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CNN IN THE MONEY

A New Plan to Fight Terrorism? A look at Healthcare Fraud

Aired March 27, 2004 - 13:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


ANNOUNCER: From New York City, America's financial capital, this is IN THE MONEY.
SUSAN LISOVICZ, GUEST HOST: Welcome to IN THE MONEY.

I'm Susan Lisovicz. Jack and Andy are off today.

Coming up today's program, sting like a bee in the fight against terrorism. Nature could have a better battle plan. We will look at a tactic that starts with thinking fast and loose.

Plus smooth operators. We might say sleazy, too. Find out how some doctors and patients are feeding the high cost of health care.

And hot water. Dasani was supposed to be Coke's big new brand in Europe. What went wrong and what does it mean for the stock?

Joining me today, "LOU DOBBS TONIGHT'S" Christine Romans, and money.com managing editor, Allen Wastler.

Great to see both of you.

CHRISTINE ROMANS, CNN CORRESPONDENT: Hi Susan.

LISOVICZ: For two days Washington virtually came to a standstill. The ultimate insiders, names like Colin Powell, Madeleine Albright and a man named, new author, Richard Clarke. Everything stood still as they detailed what the government knew, what it did not know prior to 9/11.

More heat than light?

ROMANS: I was glued to this. Sometimes it sounded like a big massive free book promotional tour. Other times it sounded like it was rewriting history or trying to rewrite history. I kind was interested. But people think it's just political grandstanding.

ALLAN WASTLER, MONEY.COM, MANAGING EDITOR: Which is what I thought. I thought it was a circus for the sake of having a circus. I mean, yes.

LISOVICZ: You have to have hearings.

WASTLER: Yes, we want to find out what went wrong, but it got into you Democrats did, and you Republicans did this. LISOVICZ: Meanwhile the families are there holding pictures of their loved ones. I'd have to say a stellar moment is when Richard Clarke was the only one who apologized.

ROMANS: He said we failed you. Our country failed you. I failed you. That was a moving moment. You are right about the families of the September 11th victims, you have to wonder how they feel when you start to sense politics might be creeping in to all of the discussions, trying to figure out what went wrong. Making sure it does not happen again. But again, as in everything that happens in front of television cameras, and in an election year...

WASTLER: Clarke's entire -- we're sorry and everything. I think it's just -- he is trying to sell a book. So, of course he wants to come across as sympathetic. I thought, nah.

LISOVICZ: More to come. Condoleezza Rice, that chapter has not closed yet.

ROMANS: You are right.

LISOVICZ: We have been hearing a lot about going after terror suspects, everybody from the top al Qaeda guys to the founder of Hamas. Overwhelming fire power and a top down hierarchy might not be the answer to stopping a terrorist group. For that it might be time for a new tactic. Bees do it and than maybe he can, too. It's called swarming. For more about that we are joined from (UNINTELLIGIBLE) California by John Arquilla. He's an associate professor at the naval post graduate school in Monterey and a consultant at Rand. Welcome.

JOHN ARQUILLA, SENIOR CONSULTANT, RAND: Good to be with you.

LISOVICZ: I guess your theory is that since these al Qaeda for instance is not just a bunch of criminals in Afghanistan, they are world-wide, quite literally that we need to go after these cells one by one and then destroy them one by one?

Is that what you mean by swarming?

ARQUILLA: Well, al Qaeda is distributed in about 60 different countries around the world in small units. And when they decide to attack they come together from different parts of the world and arrive at the same place and same time and either take over planes or plant bombs on trains in Spain. And if we are going to defeat them we will not do it with area bombing or conquering countries, we are going to do it by building our own swarming forces that can come together quickly on those occasions when we can get intelligence about them. And this we have done in few places around the world.

ROMANS: So they swarm us. Now it's our turn to switch our intelligence and combat mechanism to swarm them back, right?

ARQUILLA: Yes, the old saying was it's the -- the best defense is a good offense. And I think now the best way to defeat a swarm is with one of your own. And we are getting a little bit better at this. It means good intelligence, cooperation, and it means understanding that we are less about destruction now and much more about disruption. We are like antibodies, if you will, if you want to use a metaphor from biology. The antibody will converge from all parts of your body on the intruder in you're system. That's how we have to behave against terror now.

WASTLER: Professor, I'm sort of hip to the idea from attacking from multiple different points, and what not, but I'm worried.

Doesn't this kind of theory, and if you put it into practice, won't it lead to more friendly-fire incidents or intelligence agencies working cross-purposes?

Isn't there more room for messing up of it, frankly?

ARQUILLA: The hall mark of a swarm is that it is synchronized but without central leadership just as the antibodies in our bodies or the swarms of bees that go after some objective. And you are quite right, that there are operational risks that attend it. On the other hand swarms can move with much smaller numbers. The costs and risks are far lower for example than sending in a quarter of a million man field army into a country looking for terrorists or weapons of mass destruction that are not there. Either approach you use has its own risk. And I would argue swarming entails far fewer risks than the older approach we've taken to try to deal with terror.

LISOVICZ: Now, professor, I'm sure you watched the 9/11 Commission hearings this week. As the testimony made abundantly clear, the intelligence community in the U.S. has not played well with each other, never mind plenty of worldwide operations. Isn't this biting off a little bit more than we can chew?

I'm sure everyone wants to destroy al Qaeda, but executing it, isn't that close to impossible what your proposing?

ARQUILLA: We are talking about a kind of nimbleness that does not come to a classic hierarchy. It requires networking. And I think these 9/11 Commission hearings have suggested that 9/11 was an organizational failure, not a failure of intelligence. There was a lot of information in the system, but it wasn't properly used. As my colleague from Rand, David Ronfeldt, and I have said for years it takes a network to fight a network. Now, we have to think about the war on terror in these terms. We have to break down the barriers between what's civil and what's military, what is federal and local and what's foreign and domestic. I think, in many cases, our European and other allies around the world understand this better than we. War against terror has no leader, but we are all part of the same network working for the same goal.

ROMANS: From what you have seen, is there a switch in momentum in Washington and among intelligence communities to start addressing terrorism this way?

Is there much, you know, agreement in Washington that a swarm mentality is what we need to take as well?

ARQUILLA: I think there's a lot of traction for the swarming idea, particularly in the military, our special forces use this explicitly as their doctrine now. I think in the intelligence realm there is indeed a great appreciation of the need for better networking. We are swimming upstream, however. In the past few years we created a new hierarchy, the Department of Homeland Security, which has no intelligence assets of its own and must rely on the kindness of other spies for the information it might get. But I have been speaking with a few members of the 9/11 Commission, and I think, this is something we will see if their final reports or recommendations for waging this war on terror in a more efficient way in the years to come.

LISOVICZ: All right. John Arquilla, we'll leave it at that. Professor of defense analyst at the Naval Post Graduate School, also a senior consultant at Rand, thanks for you very much for your, insight.

ARQUILLA: My pleasure.

LISOVICZ: Up next on IN THE MONEY, operating costs. Find out why the feds are out to bust an insurance scam where the doctor pays the patient.

And later Coke on ice. The company froze its plan to launch Dasani in Europe.

We'll tell if the stock breaking a sweat?

What's French for pay up. With the EU demanding an antitrust fine from Microsoft, see if the company is writing a check.

(COMMERCIAL BREAK)

ROMANS: If the Feds are right some medical patients on the west coast have been getting poked, prodded and probed all to make their bank balances healthier. Federal officials this week seized files and computers from three surgery centers in California. Doctors there allegedly paid patents to undergo procedures they didn't need, and than over billed insurance companies for work. The scam is known as rent a patient.

And for a look at how it works, we are joined by Bill Mahon. He's the president of the National Healthcare Anti-Fraud Association.

Bill, I don't know what is worse being so desperate you got to have somebody cut you open so you can get some money or being the kind of doctor that would do it to overbill medical insurance companies.

BILL MAHON, NATIONAL HEALTH CARE ANTI-FRAUD ASSOCIATION: It's pretty extreme in both cases, Susan. And this is a phenomenon we have seen in the health insurance side for between two and three years now. And it's gotten to a degree of magnitude that for the last year it's been the subject of very intense attention and investigative activity in the private health insurance industries anti-fraud units and in federal law enforcement.

WASTLER: Mr. Mahon, Allen Wastler here what kind of doctor -- I go to my doctor, educated, all the degrees, fine upstanding citizen of the United States, then you hear about stories like this.

Is this your typical doctor or sort of maybe, you know, a sleaze -- sleazier kind of doctor?

MAHON: I wouldn't characterize any one of them but I would say like you, I almost never met a doctor I did not like and respect as a hard-working ethical person dedicated to patients. But in any system this large, this complicated, you are going to have some bad apples. And the suspicion here that been pretty well documented in some respects is that the surgery centers themselves are paying recruiters throughout the country to recruit patients from throughout the country who are willing to let doctors subject them to invasive tests such as colonoscopies, other procedures, biopsies in you digestive system, even surgeries, sweaty palm surgery is a big ticket item in these schemes, in exchange for cash.

The patient gets typically $800 to $,1200 in cash, the recruiter might get between $1,000 and $2,000 for every patient he sucks into the center. The recruiters coach the patients on what symptoms to describe to the physician when they go in. Based on those phony symptoms that they don't have the physician then goes ahead and performs the given procedure. And I can't say in a given case how conscious the doctor is, how complicit a doctor might be in it, but most of these things happen on Saturday's and Sundays. And you have to question why are all these elective procedures done on weekends.

LISOVICZ: There's so many questions to ask. But I guess as revolting as this scam is, at least it seems to be centered on two area's and does not seem to be nationwide from what I understand. Southern California and Florida, is that right, and why is that?

MAHON: The outpatient surgery center activity that is being looked at is all centered in the Southern California area, in Greater Los Angeles and Orange County. The recruitment activity has drawn patients from almost all 50 states, about 49 states have had people go to California for these bogus procedures.

Why California?

California is sort of tied with south Florida for the title of the health care fraud capital of the country. For many, many years there have been very ambitious health care fraud schemes coming out of Southern California. Some involving cross border treatments in Mexico. You know, bogus unapproved cancer treatments that are disguised as legitimate treatments performed on the U.S. side of the border. Cosmetic surgery schemes have been very big in the Los Angeles area from the mid '90s on. And the bottom of it, this is where these particular operators have decided to set up shop.

ROMANS: I'm wondering if these recruiters are taking advantage of people who might be really poor, who might not speak great English, who might really be looking for a way to get by.

What kind of people are walking into the clinics to have elective surgery they don't need? MAHON: That's what makes the scheme so bad. These are not lawyers or architects or CEOs or other professionals being sucked in. These are wage-earners, low wage earners, non-English speaking people. There's a great deal of patient traffic from the Vietnamese community for example, from the Hispanic-American community. Recent immigrants who have health insurance because you wouldn't expect to be knowledgeable about how it all works, and who are willing to subject themselves to that sort of thing for $800 or $1,200. That's a lot of money to some people.

OK, Bill, thanks so much for joining us. President National Healthcare Anti-Fraud Association.

We have to step out for a minute.

But up next, Coke's plans to sell bottled water overseas are all wet. We will talk about whether the drink giant is a good investment now.

And talk about unnecessary surgery. Our fun site of the week lets you improve on the Mona Lisa.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Vera Wang is saying I do to more than fashion. Known for modern bridal wear, Wang continues to challenge herself as a designer by adding fragrance, eye wear, China, crystal, and silver flatware giftware to her Multimillion dollar empire.

VERA WANG, DESIGNER: Because design goes by so quickly. And things are old by the time they get to market. You have to be very vigilant about what is going on around you.

UNIDENTIFIED MALE: Wang says her job is tireless because she is fulfilling a life long dream.

WANG: I think one of the most important things in any career is to feel passionate about what you do. And that makes the effort that much easier. And let's face it, it is very much that effort.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

LISOVICZ: Now for a look at the week's top stories in our "Money Minutes."

The European Commission fined Microsoft about $613 million for antitrust violations. The commission says the main problem is Microsoft's continued bundling of its media player with its operating system. Microsoft is vowing to fight the fine but fears of a tech trade war are growing.

Another week, another record high for U.S. gas prices. The average cost of a gallon of gas is about $1.73. And the U.S. Energy Department expects prices to spike another dime per gallon in the next two months. Just in time for the peak driving season.

And there's mixed news about Americans and debt. More Americans paid their mortgages and car loans down in the last three months of 2003, but at the same time the American Bankers Association says the number of credit card accounts going past due soared to a new record high.

ROMANS: And Europe is becoming an unfriendly place for Coca-Cola this these days. The soft drink giant pulled it's Dasani brand bottled water from shelves in Britain after questions about its purity. And that's jeopardizing plans to launch Dasani in France, and Germany as well.

This all comes as Coca-Cola searches for a new CEO to replace the departing Doug Daft. Coke is our stock of the week. A stodgy old company. It doesn't like to give earnings guidances for the quarter because it really likes to look broadly at how well it's going to be doing. And now a little bit of a stumbling block in Europe. Some European commentators are calling it Coke's Waterloo.

LISOVICZ: Is that like the new Coke?

Remember what a disaster that was when Coke launched a new formula?

WASTLER: I think that's part of the -- Coke is such a big company and a big part of America, when it makes a misstep everybody wants to leap on it and go ahahaha.

ROMANS: But the water strategy is important for Coke. The water war, as they call it. This is -- you've got Pepsi in it, you've got Nestle in it. A lot of big players are in the water business. And Europeans are big consumers of bottled water. They have been long before U.S. companies were selling bottled water.

LISOVICZ: Another thing, it goes to integrity. Coca-Cola is one of the best known brands in the world, next to say Disney and the Marlboro man. What's more pure -- supposed to be more pure than water?

This is not some mom and pop operation. When you're questioning Coke to get the water clean for safe consumption, that's something that can taint the brand.

WASTLER: It also hurts it because international markets are important to Coke. Seventy percent of their revenue comes from overseas. And the soda pop is sort of flat and they are making all these...

ROMANS: Soda pop is flat. Very good.

WASTLER: Cute, huh?

They are going more to health drinks, the big energy drinks...

ROMANS: And the water, the bottled water, is something I think, 50 percent growth rate over the past three years, it accounts for some 8 percent of the bottom line of Coke. We should talk about Coke's CEO as well.

(CROSSTALK)

WASTLER: That would be a bigger problem at this point.

ROMANS: A lot of people are wondering if this will be an insider coming in?

Are they going to find -- led by Warren Buffett, who of course, is on the board and a big share holder. Are they going to find someone from the outside. What's this person going to look like?

Coke is a very big brand. I think the number one recognized brand in the world.

LISOVICZ: Right. If they can't get their succession plans straight, then you wonder about so many other companies.

WASTLER: So, you know, big successor candidate inside is Steve Hire, a former Turner executive.

ROMANS: Is that so?

WASLTER: Yes. Used to be are big boss.

LISOVICZ: Right, because CNN started out in Atlanta. Coke started out in Atlanta.

WASLTER: There you go. OK, earlier we talked about the growing surgery for hire scandal. But for our fun site of the week we thought we would show you a place where you can do unnecessary surgery of your own for free -- on one of the most famous masterpieces of our time. Look at Mona there. You just want to botox those lips a little bit?

Yes, you know, get collagen, botox the wrinkles. And you know, she needs to be augmented down there, so a little surgery there.

LISOVICZ: Art majors. Art majors, art lovers around the world are horrified.

ROMANS: I got on this thing, and I've got to tell you it only takes about three or four clicks, and it looks like Angelina Jolie.

WASLTER: No kidding.

ROMANS: I'm not kidding. Try it yourself.

WASLTER: I'll go back and visit again.

LISOVICZ: OK. That's the fun site of the week. As always, fun and very funny, Allan.

WASLTER: We try. LISOVICZ: That's it for this week. Join us next week at 1:00 P.M. on Saturday, 3:00 p.m. on Sunday. Thanks to money.com's managing editor Allen Wastler, fun sites always a high light of the show. And thanks as well, to the hard-working "LOU DOBBS TONIGHT" correspondent and my office roommate Christine Romans.

Up next, Andy Serwer will host our special look at 50 years of the "Fortune 500." You won't miss it. Enjoy the rest of your weekend.

(COMMERCIAL BREAK)

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com


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