Health Plans Pay Millions to Settle Federal, State Lawsuits

(Reprinted from The HCCA-AIS Medicaid Compliance News)

By Eve Collins, Editor
Health Business Daily
March 24, 2011

Two insurers in separate cases agreed in February to pay millions to the federal government and their respective states to settle allegations that they defrauded Medicaid.

Ohio Medicaid managed care company CareSource and its corporate entities have agreed to pay $26 million to resolve False Claims Act allegations, the Department of Justice said Feb. 1. And Blue Cross Blue Shield of Illinois will pay a total of $25 million to settle claims that it wrongly terminated insurance for private-duty skilled nursing care for medically fragile, technologically dependent children. Both insurers denied the charges.

The feds allege that Dayton, Ohio-based CareSource caused Ohio Medicaid to make payments for screenings and assessments the company never provided. The conduct occurred between January 2001 and December 2006, the feds say. Specifically, the complaint alleges that "large numbers of" special-needs children never received baseline assessments, and that the company falsely represented that the assessments were done and that case management services were being performed.

CareSource allegedly submitted false data to the state so it appeared the firm was providing the required services so it could improperly retain incentives from Ohio Medicaid and to avoid penalties, according to DOJ.

The whistleblowers, Laura Rupert and Robin Herzog, worked for CareSource as telephonic case management queue nurses tasked with conducting baseline assessments. They filed the suit in 2006 and will receive a total of $3.1 million from the settlement.

CareSource did not admit liability in the settlement. The parties agreed to settle to avoid the delay, uncertainty, inconvenience and expense of litigation.

"In the end, we chose to reach the financial settlement, bringing the matter to a close, and continuing to focus on our mission of making a difference in the lives of underserved people by improving their health care," CareSource President and CEO Pamela Morris said in a statement.

State Share Could Have Been Bigger

The state will get $10 million from the deal, but Ohio Attorney General Mike DeWine (R) said it could have gotten more if the state had its own false claims law. "If we had that in place, our percentage of the settlement would have gone up 10%," he told the Columbus Dispatch. Ohio lawmakers have introduced bills in the past, but none have been approved, the newspaper reports.

Under the Deficit Reduction Act, states that enact false claims acts modeled on the federal law can receive up to 10% of the recovery from a state Medicaid judgment or settlement.

Meanwhile, the feds allege that the Illinois Blues plan wanted to shift medically fragile children into a program designed to provide home care for children at risk of institutionalization rather than covering private-duty skilled nursing care. The feds explain that the children's specialized care should have been covered by the insurer under the terms of their existing insurance policies, but instead they were shifted into the Medicaid program for home and community-based services.

Nursing Benefits Were at Issue

The settlement resolves allegations that the Health Care Service Corp. unit denied patient claims based on internal guidelines that were more restrictive than the language provided to beneficiaries' families in policy materials.

Also, the feds allege that Blue Cross Blue Shield of Illinois fraudulently told policy holders that children were not covered for private-duty nursing during a claims review process after initial denials of the claims.

The Illinois Blues plan will pay $14.25 million to the state and $9.5 million to the federal government. The insurer will also pay $1.25 million to Illinois under the state consumer fraud statute.

A prepared statement from the Illinois Blues plan says the settlement resolves a long-standing dispute about claims for private-duty nursing benefits. The insurer disagrees with the allegations and denies any appropriate conduct, it says.

"This dispute began many years ago when we reviewed certain claims and determined that the benefits sought were not covered by the applicable insurance plans and policies. These plans and policies determine which benefits are covered and which are not. Several years ago, in cooperation with the state attorney general, we expanded our explanation of benefits to ensure that our members understood what nursing benefits are covered under their plans. That action, coupled with today's agreement, are in the best interests of our members," it says.

The two settlement agreements follow events in Kentucky and Florida where Medicaid managed care plans also have been under fire. Kentucky officials in November and December released audit findings showing oversight problems in its largest Medicaid managed care contractor and a corrective action plan to address them (MCN 1/11, p. 6). And in Florida, five former executives were recently charged with conspiracy to commit Medicaid fraud, among other allegations.

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