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LINCARE BECAME A MULTIBILLION-DOLLAR MEDICARE SCOFFLAW
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Peter Elkind
November 13, 2024
Pro Publica
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_ Lincare, the nation’s largest distributor of home oxygen
equipment, has repeatedly violated Medicare rules and probation
agreements. _
Lincare billed Neil Bauer, who struggles to breathe because of
asbestosis, for seven years after the charges for his oxygen device
were supposed to stop., Credit: Rebecca Stumpf, special to ProPublica
For Lincare, paying multimillion-dollar legal settlements is an
integral part of doing business.
The company, the largest distributor of home oxygen equipment in the
United States, admitted billing Medicare
[[link removed]]
for ventilators it knew customers weren’t using (2024) and
overcharging Medicare
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and thousands of elderly patients (2023). It settled allegations of
violating a law against kickbacks
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(2018) and charging Medicare for patients who had died (2017). The
company resolved lawsuits alleging a “nationwide scheme
[[link removed](Lincare).,%2Dyear%20company%2Dwide%20CIA.]
to pay physicians kickbacks to refer their patients to Lincare”
(2006) and that it falsified claims that its customers needed oxygen
(2001). (Lincare admitted wrongdoing in only the two most recent
settlements.)
Such a litany of Medicare-related misconduct might be expected to
provoke drastic action from the Department of Health and Human
Services, which oversees the federal health insurance program that
covers 1 in 6 Americans. Given that most of Lincare’s estimated $2.4
billion in annual revenues are paid by Medicare, HHS wields tremendous
power over the company.
Sure enough, as part of the 2023 settlement, HHS placed Lincare on the
agency’s equivalent of probation, a so-called corporate integrity
agreement. The foreboding-sounding document includes a “death
penalty” provision: Any “material breach” of the probation
agreement, which runs for five years, “constitutes an independent
basis for Lincare’s exclusion from participation in the Federal
health care programs.” Such a ban could effectively kill Lincare’s
business.
That sounds dire. Except that before that corporate integrity
agreement was signed in 2023, Lincare was under the same form of
probation, with the same death penalty provision, from 2018 to 2023,
and violated its terms. From 2006 to 2011, Lincare was similarly on
probation and also violated the terms, according to the government.
And before that — well, you get the picture. Lincare has been on
probation four times since 2001. And despite a pattern not only of
fraud, but of breaking its probation agreements, Lincare has never
been required to do more than pay settlements that amount to pennies
relative to its profits.
This is not an aberration. While HHS routinely imposes the death
penalty on small operations, it has never barred a national Medicare
supplier like Lincare from continuing to do business with the
government. Some companies, it seems, are too big to ban.
Lincare’s lengthy record of misbehavior isn’t a surprise to people
in the medical equipment business. What _is_ surprising is the federal
government’s willingness to pull its punches with a company that has
fleeced taxpayers and elderly customers again and again.
Federal officials have never pursued the company executives who
oversee this behavior even though two of them, Chief Operating Officer
Greg McCarthy and Chief Compliance Officer Jenna Pedersen, have worked
at Lincare through all four of the company’s probationary periods.
No one has faced criminal charges for activity the government’s own
investigators deemed fraud.
Medicare has continued to pay Lincare billions even as many of the
company’s customers revile it. Evaluations on customer-review
websites are lacerating, and complaints to state attorneys general
abound. On the Better Business Bureau’s website
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888 reviewers gave Lincare an average score of 1.3 out of 5. They cite
dirty and broken equipment, charges that continue even after equipment
has been returned, harassing sales and collection calls, and
nightmarish customer service. As one person wrote in April, Lincare is
“running a scam where they have guaranteed income” and “the
customer can’t do a thing.”
HHS has always been reluctant to cut off big suppliers. Medicare’s
first objective is to make sure nothing interrupts the flow of
medications, devices and services to beneficiaries. And were HHS to
seek to ban Lincare, the company would surely launch a long, costly
legal war. But even if the cost of such combat reached many millions
of dollars, it would still be a tiny fraction of the amount lost to
fraud, which is yet another contributor to the soaring medical costs
that bedevil the country. “This is taxpayer money,” said Jerry
Martin, a former U.S. attorney who represented an ex-Lincare executive
in a whistleblower suit against the company. “We need to pay people
that don’t have four corporate-integrity agreements.”
Weak enforcement is not the only problem. Lincare is paid to rent
oxygen equipment to patients, with HHS covering most of the monthly
bills. But those rental fees often add up to many times what it would
cost simply to buy the equipment. “If this were a rational
country,” Bruce Vladeck, who ran Medicare from 1993 to 1997, told
ProPublica, “the government would buy a million [oxygen]
concentrators and pay Amazon or somebody to deliver them.”
In a seven-month investigation, ProPublica examined how Medicare’s
largest provider of home medical equipment has managed to take
advantage of its customers for a quarter of a century while fending
off meaningful enforcement. ProPublica interviewed more than 60
current and former employees and executives, Medicare and Justice
Department officials, patient advocates, and health care experts.
ProPublica also reviewed dozens of court cases involving Lincare and
thousands of pages of internal company documents, sales presentations
and emails.
The investigation reveals a dismal picture of a company with a sales
culture that depends on squeezing infirm and elderly patients and the
government for every penny. Lincare employees are pressured to sell
— whether a customer needs a product or not — on pain of losing
their jobs.
And the company’s record of misbehavior and conflict extends far
beyond its sales and billing practices. Lincare has paid $9.5 million
in settlements for data breaches and mishandling patient and employee
records. It has faced claims of violating wage rules, harassing
customers with sales and collection calls, and tolerating racist
comments to an African American employee. (Lincare lost the latter
suit at trial and is appealing.) The company has repeatedly sparred in
court with former executives, including a 2017 suit in which longtime
executive Sharon Ford claimed that the company had cheated her out of
a $1 million bonus. (A judge ruled in favor of Ford at trial before
the case was overturned on appeal.) Ford testified that Lincare had
earned an industry reputation as “The Evil Empire.” And when
Lincare’s CEO, Crispin Teufel, resigned last year to become CEO of a
rival company, Lincare sued him for breach of contract and
misappropriating trade secrets. Teufel ultimately admitted to
downloading confidential company records and was blocked from taking
the new job. (Teufel did not respond to requests for comment. His
replacement, Jeff Barnhard, took over as Lincare’s CEO in July
2023.)
Lincare declined multiple requests to make executives available for
interviews. After ProPublica provided a lengthy document listing every
assertion in this article, along with separate such letters to
executives McCarthy and Pedersen, the company responded with a
three-paragraph statement
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It asserted that Lincare is “committed to delivering high-quality
and clinically appropriate equipment, supplies, and services” but
acknowledged “missteps in the past.” The company said its “new
leadership” had “commenced a comprehensive review of our policies
and procedures to help ensure we are complying fully with all state
and federal regulations” and that “investments and enhancements we
have made over the last several months will help prevent these issues
from repeating in the future.” Lincare did not respond to follow-up
questions requesting examples of the steps the company says it’s
taking, including whether it has terminated any executives as part of
this push.
When ProPublica asked a top Medicare enforcer why Lincare had eluded
banishment, her answer suggested she views probation as a continuing
ed class rather than a harsh punishment. “It’s like taking a
college course,” said Tamara Forys, who is in charge of
administrative and civil remedies for HHS’ Office of Inspector
General. “At the end of the day, it’s really up to you to change
your corporate culture and to study, to learn to pass the class … to
embrace that and take those lessons learned and move them forward.”
A spokesperson for the Centers for Medicare and Medicaid Services,
which runs Medicare, declined to comment on Lincare but said the
agency “is committed to preventing fraud and protecting people with
Medicare from falling victim to fraud.”
There’s little incentive to refrain from misbehaving in an
environment that tolerates bad behavior, said Lewis Morris, who was
chief counsel to HHS’ Office of Inspector General from 2002 to 2012.
“As long as that [settlement] check is less than the amount you
stole, it’s a good business proposition."
Indeed, Lincare has counted on the government’s tepid response, two
former company executives told ProPublica. Top management, they said,
responds to fraud warnings by conducting a cost-benefit analysis.
“I’ve sat in meetings where they said, ‘We might have $5 to $10
million risk — _if_ caught,’” said Owen Kirk Staggs, who ran one
of Lincare’s businesses in 2017 and fell out with the company.
“‘But we’ve made $50 million. So let’s go for it. The risk is
worth the reward.’”
Libby, Montana, provides a glimpse of the way Lincare operates. Oxygen
is an urgent need in this mountain town of 2,857. Libby suffers from
the lingering effects of “the worst case of industrial poisoning of
a whole community in American history,” in the words of the
Environmental Protection Agency. An open-pit vermiculite mine, which
operated from 1963 to 1990, coated the area — and residents’ lungs
— with needle-like asbestos fibers. More than 2,000 Libby citizens
have been diagnosed with respiratory diseases since then; some 700
have died [[link removed]].
Hundreds of ailing residents relied on Lincare for home concentrators,
which provide nearly pure oxygen extracted from room air. Medicare and
Medicare Advantage plans (which the government also funds) covered 80%
of the monthly rental of about $135; patients paid the remaining 20%.
In 2020, Brandon Haugen noticed something suspicious in Lincare’s
bills. Haugen was a customer service representative at the company’s
local distribution site, one of 700 such locations around the country.
(Lincare serves 1.8 million respiratory patients in 48 states.)
Lincare was allowed to charge patients and their insurers for a
maximum of 36 months under federal rules. After that point, patients
could use the equipment without further charge. Lincare, however, kept
billing local patients and their Medicare Advantage plans far beyond
36 months — in some cases, for years. To Haugen, this looked like
fraud.
Haugen conferred with center manager Ben Montgomery. The two, who had
grown up in the area, had been buddies since seventh grade, after
getting to know each other at summer Bible camp. Then 38, earnest and
just beginning to gray out of their boyishness, the two men were
concerned. The patients the men dealt with were their neighbors.
A regional Lincare manager assured them that charging beyond 36 months
for Medicare Advantage patients “is the correct way to bill.”
Skeptical, Montgomery raised the issue with Lincare’s headquarters
in Clearwater, Florida. Lincare’s compliance director told him,
according to Montgomery, that “it’s the patients’ problem to fix
it if they want it to stop”; that was “just how it worked.”
Further questions, sent to Lincare’s chief compliance officer,
Pedersen, went nowhere. “It seemed pretty obvious they were well
aware of this,” Montgomery told ProPublica. “For me, these were my
customers that you were screwing over.”
Among them was Neil Bauer, now 80, who lives in a ramshackle house
“out in the boondocks,” as he put it, 38 miles southeast of Libby.
Bauer spent his career as a barber, head of investigations for the
county sheriff’s department and a member of the local school board.
He’s been on oxygen for more than a decade and quickly gets short of
breath. “I can’t do stuff so much now,” he said. His wife is on
oxygen, too. “We just have a sick family,” Bauer said.
Lincare had kept billing Bauer for his concentrator for seven years
after it was supposed to stop. The monthly copays weren’t huge, but
they added up to $2,325 that he shouldn’t have been charged over
that period, a daunting sum for Bauer, who lives on a fixed income —
and a hefty mark-up over the cost of the equipment, which can be
purchased online for $799. For its part, Medicare Advantage paid
Lincare $9,299 for Bauer’s concentrator during this period, along
with another $5,760 for the months Lincare was legally permitted to
bill. All told, the rental payments to Lincare, during authorized and
unauthorized periods, were $16,547 for that one $799 piece of
equipment. “We paid forever,” said Bauer. “Never was I told that
we could have one without having to pay anything.”
Haugen and Montgomery studied billing records. Among the customers in
their tiny office, Lincare was improperly charging at least 33 people
and their Medicare plans. The two began to wonder how far this problem
extended. An employee in Idaho confirmed the same practice was
occurring there. “In my mind,” Montgomery said, “I went, ‘This
is Libby, Montana. Multiply that by every center in the country. This
is obviously a lot bigger deal.’”
Montgomery and Haugen had seen enough. On Jan. 18, 2021, they emailed
a joint resignation letter to Lincare’s top management, recounting
their concerns about billing that “likely affects thousands of
patients company wide.” Citing the lack of response from corporate
officials, they wrote, “we can only conclude that this is a known
issue that is being covered up by Lincare.”
Haugen had 10 children. Montgomery had four. Neither man had another
job lined up. “Had this not happened,” said Montgomery, who had
been at the company for 13 years, “I would have seen myself retiring
from Lincare.”
Instead, they became whistleblowers. They retained a law firm and sued
Lincare in Spokane, Washington, the site of Lincare’s regional
headquarters. After federal prosecutors decided to back the case,
Lincare settled in August 2023. The company admitted to overbilling
Medicare plans and patients across the country for years and paid $29
million to settle the matter, with $5.7 million of that going to
Montgomery, Haugen and their lawyers. Dan Fruchter, the assistant U.S.
attorney leading the government’s case, told ProPublica that the
overbillings likely involved “tens of thousands” of patients.
Lincare agreed to its fourth stint of probation with HHS; the new
corporate-integrity agreement took effect on the day after the
previous one expired. The conduct Montgomery and Haugen flagged had
gone on for years while the company was already on probation. But
Lincare got the government lawyers to agree that nobody would try to
impose the Medicare death penalty. Lincare asserted in the settlement
that it had installed software (which it did only after learning of
the government investigation) that will prevent billing beyond 36
months. Lincare promised to ensure “full and timely” compliance
with the agreement and prevent future wrongdoing.
“We paid forever,” said Bauer, seen at his house outside Libby. He
didn’t realize at the time that Lincare had been wrongly billing him
for years. Credit: Rebecca Stumpf, special to ProPublica
Medicare fraud, including in the “durable medical equipment”
category that Lincare operates in, has long been an intractable
problem. It cost the U.S. Treasury an estimated $60 billion in 2023
alone.
The government deploys large sums to try to stop it. HHS’ inspector
general’s office has a $432 million budget and a staff of 1,600.
Those resources are effectively extended by whistleblowers — most of
the cases against Lincare have been such suits — who can receive a
percentage of a civil settlement if they reveal wrongdoing, and by
federal prosecutors, who can also bring cases or join those filed by
whistleblowers. Last year HHS recovered $3.2 billion from fraudulent
schemes.
But the agency’s enforcers have wielded their biggest deterrent
almost entirely against small perpetrators. In 2023, they banned 2,112
small firms and individuals from Medicare reimbursement.
HHS hasn’t done the same with companies that operate on a national
scale. Forys, the agency enforcer, said she worries that expelling a
big provider from Medicare could leave customers in the lurch. In
April, Inspector General Christi Grimm defended her office’s work in
congressional testimony but also asserted that its resources are
inadequate. A lack of staff keeps it from even investigating
“between 300 and 400 viable criminal and civil health care cases”
annually, she testified, as well as more than half the fraud referrals
from Medicare’s outside audit contractors.
A different reason for going easy on big companies was suggested by
Vladeck, the former Medicare chief. Seeking to bar a large supplier
for repeatedly violating probation would require exhaustive
documentation and years of litigation against squadrons of well-paid
corporate lawyers. As a result, Vladeck said, “there’s a real
incentive, from a bureaucratic point of view, to just slap their
wrist, give them a kick and make them apologize. … It’s a cost of
doing business.”
There are steps enforcers could take, but almost never do, that would
make companies take notice, according to Jacob Elberg, a former
federal prosecutor who is now a professor at Seton Hall Law School.
(Among his publications is a 2021 law review article titled “Health
Care Fraud Means Never Having to Say You’re Sorry.”) Elberg’s
research shows that HHS and prosecutors tend to negotiate far smaller
civil settlements than the law allows, and they rarely prosecute
company executives. They also almost never take cases to trial. In
short, enforcers have long signaled to companies that they’re
looking for a smooth path to a cash payment rather than a stern
punishment for a company and its leaders. “It is generally a safe
assumption,” Elberg said, “that the result will be a civil
settlement at an amount that is tolerable.”
For its part, Congress may soon be weighing a new law that would
reshape how the oxygen industry is paid by Medicare. But rather than
clamp down on corporations, the legislation seems poised to do the
opposite. A new bill called the SOAR (Supplemental Oxygen Access
Reform) Act would hand companies like Lincare hundreds of millions
more, by raising reimbursement rates and eliminating competitive
bidding among equipment providers. Advocates say
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the legislation will help patients by making some forms of oxygen more
available and improving service. But along the way it will reward
Lincare and its rivals.
Congress has a history of treating oxygen companies generously. For
years, lawmakers set Medicare reimbursements for oxygen equipment at
levels that even HHS, in 1997, characterized as “grossly excessive
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Over the succeeding decade and a half, Lincare took advantage,
snatching up hundreds of small suppliers and becoming the industry’s
largest player.
In 2006, under pressure to reduce costs, Congress approved steps to
curb oxygen payments, including the introduction of competitive
bidding and the 36-month cap on payments for equipment rentals. But
even those strictures were watered down after the industry poured
money into political contributions and lobbyists, who warned that cuts
would harm elderly patients.
Lincare compensated by amping up strategies that generated profits,
with little apparent regard for Medicare’s rules, which say it will
reimburse costs for equipment only when there is evidence of
“medical necessity.” The company aggressively courted doctors and
incentivized sales, through bonuses the company paid for each new
device “setup.” According to a 2016 commission schedule, reps
could earn $40 for winning an order for a new sleep apnea machine,
$100 for a new oxygen patient and $200 for a noninvasive ventilator.
The entire staff of each Lincare center could receive a small bonus
for signing up a high percentage of new patients for automatic monthly
billing. Patients who refused auto-billing, a company document
advised, should be warned they might face “collection activity”
and service cutoffs. “Sales is our top priority!” declared a 2020
PowerPoint to train new hires.
Once it had a customer, Lincare would pitch them more costly products
and services. One way Lincare did this was through a program called
CareChecks. Promoted as a “patient monitoring” benefit, CareChecks
were aimed, according to a company presentation, at generating
“internal growth.” If a patient exhibited a persistent phlegmy
cough, Lincare could persuade their doctor to prescribe a special
vibrating vest to loosen chest mucus. Nebulizer patients might be
candidates for home oxygen. Patients using apnea devices were
potential candidates for ventilators. “We’d make patients think we
were coming in clinically to assess them,” a former Lincare manager
said, “when really it was to make money off of them.”
Selling replacement parts could also be lucrative. At Lincare call
centers that sold items like hoses, masks and filters for CPAP
machines (used to treat apnea), hundreds of commissioned agents in
Nashville, Tennessee, and Tampa, Florida, were equipped with programs
displaying what items each patient was eligible for under Medicare. By
law, patients had to request replacement parts. But frequently, that
wasn’t what happened, according to Staggs, who oversaw the CPAP
business in 2017. He discovered that top salespeople, whose bonuses
could total $8,000 a month, averaged just a few minutes on the phone
per order. That wasn’t nearly enough time to identify what items, if
any, customers actually needed. Staggs listened to recorded calls and
found that, after reaching customers, agents often placed them on hold
until they hung up, then ordered them every product that Medicare
would cover.
At Lincare, results were closely tracked and widely shared in weekly
emails displaying the best and worst performers in each region. Notes
taken by one manager show supervisors’ performance demands during
weekly conference calls: “Unacceptable to miss goal … stop the
excuses … If this is not being done, wrong [center manager] in place
… If you’re not getting O2 and not getting Care Checks — you
shit the bed. Stop accepting mediocre, lazy responses ….”
“If we didn’t meet our quota, they were going to chop our
heads,” said former Illinois sales rep Sandra Gauch, who worked for
Lincare for 17 years before joining a whistleblower suit and quitting
in 2022.
One salesperson was so fearful of missing her quota, according to
Gauch, that she signed her mother up for a ventilator that she
didn’t need. A company audit in 2018 found that only 10 of 56
ventilator patients at one center were using them consistently. Some
patients hadn’t used their devices for years. Yet Lincare kept
billing Medicare.
Only one thing mattered as much as maximizing new equipment rentals,
according to former employees and company documents: minimizing
customers’ attempts to end rentals. A call to retrieve breathing
equipment meant that it was no longer wanted or being used, and
Lincare was supposed to retrieve it and promptly stop billing Medicare
and the patient. The person’s health might have improved. They might
have gone into the hospital — or died. The reason didn’t matter;
at Lincare, “pickups” were a black mark, deducted from
employees’ performance scores, jeopardizing their bonuses and jobs.
As a result, employees said, such requests were dreaded, delayed and
deterred. Clinical staff were sent to “reeducate” customers to
keep using their devices. Patients were told they’d need to sign a
form stating they were acting “against medical advice.”
Lincare managers made it clear that pickups should be discouraged. In
a 2010 email, an Ohio center manager instructed subordinates: “As we
have already discussed, absolutely no pick-ups/inactivation’s are to
be do[ne] until I give you the green light. Even if they are
deceased.” In 2018, an Illinois supervisor emailed her deputies that
pickups were barred without her explicit approval: “Not even Death
that I don’t approve first.”
In February 2022, Justin Linafelter, an area manager in Denver,
responded to the latest corporate email celebrating monthly
“Achievement Rankings” for oxygen sales by pointing out that
almost all of the centers atop the rankings had at least 150
“pending pickups,” customers who weren’t using their equipment
but whom the company appeared to still be billing. “Some of these
centers are just ignoring pickups to make this list.”
That was only one of Linafelter’s concerns. In July of that year, he
emailed headquarters, saying he no longer had “the resources to be
successful at my job.” The customer service staff in Denver had been
cut in half, Linafelter explained, and he’d been barred from hiring
replacements. Denver’s remaining staff was “at a point of
exhaustion,” threatening patient care.
The morning after Linafelter expressed concerns to Lincare in 2022, he
was summoned to a conference call with the head of HR and fired, for
what he was told was a “corporate restructuring.” Linafelter, who
had worked at Lincare for nine years, said, “I got thrown away like
a piece of trash.”
Other former employees offer similar accounts. In 2020, Jillian
Watkins, a center manager in Huntington, West Virginia, repeatedly
alerted supervisors that Lincare was improperly billing for equipment
that patients weren’t using. Lincare blocked her from firing a
subordinate who’d falsified documents supporting the charges, then
fired Watkins, citing “inadequate direction and leadership.”
Then came a series of turns. Pedersen, the chief compliance officer,
effectively confirmed Watkins’ assertions, belatedly alerting the
government about $486,000 in improper billings by Lincare. But
Pedersen blamed the billings on Watkins, writing to Medicare that the
company had “terminated” her to “prevent [the problem] from
recurring.” After Watkins sued, Pedersen admitted in a deposition
that Watkins’ firing “had nothing to do with the overpayment.”
In April 2024, a federal judge ruled that Watkins had presented “a
prima facie case of retaliation.” The suit was privately settled in
mediation.
Staggs, too, was ousted, he said, after he warned top Lincare
executives about improper practices at the CPAP call centers. Staggs
emailed a Lincare HR officer: “Patients are being shipped supplies
that they never have ordered. … This is fraud and I have gotten zero
support or attention to this matter when I raise the issue to my
leadership.” Only months after starting, he was fired in November
2017. He later filed a whistleblower suit; Lincare denied wrongdoing.
After the U.S. attorney’s office in Nashville declined to join the
case in 2022, Staggs withdrew the action.
Staggs’ account of improper billings matches an industry pattern
that appears to continue to this day. In a 2018 report
[[link removed]], HHS’
inspector general estimated that Medicare had paid more than $631
million in improper claims for CPAP and other supplies over a two-year
period. Another HHS analysis
[[link removed]]
identified an additional $566 million in potential overpayments for
apnea devices.
The agency’s oversight “was not sufficient to ensure that
suppliers complied with Medicare requirements,” the 2018 report
concluded. Six years later, HHS has not taken public action against
Lincare relating to CPAPs.
Today, fraudulent billing among Medicare equipment providers remains a
“major concern
[[link removed]],”
according to the inspector general. The agency says it continues to
review the issue.
Doris Burke [[link removed]]
contributed research.
Peter Elkind is a reporter covering government and business.
ProPublica is an independent, nonprofit newsroom that produces
investigative journalism with moral force. We dig deep into important
issues, shining a light on abuses of power and betrayals of public
trust — and we stick with those issues as long as it takes to hold
power to account.
* Medicare
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* Medicare fraud
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