December 2, 2009
The State of Minnesota is taking a chiropractic clinic to court, accusing it of fraudulently enrolling patients for credit cards issued by GE Money Bank, the nation's largest issuer of health care credit cards.

The state's Attorney General, Lori Swanson, and the Minnesota Board of Chiropractic Examiners filed the lawsuit against Okeson Optimal Chiropractic clinic, a Lakeville, Minn., chiropractic clinic, and its owner, Erik Okeson, D.C. The suit claims the clinic fraudulently enrolled patients in health care credit cards by usurping the identities of unrelated third parties and listing them as credit card co-applicants without their knowledge and by inflating patients' actual income.

By listing unsuspecting strangers as co-applicants on other patient's credit cards and inflating patients' real income, the clinic jeopardized patients' credit histories and obligated patients to repay credit card bills on lines of credit for which they otherwise may not qualify," Swanson said . "The clinic wanted patients to qualify for these credit cards so it could pre-bill the cards and make money."

According to the complaints, the defendants pre-billed patients' CareCredit credit cards amounts ranging from $1,200 to $4,300, prior to all services being delivered. If a patient did not pay back the amount charged on a CareCredit credit card on time, default interest rates of up to 29.99 percent apply.

The lawsuit alleges that defendants engaged in the following types of credit card fraud in order to create a source of funding to pre-bill their chiropractic services:

Pre-billing

First, the lawsuit alleges that, in order to ensure that primary applicants qualified for credit cards on which defendants could pre-bill thousands of dollars in up-front charges, the defendants in some cases falsely listed unsuspecting co-applicants on other patients' credit cards, thereby usurping their identities and harming their credit. A co-applicant on a credit card is financially liable for the charges incurred on the credit card by the primary applicant.

The unsuspecting co-applicants typically provided their name and Social Security number to the defendants as part of an initial health screening by the clinic. Some patients learned that the defendants added a co-applicant to their application when they received a CareCredit credit card in the mail along with a statement that included the name of the unknown co-applicant.

The "co-applicants" did not consent to be co-applicants, were not aware they were made co-applicants, and did not know the primary applicant. Some of Okesons patients who were listed as co-applicants on strangers credit cards without their permission have discovered the fraudulent accounts on their credit reports.

Second, the lawsuit alleges that, in order to ensure that primary applicants qualified for credit, defendants also in some cases submitted false and grossly inflated annual income to CareCredit for the patientincome far in excess of the actual income reported by the patient to the clinic.

For example, defendants allegedly told the credit card company that a retiree with annual income of $30,000 earned $120,000; that a gas station worker with annual income of $15,000 earned $180,000; and that a 22-year old nurse's aide earning $15,000 per year earned $120,000.

Inflating incomes

Defendants reportedly told CareCredit that 108 of 283 patients enrolled in CareCredit had income of exactly $120,000 per year. By inflating patients' income to GE Money Bank, defendants obligated patients to repay credit card bills on lines of credit for which they otherwise may not qualify, Swanson said.

Over a 26-month period from June, 2007 through July, 2009, defendants placed about $632,000 in charges on credit cards issued to their patients by CareCredit.

By falsely listing unsuspecting strangers as co-applicants on other patients' credit cards and by inflating patients' income, defendants jeopardized the credit histories of the co-applicants, defrauded the credit card company, and obligated the original patients to repay credit card bills on lines of credit for which they otherwise might not qualify, the complaint alleges.

In recent years, many of the country's largest financial institutions have begun to sell health care credit cards to patients, capitalizing on rising health care costs and gaps in insurance coverage. According to a report by McKinsey & Company, consumers currently charge about $45 billion in out-of-pocket medical expenses on credit cards, and that number has been estimated to triple to $150 billion by 2015.

This is the second lawsuit that Swanson and the Board have filed against a chiropractic clinic for health care credit card fraud. In August, Swanson and the Board filed a lawsuit against Express Health, P.A. and its owner, Cory Couillard, D.C., for enrolling patients in health care credit cards without their permission and inflating patients' income in order to qualify them for credit cards.