Medical aids: who's scamming whom?

Doctors and pharmacists say evidence is being fabricated to strong-arm money out of them for purported fraud.

For years medical aid providers have claimed that medical practitioners were robbing them blind through various intricate medical aid fraud scams – fraud that is often blamed for the above-inflation increases that members need to swallow on a yearly basis.

But now a number of doctors are claiming that they are the ones being cheated, extorted and left bankrupt by the very same medical insurance industry, as it attempts to claw back losses that amount to a financial black hole – the industry’s annual losses to fraud are estimated at anything up to R20 billion, depending on the source.

The medical aids’ primary weapon, it emerges, is to pressure accused doctors to sign an acknowledgement of debt (AOD) committing to pay back the money they’ve allegedly stolen.

An AOD seen by Noseweek, that was drawn up by Discovery Health (Pty) Ltd, allows the debtor no slack, even dictating that the debtor cannot raise certain defences in future litigation to get out of the debt, including errore calculi where they could claim the medical scheme made an error in its calculations as to what is owed.

It also states that “by signing this agreement you are exercising your own free choice without inducement or coercion”. Which by several accounts does not quite describe the real situation.

Several practitioners believe they had little choice but to sign the AOD or face financial ruin and huge reputational damage. In one such case Durban pharmacist Previsha Harripersad says she has been fighting Discovery since 2013 over two AODs totalling R1,250,000, which she claims she was forced to sign “under duress”. She claims the “evidence” against her is a complete fabrication and maintains she has been financially ruined by the AOD policy.

However Discovery Health CEO Dr Jonathan Broomberg says Harripersad is telling porky pies. 

Meanwhile, the National Health Care Professionals Association (NHCPA), a body of black medical practitioners initially created to deal with challenges faced by its members with medical aids, has stated they are being unfairly targeted, even racially profiled as automatic suspects by the medical scheme forensic departments, and have lodged papers with the North Gauteng High Court in an attempt to force the medical schemes to rethink their approach in dealing with allegations of fraud. They are asking that they be seen as innocent until proven guilty, not the reverse, as now appears to apply.

The types of medical aid fraud keep on evolving, but broadly speaking its purpose is to make sure the medical schemes pay for something or someone they do not normally cover, or to extract undue money out of the schemes for purposes of self-enrichment.

To counter this crime the insurers have devised complex algorithms to detect anomalies within the supply chain and when irregularities appear they are flagged for further inspection.

They might then send in a “probe” armed with a secret camera to spy on the alleged fraudulent practitioner by pretending to be a real client. The probe will try to persuade the practitioner to commit a fraudulent act, as the computer suspects is his or her custom.

The insurer then uses the video evidence and data they’ve collected to make the medical practitioner sign an AOD rather than pursuing criminal charges.

Discovery Health CEO Jonathan Broomberg accuses pharmacist Previsha Harripersad of lying

The AOD is not for the debt that the administrator can prove through the evidence gathered by the probe, but rather an extrapolation of what was thought to have been fraudulently claimed over a period of time. For instance Medscheme Holdings (Pty) Ltd, which administers 18 schemes including the Government Employees Medical Scheme (GEMS) which is the second-largest in the country after the Discovery Health Medical Scheme, quantifies the value of the loss over a three-year period. 

If a doctor refuses to sign the AOD and disputes the allegation of fraud or fails to service the AOD timeously, the administrator freezes all claims by that practitioner from all the schemes it administers. This includes freezing claims made by members who paid cash upfront at that facility.

And in an industry where the market is concentrated between two big administrators, falling out with them can instantly destroy a practice or business. Two such players are Medscheme and Discovery Health. Both Medscheme and Discovery are respondents in the NHCPA’s application to have section 59(3) of the Medical Schemes Act (which allows medical aids to withhold funds if they suspect fraud) deemed unconstitutional.

Dennis Sibuyi, a Sandton-based lawyer representing the NHCPA, said the manner in which the administrators are using the AODs to recoup funds could easily be construed as extortion.

“We are not saying fraudulent medical practitioners mustn’t be prosecuted. We are just saying that due process must be followed. For instance if the doctor has submitted claims of R1 million and the medical aid scheme suspects R100,000 of this could be fraudulent, then they must still pay the R900,000 and obtain a court order empowering them to retain the rest. Right now they just unilaterally withhold the entire sum under the protection of section 59(3) of the act, which we deem is unlawful,” said Sibuyi.

A date for the application has yet to be set.

Founder and secretary general of NHCPA Dr Prudence Buthelezi said if doctors refuse to sign the AODs presented by a scheme they are told “you won’t get any clients from the medical aid” and in some cases this has led to colleagues’ taking their own lives.

“I am fighting the use of probes that are often conducted by untrained persons who attempt to entrap the practitioner. I’m also fighting the extortion [and AODs]. The schemes are powerful but we are raising the funds to take this matter to court. We buried a colleague in the Eastern Cape in December who took his life because of the stress this issue has caused,” said Buthelezi. In the insurers’ quest to root out fraud they demand access to patient files. “This violates patients’ confidentiality and if you don’t give them the file, including historical information going back several years, they will stop your payment,” said Buthelezi. 

Represented by ENS, Discovery’s forensic chief Marius Smit argues in an 87-page replying affidavit that NHCPA’s claim that section 59(3) of the Act is unconstitutional, is “nothing more than an empty assertion which is wholly bereft of any fact”.

Since 2014, Discovery Health has reportedly recovered R1,680 billion in fraudulent claims of which a large proportion would have been recovered based on AODs.

“The use of AODs to recover fraudulent payments from medical service providers has been determined lawful by the Supreme Court of Appeal,” said Smit. The use of “probes” was lawful and medical aids had a duty to check patient records when data they received needed to be checked and verified against the doctor’s file, he said.

But as Harripersad has found, even when the “evidence” presented by the medical scheme to make her sign an AOD does not stand up to independent interrogation, wiggling out of the AOD is nearly impossible.

She signed two AODs, one of R1m and another of R250,000 in relation to her two pharmacies; Main Pharmacy and Hill Street Pharmacy respectively, both based in Pinetown. She has since closed both businesses. She believes that because the South African Pharmacy Council cleared her of wrongdoing, she shouldn’t have to repay the debt.

Discovery Health reported her to the council in 2013 and presented the body with the evidence they used to sanction her. But in February 2015 the council Registrar’s Complaints Review Panel (RCRP) found “in respect of the complaint lodged against [Harripersad]” that there is “no further action due to insufficient evidence or unprofessional conduct”. They considered the matter closed.

Discovery’s Broomberg, said in a written response to Noseweek, said the SAPC ruling doesn’t “change the fact that Harripersad’s pharmacies, by her own admission and backed up by our clear evidence, submitted fraudulent claims”.

“In our view, the SAPC should explain how it can allow professionals which it regulates to get away with criminal conduct of this kind,” said Broomberg.

Harripersad said no solid evidence had been presented to her as to how Discovery arrived at the total AOD figure of R1.25m. Her pharmacies were, according to Discovery, caught on camera charging flip flops, sex stimulants, snacks, nappies and baby formula to a medical aid account and falsely claiming the client bought vaginal rash applicators instead. But Harripersad claims they’ve never shown her a receipt from the store.

Broomberg said Harripersad had  “offered to repay R1,250,000” and the settlement amount was “based on her calculation of how much she estimates she gained in fraudulent claims”. He said Discovery did not extrapolate the settlement.

“Harripersad freely admitted to the dispensing of non-claimable items, expressly, and said that “this is what was needed to be done to survive in Pinetown”. Ms Harripersad then sent an email to Discovery Health, thanking Discovery Health for resolving the matters,” said Broomberg.

Harripersad denies this exchange.

In December 2017 Harripersad filed papers before the High Court in Durban for an urgent interdict against the R1m debt for Main Pharmacy and to force Discovery Health to settle claims at her King Edward Pharmacy in Umbilo, Durban. However it was dismissed as not urgent.

In her founding affidavit she claims she was forced to sign an acknowledgement of debt while locked in a windowless “interrogation” office while several months pregnant, at Discovery’s Sandton HQ.

In an emotional affidavit Harripersad wrote: “This inhumane, merciless torture of an eight-months’ pregnant woman by Discovery Health’s representatives is gruesomely shocking and unendurable.  The only way to get out of there was to sign this thumb-sucked, extortive acknowledgement of debt with a capital sum of R1m, lacking any commercial purpose.”

This is not the first time that Harripersad has used the courts to try to get out of the AOD debt. In January 2015 she raised a similar defence of “under duress” when Discovery successfully obtained a provisional sentence against her for R250,000 owed to the medical insurer through an AOD signed regarding her Hill Street Pharmacy.

Heard at the Pinetown Magistrate’s Court, Magistrate S Hlatshwayo was brutal in his judgment, claiming it was “crystal clear” the “allegations of duress are far fetched” and he stated that even if she was threatened with arrest, “there is nothing morally repulsive or legally wrong with their respective warnings, call them threats if you will, that they will press criminal charges against the defendant unless [she] pays back [the money]”.

A second provisional sentence was obtained on October 2015 against Harripersad in the High Court, Durban for R1m. But Harripersad is defiant. “I refuse to pay them the money. I did not commit the acts of fraud they are claiming. If I committed a crime then why have they not laid criminal charges against me?”

Asked this question, Broomberg responded: “We have had extensive prior experience in reporting similar matters to the SAPS and these matters are simply not followed up. For this reason, we did not report this matter to the SAPS.”

By 29 April 2013 Discovery informed Harripersad that unless she started making monthly payments of R23,300-a-month, as agreed in the two AODs “as of 8 May 2013, no further claims will be paid to your practice, neither will we reimburse your Discovery patients who pay your practice directly”. 

She has yet to service the debt and judging by her poorly stocked pharmacy in Umbilo, visited by Noseweek, there doesn’t look like there is much in the kitty.

In the six months ended December 2017, Discovery Health’s income was R276 billion, and its after-tax profits for the same period rose 30% on the previous year, to R2.7bn.

Discovery directors have not always been squeaky clean either. Fifteen-odd years ago the entire top hierarchy, including then-CEO Adrian Gore; executive director Barry Schwarzberg; Aubrey Cimring; Neville Koopowitz; Alan Pollard; Shaun Matisonn and Dr Maurice Goodman all used an “illegal offshore structure” to hide their earnings from the taxman (see
noses 92&95). – Ed.

Share this article:

Reader's comments

Like to add your own comment ? Please click here to subscribe - OR -


While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither the authors nor the publishers of this website bear any responsibility for the consequences of any actions based on the information contained therein.