Who’s watching the watchers?

Former Medicare carrier settles suit for $144M

In a case that raises the question of who watches the watchers, a Medicare carrier has paid $144 million in civil and criminal fines to settle a whistle blower suit — the government’s largest settlement ever with a Medicare contractor.

Health Care Service Corporation, the former Blue Cross/Blue Shield Part B Illinois contractor, has pled guilty to obstructing a federal audit as well as conspiracy to obstruct the audit. HCSC also admitted to six incidents of making false statements.

The charges involved "manipulating work samples and falsifying reports used by HCFA to evaluate how well HCSC was performing its contractual duties," according to an OIG statement. "HCSC concealed its poor performance and falsely claimed superior performance."

The plea agreements follow a 14-count indictment earlier this month of five current and former HCSC employees. They’re charged with conspiring to defraud, obstructing a federal audit, mail fraud, wire fraud and making false statements. Two other former employees have pled guilty to conspiracy and other charges and are awaiting sentencing. HCSC itself opted not to renew its Medicare contract last year, and is only processing claims until a replacement takes over.

The plea, which includes $4 million in criminal fines and a $140 million civil settlement, is the culmination of a qui tam suit filed by a HCSC employee who charged that the carrier had:

- Altered records of its claims processing performance.

- Failed to process claims in accordance with HCFA guidelines.

- Responded slowly to physician and beneficiary inquiries.

The case involved performance incentives that the carrier received from HCFA. The investigation centered on HCSC’s Marion office, says company spokesman Bob Kieckhefer. "Employees felt pressured to perform to their maximum for the reputation of themselves and their company," Kieckhefer says. He admits that some employees had been paid incentives based on their performance, though he adds that the incentives probably were not a contributing factor to falsifying performance data.

HCSC began an internal investigation in 1995 after it became aware of the suit. The carrier dismissed four employees in its Marion office, installed a new government contracts team and instituted new internal controls. These include expanded ethics training for employees as well as enhanced monitoring, says Kieckhefer.

HHS Inspector General June Gibbs Brown says investigations of other Medicare contractors are under way. "Rogue contractors have been caught cheating the program in the past," Brown says. "And I am sure, because of the vast amount of money spent on Medicare, others will be tempted to scam the program in the future."

Past cases of alleged contractor fraud and abuse include:

- BC/BS of Florida paid $10 million in 1993 to settle charges that it didn’t properly screen provider claims.

- BC/BS of Massachusetts paid $2.75 million to settle charges that it falsified its performance reports. The same contractor also paid $700,000 last year to settle a case in which it was accused of submitting false statements on its application to be a Medicare HMO.

- BC/BS of Michigan paid $51.6 million to settle charges that it falsified cost reports and used Medicare funds to pay claims that should have been handled by other insurers.

- BC/BS of California paid $12 million in 1997 for falsifying documents and destroying claims.

Ironically, the plea came as providers and their supporters in Congress have launched an offensive to weaken the False Claims Act. At a press conference, Brown didn’t miss the opportunity to blast the critics of the FCA. "It is one of the most potent weapons against fraud and abuse," she said. "Because of its deterrent value it should not be tampered with, as some have proposed."