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December 3, 2007

DiNapoli: Audits Find More Abusive Practices in
New York State Health Insurance Program

Medical Facilities Inflated Bills, Costing Taxpayers $8 Million

Four health care facilities submitted inflated claims to the state’s Empire Plan after they inappropriately waived out-of-pocket costs for medical services provided to state and local government employees, costing taxpayers $8 million, according to audits released today by State Comptroller Thomas P. DiNapoli. Under New York State law, submitting an insurance claim with false information may constitute insurance fraud.

“These medical facilities engaged in abusive practices and inflated their bills, causing the state to incur significantly higher costs,” DiNapoli said. “These providers hurt taxpayers and must be held accountable for their actions. After only a handful of completed audits, I am very concerned about the abuse that we have found in this program. My office will continue to partner with the Department of Civil Service to ensure that taxpayers aren’t paying a dollar more than they should.”

Civil Service Commissioner Nancy G. Groenwegen said, “New York State strives to provide good health care benefits to workers and retirees at a cost that is affordable to the State. This balance is upset when sophisticated providers break the rules. The abuse identified in these audits is particularly insidious and difficult to detect because each instance appears on the surface to show a physician merely agreeing to accept what the insurance company pays. Because the patient benefits from this practice and is probably unaware that this is potentially a fraudulent activity, the likelihood that the patient will complain is remote. Although the Civil Service Department’s own audit staff have been responsible for the recovery of more than $24 million over the past two years, the systemic abuse revealed by these audits suggests that questionable if not fraudulent billing practices are much more prevalent than previously thought. It underscores the necessity for increased audit activity to ensure that taxpayer dollars are not wasted.”

As part of an effort to examine whether medical providers were complying with reimbursement requirements under the New York State Health Insurance Program (NYSHIP), auditors examined medical claims for four of the state’s largest ambulatory surgery centers for the six-year period of January 2001 through December 2006. Auditors found that these providers routinely waived out-of-pocket costs for Empire Plan members and inappropriately billed United HealthCare, the state’s insurance administrator, for these costs for a total of $8 million.

The providers were:

The individuals who were treated at these facilities all saw physicians who participated in the Empire Plan and also worked at these various facilities. However, none of these facilities were participating providers in the plan.

When Empire Plan members receive services from a non-participating medical provider, the member and the Empire Plan pay significantly more for these services. The member is required to pay higher out-of-pocket costs, and the Empire Plan pays more than it would have if the member had seen a participating provider, who has agreed to lower reimbursement rates. Auditors also determined that if these individuals had gone to participating providers rather than non-participating providers, United HealthCare would have paid at least 77 percent less for certain procedures. In addition, even though the providers waived the members’ out-of-pocket costs, the claims they submitted to United Healthcare did not reflect this and therefore were inflated.

Auditors determined that these out-of-pocket fees were likely waived by the providers because most Empire Plan members would not otherwise accept a referral to a non-participating provider and incur significant out-of-pocket costs. Instead the providers passed the costs onto United HealthCare, therefore, the state incurred substantially higher costs for services.

Under New York State law, submitting an insurance claim with false information, such as an inflated charge, may constitute insurance fraud. The Office of the State Comptroller referred the audit findings to the Department of Civil Service.

An audit released in September found that Amityville-based Island Medical Associates was charging out-of-network rates for physicians, who were actually participating physicians in the Empire Plan. Island Medical paid the physicians the smaller network allowance and retained the balance for itself. If the claims had been billed at network rates, Island Medical would have been paid only $800,000 – about $3.1 million or five times less than what was actually paid.

The Office of the State Comptroller has other audits of NYSHIP underway that are examining whether providers are complying with program requirements.

Auditors recommended that United HealthCare recover the $8 million from these providers and work with the Department of Civil Service to develop a course of action to prevent providers from taking advantage of the system and inappropriately waving patients’ out-of-pocket costs.

New York State provides health insurance coverage to active and retired state, local government and school district employees and their dependents. This coverage is provided by several benefit plans, including the Empire Plan. The New York State Department of Civil Service is responsible for overseeing these plans.

Click here for the audit of Endoscopy Center of Long Island

Click here for the audit of Capital Region Ambulatory Surgery Center

Click here for the audit of Digestive Health Center of Huntington

Click here for the audit of Day-Op Center of Long Island

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