When federal law enforcement agents swept through seven U.S. cities earlier this month to arrest more than 91 doctors, nurses and others for Medicare fraud, one of their targets was Houston. For the Bayou City, it was the latest in a disturbing series of revelations about health care fraud there.

A picture has emerged in Houston of kickbacks and schemes to steer patients between group homes and outpatient mental health clinics offering “partial hospitalization” programs that bill Medicare.  The clinics often operate out of strip-mall storefronts or even single-family suburban homes.

A Houston Chronicle investigation last year noted that more than 75 percent of all Medicare spending in Texas on outpatient psychiatric programs is flowing into just one county: Harris County, where Houston is located.

Private ambulance companies in Houston also bill Medicare to ferry the patients back and forth. The Chronicle questioned the lack of oversight for the clinics and the medical necessity of the ambulance rides. Series reporter Terri Langford revealed that private ambulance operators in Harris County billed Medicare in 2009 almost nine times as much as companies in New York City.

“I’m more struck by why didn’t someone catch these things in the first place,” said Vivian Ho, a health economist at Rice University’s James A. Baker III Institute for Public Policy. “When you find so many additional ambulance rides going on. Or how is it that a home health care agency can bill for several million dollars and no one realizes the care isn’t legitimate?”

The October arrests ensnared leaders of an historic hospital that once served Houston’s African American community. Riverside General Hospital was once the Houston Negro Hospital – but now specializes in the treatment of mental illness and substance abuse.

The CEO of Riverside was arrested, along with his son and five other people. Earnest Gibson III has led the hospital for 30 years. The government alleges that Gibson and his employees bilked Medicare out of $158 million over more than seven years.

Riverside had already suffered the arrest of a top administrator in February, on charges of using patient recruiters to steer group home residents into its programs.  In June, Medicare stopped reimbursing Riverside for its partial hospitalization programs at four mental health sites.

While federal agents trumpet the arrests as victories in rooting out health care fraud, it’s unclear how it plays politically.

“The other side effect of all this fraud is it leads to people being less confident that their taxpayer dollars are being spent well and they end up being less supportive of government provision of health care,” Ho said.

“I think on the margin this Medicare fraud can lead people to become more cynical about supporting the Medicare program.”

Still, Ho says the answer is not giving up on Medicare but cracking down even more, especially using data mining and other digital tools.

Ho says it’s hard to know for sure, but some studies estimate that up to 10 percent of Medicare spending is actually lost to fraud and abuse.

“To that extent, 10 percent savings would be wonderful in terms of trying to deal with the deficit we’re facing because we spend so much on Medicare. So when we’re talking about fraud, if we can address it effectively, it’s not a drop in the bucket, it’s actually a tremendous amount of savings that would make us all better off.”

Ho says investigations of medical fraud slowed down after Sept. 11, 2001, when the government investigations shifted to terrorism.

But investigations and arrests have picked up over the past two years.

They often focus on organized crime rings that steal the identity of seniors and bill for services at non-existent clinics.

Criminals also use home health care, ambulance services, and medical equipment to defraud the system.

A report from the Health and Human Services Department indicates that for every dollar spent in recent years on investigating medical fraud, the government recovers more than $7.

This story is part of a reporting partnership that includes KUHF, NPR and Kaiser Health News.