RAO Davao City

United States Military Retiree Activities Office Davao City, Philippines

TRICARE/CHAMPUS FRAUD UPDATE 19 June 2008

Posted by Service Officer on June 19th, 2008

A former health care executive was sentenced 17 JUN to five years in prison for helping his Philippines-based company swindle nearly $100 million from the U.S. military health insurance program. Thomas Lutz, 41, said in federal court he took responsibility for the six-year scheme in which Health Visions Corp. bilked $99.9 million from the military’s Tricare program through inflated and fraudulent claims. U.S. District Judge Barbara Crabb said the five-year sentence was modest given the extent of the fraud, but it was the longest she could impose under Lutz’s plea deal. Health Visions and Lutz were initially charged in a 75-count indictment in 2005. He pleaded guilty in 2006 to a single count of conspiracy to pay kickbacks and agreed to cooperate with prosecutors, a deal Crabb called “a huge break” for Lutz. “It’s just horrifying that you were able to take as much money as you did,” Crabb told Lutz. Prosecutors said the company routinely inflated claims by more than 230%, operated a phony insurance program and billed for medical services never delivered.

 

In April, Crabb ordered Health Visions to pay $99.9 million in restitution. Under her order, the company must sell all of its assets, including land, hospitals and office buildings, within 10 months. She said Lutz would be responsible for paying the remainder, including at least 25% of his income once he is released from prison. Crabb gave Lutz until 18 MAR to report to prison. Prosecutors asked for the nine-month delay so Lutz could help the government recover as much money as possible from the company. Formed in 1997, Health Visions owned and operated hospitals and clinics in the Philippines and billed Tricare on behalf of other health care providers. The company served thousands of U.S. military retirees living in the Philippines, where bases were located until the early 1990s. The company was reimbursed $163 million by Tricare between 1998 and 2004, and prosecutors believe at least $99.9 million of that was fraudulent. Lutz, an American citizen, read a brief statement in which he took full responsibility for his company’s actions. “I would like to apologize to the Department of Defense,” he said. “I am truly sorry for all those who have been affected.

Editors Note: This magnitude of this fraud was allowed in part because of the failure of the U.S. government to provide sufficient transportation funds to DCIS over six years to investigate repeated reports by Tricare users of what was going on since 1997. After 3 to 4 years many retirees in the Philippines just gave up on their attempts to report this fraud in the belief that Tricare officials and WPS for whatever reasons did not want to pursue stopping it. Now, in part as a result of these losses, TMA has initiated actions that will result in all Philippine Tricare users having to effectively pay higher Tricare fees than those in CONUS. This they are allowed to do by lowering the allowed amounts that can be reimbursed to Philippine providers. The net result of this is that in addition to the 25% copay, retirees will also have to pay their providers the difference between what Tricare allows and what is charged to Philippine citizens.

[Source: Air Force Times Ryan J. Foley AP article 18 Jun 08 ++]

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