “We were working off an outdated provider list at all times.”

Jim Houtsma, a retired Army 1st sergeant in Naga City, spent 41 years working in mil itar y health care management and now helps fellow retirees works through a private online support group to help fellow retirees struggling to get Tricare benefits.

He sa id t he cer t i f ied prov ider l ist and other at tempts by T r icare to eliminate fraud created a separate and unequal system of military health coverage in the Philippines.

Even when retirees use

certified doctors, they are routinely required to provide multiple proofs of payment for medical bills — well beyond what is normally required of Tr icare benef ic iar ies elsewhere, Houtsma said.

“We are the only beneficiaries that are required to provide not only receipts to show we paid for the care but also that we had enough money to pay for the care by showing we withdrew the money from a bank, or proof we borrowed the money,” he said.

Rejected claimsThe doctor certification

requirement has also caused Tricare to reject claims made by retirees for emergency care in the Philippines — an unstated practice that appears to conflict with the agency’s global policy on emergency medical treatment, according to Houtsma.

“We have addressed the issue of emergency care in the Philippines [with Tricare], pointing out that normal restrictions on providers are waived in the rest of the world, including the U.S. and overseas, and should apply here as well,” Houtsma said.

“The best we have gotten from them is they will take our recommendation under advisement, but that was some time ago and probably intended to put us off with the hope we would forget it.”

Walter Graue, who retired from the Air Force after 21 years of service, said he never saw the Filipino emergency room doctor working to save his life at Our Lady of Mount Carmel Medical Center near his home in the Angeles City.

Graue, 73, was rushed to the hospital in an ambulance with a blocked artery in December 2009 and was unconscious when he was wheeled into the ER.

It was only later, following h i s r e c o v e r y, t h at he discovered Tricare refused to reimburse the emergency room doctor’s fee.

M e d i c a l d o c u m e n t s provided by Graue show the agency’s Wisconsin-based contractor, which reviews all beneficiary claims, rejected the claim a year after the hospital visit because the doctor had not been certified.

“It was an emergency — I was near death,” Graue said.

When questioned about the denial of emergency claims in the Philippines, Tricare said emergency care “never requires preauthorization” and “waivers for emergency care rendered by non-approve d prov ider s or facilities” will be considered after the fact.

Meanwhi le, the many difficulties with Tricare have left retirees disillusioned and uncertain about future fixes.

Bruce Wright said the health coverage he was supposed to get with his Navy retirement has not materialized. In 2010, before his gallbladder condition, he broke a collarbone and fought with Tricare over $1,000 in medical expenses, which he said has never been reimbursed.

“ Yo u ’ r e f r u s t r a t e d , disgusted,” Wright said. “Now, not only do I have to pay for [medical care], I can’t get back my fair share.”m

Tricare scraps troubled system

Air Force retiree Walter Graue recovers in the Philippines following an emergency heart operation in 2009. Grau was unconscious for much of his life-saving treatment but later discovered his military Tricare health insurance would not cover the operation’s physician fee because the doctor had not been certified, a measure put in place by Tricare to cut down on rampant health care fraud. PHOTO COURTESY OF WALTER GRAUE

Tricare acknowledges that the Philippines system, particularly in Subic and Clark,

is one of its most dysfunctional and troubled — so much so that the agency decided in September this year to totally scrap the

program and start all over to address fraud and military retiree care

BY NEWS CENTRAL RESEARCH TEAM

Erik C. Peterson, Unit-ed States Attorney for the Western Dis-trict of Wisconsin made the revelation

on how Thomas Arthur Lutz, the administrator for Health Visions Corporation (HVC) defrauded the federal TRI-CARE program with millions of dollars of U.S. government health funds.

A copy of the statement released by the U.S. District Court in Madison, Wisconsin was obtained by News Central.

Peterson made the revela-tion based on the sworn affi-davit of Lutz, submitted before the U.S. District Court, who pleaded guilty to 33 counts of fraudulent acts.

TRICARE, formerly known as CHAMPUS, is the Depart-ment of Defense’s worldwide health care program for active duty and retired uniformed services members and their

families. The charges were brought in the Western Dis-trict of Wisconsin because Wisconsin Physicians Service, the fiscal intermediary which processed and paid these al-leged fraudulent claims, is lo-cated in Madison, Wisconsin which is in the Western Dis-trict of Wisconsin.

Lutz pleaded guilty to his di-rect participation in a conspir-acy with Health Visions HVC and a physician in the Philip-pines to double bill TRICARE and kickback the inflated pay-ments to HVC.

Lutz stipulated, under oath, to a statement of facts that in-dicated, among other things, the following:l In August 1998, Thomas

Lutz, in his capacity as the Ad-ministrator of HVC, met with representatives at a medical center in Olongapo City. Dur-ing that meeting, Lutz offered to refer HVC patients to the medical center if HVC would receive a 50% discount. When the representatives balked at

the size of the discount, Lutz instructed the medical center representatives to inflate their bills by 100% and pay the in-flated amount to HVC.

Lutz wrote out on a piece of paper how two bills should be prepared for every HVC pa-tient; one bill should be the real bill, the second bill should be the inflated bill with every line item doubled in price. In exchange for this arrange-ment, Lutz promised that the medical center would become a preferred provider for HVC patients and would receive im-mediate payment for services provided to HVC patients. l On or about October 1,

1998, Lutz had another meet-ing with the same represen-tatives at the medical center. At this meeting, he produced a letter on HVC letterhead, dated October 1, 1998, to the medical center. The letter de-tailed an agreement between HVC and the medical center where HVC agreed to refer its patients to the medical cen-

ter in exchange for “a rebate of 50% back to Health Visions Corp. . . .

The rebate will be paid to Health Visions Corp. immedi-ately after payment received by the [medical center].” The letter is signed by Lutz as the Administrator for HVC.l The arrangement between

HVC and the medical center lasted from October 1, 1998 to June 20, 2000. During this time frame, HVC submitted to Wisconsin Physicians Service (WPS), a TRICARE subcontrac-tor in Madison, Wisconsin, ap-proximately 105 claims involv-ing HVC patients who received medical care at the medical center.l HVC employed billers who

prepared the claims submitted to TRICARE. HVC instructed its billers to inflate the amounts listed on the hospital bills by at least 233% when entering the numbers on the TRICARE claim. l HVC also instructed its

billers to hide denied medica-

tions on a hospital bill by mov-ing those costs to “profession-al fees” on the TRICARE claim. l HVC also instructed its

billers to create false docu-mentation to backup fake medical diagnoses that were not on the hospital bills, but would be added to the TRI-CARE claims. This false doc-umentation included fake let-ters with pasted on letterhead and doctor signatures.l HVC directed WPS to send

the payments for all the TRI-CARE claims to a lockbox ac-count in the name of HVC at Bank of America in Columbia, Missouri. When the account reached over $1,000,000, Lu-tz's brother directed Bank of America in Missouri to wire transfer funds from the HVC account at Bank of America to an HVC bank account at Unit-ed Cocoa Planters Bank in Ma-nila, in $1,000,000 increments. l During the years 1998

through 2004, WPS paid over $163,380,648 in total TRICARE claims submitted by HVC. Of

this amount, approximately $144,618,061 came from third-party billing by HVC, and $18,762,587 came from direct billing from HVC owned hos-pitals. The charges against Lutz were the result of an in-vestigation conducted by the Department of Defense Office of Inspector General -Defense Criminal Investigation Ser-vice, and the U.S. Postal In-spection Service assisted by agents in the Philippines with the U.S. Naval Criminal Inves-tigation Service, and Regional Security Officers with the U.S. State Department Diplomatic Security Service.

The prosecution of the case has been handled by Assis-tant U.S. Attorneys Peter M. Jarosz and Daniel J. Graber. Chief U.S. District Judge Bar-bara B. Crabb sentenced Lutz with a statutory maximum penalty of each case five years in prison, a $250,000 fine, and three years of su-pervised release after serv-ing his prison term. m

The untold story of Subic Tri-care program