Fraud Scheme Billed Medicaid for Hospitalized Patients
Adult day care centers billed Medicaid for hospitalized patients in a $127 million fraud scheme.
4 min read
In a shocking revelation, adult day care centers in Flushing, Queens, billed Medicaid for services that patients could not have received while hospitalized. The fraudulent scheme, which spanned over a decade, was exposed through the guilty plea of Daniel Lee, a program director at Happy Life and Royal Adult Day Care Center. Lee pleaded guilty on November 9 to a $127 million Medicare and Medicaid fraud scheme, marking a significant step in the Department of Justice’s ongoing efforts to combat healthcare fraud.
A Decade of Fraud
Lee’s scheme involved cash kickbacks to induce enrollment and related pharmacy billing for unnecessary prescriptions. His actions were part of a broader conspiracy to defraud Medicare and Medicaid by submitting fraudulent claims for services that were never provided. The fraudulent payments consumed resources that were intended to support individuals who genuinely needed care, highlighting the severity of the exploitation of public health programs.
“For over a decade, Daniel Lee helped run a brazen kickback scheme that stole from Medicare and Medicaid through fraudulent claims for medically unnecessary prescription drugs and social adult day care services that were never provided,” said Assistant Attorney General Colin M. McDonald of the Justice Department’s National Fraud Enforcement Division. “Yesterday’s guilty plea underscores the Department’s commitment to holding accountable those who exploit federal health care programs for personal gain.”
Administrative Failures Exposed
New York’s own auditors have documented substantial weaknesses in the system. A February audit, covering January 2019 through October 2024, identified more than $285 million in questionable payments for services dated after providers had been terminated from at least one managed long-term care network. Some providers who were dropped for cause continued receiving payments through other plans, indicating a clear failure in the administrative oversight process.
At three centers auditors visited, nearly 8,000 encounter claims, totaling $672,147, lacked supporting sign-in logs. Auditors also found that state rules and health officials hadn’t specified sufficient documentation to support billing. These findings underscore the need for stronger monitoring and recovery of improper payments where appropriate.
Public Responsibility and Accountability
A legitimate patient can struggle to get a service approved, while a dishonest provider collects money for care never delivered. Every fraudulent payment consumes resources entrusted to programs serving people who need help. Lee’s guilty plea establishes criminal responsibility, but it also leaves a public responsibility: to explain which controls failed and how officials will prevent the next operation from collecting for years.
“Yesterday’s guilty plea marks the end of the defendant’s long running and staggering fraud against the Medicare and Medicaid programs,” said U.S. Attorney Joseph Nocella Jr. for the Eastern District of New York. “Our Office is working diligently to uncover and prosecute social adult day care fraud schemes to protect the vital public benefit programs that so many Americans rely on.”
Improving Systemic Controls
A program that pays for attendance needs dependable attendance records. Requiring providers to show that someone received a service is a basic obligation of accepting public money. Officials should be able to explain how they check claims against hospital stays, investigate conflicts, and stop repeat violations.
State auditors merit credit here. The comptroller’s office referred findings and worked with law enforcement. Health officials also described efforts to strengthen oversight. The record supports demanding better controls while recognizing the people who helped expose wrongdoing.
Practical Measures for Prevention
Prosecutors can punish fraud after investigators reconstruct the transactions. Administrators have a separate job: making fraudulent payments harder to collect in the first place. Both duties belong in any credible promise to protect Medicaid.
The test should be practical. Can a billing reviewer identify overlapping hospital dates? Does a provider’s removal trigger scrutiny across the plans still paying it? Are unsupported claims corrected and improper payments recovered? Public officials should publish measurable results so taxpayers can judge whether announced safeguards actually work.
The Need for Transparency
Announcing a policy is only the beginning. People who depend on adult day care need reliable services. Families need confidence that a loved one’s attendance and care are being recorded accurately. Taxpayers need officials willing to explain failures without hiding behind the program’s size or complexity.
Lee will face a judge. The officials responsible for overseeing these payments should face questions just as plainly. What changed, who must enforce it, and how will the public know it’s working? A guilty plea closes one chapter, but preventing the next decade of theft requires answers.
Source: PJ Media
