Negligent Oversight Medical Cartel Embezzled Millions

Despite evidence of €500 million in fraudulent medical lab claims, Bavarian regulators and private insurers have failed to act against 10,000 physicians and medical personnel suspected of fraud, a Handelsblatt/Frontal 21 investigation has revealed.
Dodgy doctors and negligent insurance companies have robbed millions from their patients.

When officers of the Bavarian State Criminal Police wrote a letter to the Association of German Private Health Insurers in 2008 outlining details of a huge fraud involving as many as 10,000 doctors, they expected a response.

The police's special "Soko Labor" laboratory commission had spent years investigating the Labor Schottdorf Group, one of the largest pathology businesses in Germany. They strongly suspected that doctors, who are clients of Schottdorf, were claiming its specialized laboratory analysis as their own.

Fraud damages were estimated to be “in the tens of millions annually.”

The police officers suggested that the private insurer association inform its members. Five days later detectives also wrote to the agencies that administer the state health funds for civil servants. Their goal was to highlight the massive amount of financial damage done to patients, insurers and the state. They wrote that the injured parties might be entitled to “repayment claims amounting to around €500 million ($619.1 million).”

But the warnings fell on deaf ears.

Although the association informed its 48 members of the Schottdorf case, very few insurers have made any attempt to get their money back from the fraudulent doctors, according to a joint investigation by Handelsblatt and “Frontal 21,” a program on German state-owned television station ZDF.

“A maximum of ten insurers responded to the information letter,” a source said.

The Handelsblatt research shows that few insurers noticed the sheer amount of doctors submitting invoices for services they couldn’t charge for – until they received notification of the criminal investigations.

As a rule, the doctors submitting invoices had neither the correct training nor the technical equipment to perform such specialized blood analyses. But the insurance companies appeared not to connect the dots and detect the false claims.

At present, only Allianz and the Bayerische Versicherungsverband (Bavarian Insurance Association) have successfully reclaimed money. Others' efforts failed due to the Bavarian judiciary.

“We applied to the public prosecutor’s office in charge for permission to inspect the records back in 2008, but it was denied,” said Debeka insurance group spokesperson Gerd Benner. Without the records, Debeka was hamstrung.

Most of the other insurance companies did not even try to address the problem. State aid agencies also failed to react. Millions of euros the state could have recovered remain locked away in the bank accounts of shady doctors.

When Handelsblatt first reported on the laboratory affair on May 5 this year, the Bavarian judiciary had taken no action against most doctors suspected of fraud. On May 16, opposition parties in Bavaria began preparations to form an inquiry commission. It started its work in July. Members of the Bavarian parliament now are witnessing efforts to explain the inexplicable.

If they know that that system of false claims has been running since 2008, then the state agency would be obliged to undertake a detailed analysis. Rüdiger Pötsch, Former executive, Bavarian Association of Statutory Health Insurance Physicians

In Bavaria, for example, the State Office for Finance is responsible for the health insurance of civil servants. In testimony before the commission, a representative of the office said she had known nothing about the fraudulent billings being submitted. Yet records show investigators from the “Soko Labor” had informed the state agency of their suspicions on August 5, 2008.

The state agency refused to comment on why the warnings from 2008 were ignored.

The situation angers experts such as Rüdiger Pötsch, the former executive of the Bavarian Association of Statutory Health Insurance Physicians. “If they know that that system of false claims has been running since 2008, then the state agency would be obliged to undertake a detailed analysis,” he said.

Its antiquated systems has made things worse. “Monitoring in the agency is run over its computer system, but it is extremely outdated," said Mr. Pötsch. "No detailed statistics can be fed into it. Only amounts and dates can be recorded, the rest of the billings are thrown out.”

“They simply should have updated the computer system,” Mr. Pötsch added. “They could have written to the doctors with a request to substantiate their professional expertise and their technical equipment. Then, they could have found out what the doctors were allowed to invoice and what not.”

The net of suspicion now encompasses the law, the insurance companies, the state-aid administration agency and Bavarian politics. And the key question remains: why have 10,000 doctors suspected of fraud have gotten off scot-free?

At the center of the probe is Bernd Schottdorf, the Augsburg millionaire and laboratory magnate at the time. Maneuvering around a decision by the German Federal Supreme Court, he created a settlement system, used by thousands of his customers, to illegally profit from invoiced laboratory work, mainly at the expense of private patients. Mr. Schottdorf denies any wrongdoing.

Bavarian Minister-President Horst Seehofer has known about these events since 2010, but nothing has happened.

The fact that he went unpunished is primarily due to the Bavarian legal system. Even while the laboratory commission was making good progress in its investigations and one of the investigated physicians was sentenced to three years confinement in a pilot lawsuit in 2010, the state prosecutor’s office in Augsburg undid the success.

Long before the pilot lawsuit came to a conclusion, prosecutors dropped 151 of the criminal proceedings including one against Mr. Schottdorf. The other 9,800 cases lapsed over time. All of this occurred with the knowledge and consent of the attorney general’s office and the ministry of justice.

Bavarian Minister-President Horst Seehofer has known about these events since 2010, but nothing has happened, even after the prison sentence against the guilty doctor in the pilot lawsuit was upheld by the German Federal Supreme Court in 2012.

The insurance companies and politicians should have snapped to attention. After all, the PKV’s scientific institute had investigated other problems in the laboratory industry, which had long been suspected of sucking up money for unnecessarily requested blood tests. One of the studies from 2009 concluded that it could not be justified “that resident doctors can realize a considerable part of their extra income by extensively requesting laboratory services.”

“One look at the invoices would have been enough to determine that they were submitting false claims,” said Rudolf Seuffer, a specialist in laboratory medicine, microbiology and biochemistry.

But the insurers apparently did not use this information to improve how they processed their invoices. Experts such as Ole Ziegler, a medical-law attorney, consider this shoddy handling of customers’ money as a breach of trust.

The companies, meanwhile, have argued any problems were unintentional and caused by their own incapability. Allianz, for example, told “Soko Labor” they are not in a position to trace and monitor whether and to what extent they should refuse reimbursement.

Axa reacted similarly. A detective in the criminal investigations office noted on August 11, 2008, “Mr. S. of Axa health insurance submitted that his insurance company has no search functions available of any kind to filter out which invoices in laboratory services were not reimbursed.”

Munich-based Axa is tight-lipped about the investigation and, when asked, has refused to reveal how much money it collected.


Sönke Iwersen is the editor-in-chief of Handelsblatt Live and heads up the investigative team. Jan Keuchel is an investigative journalist specializing in judicial processes. To contact the authors: [email protected], [email protected].