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May 5, 2009


Medical Provider Abusing New York State Health Insurance Program

Abuse Costs State Nearly $800,000

A Nassau County medical practice took in an extra $787,134 in payments by routinely waiving the required out-of-pocket costs for services provided to members of the New York State Health Insurance Plan (NYSHIP), according to an audit released today by State Comptroller Thomas P. DiNapoli.

“Even in good fiscal times, abuse of taxpayer dollars is unacceptable,” DiNapoli said. “Now more than ever, we have to crack down on anyone who tries to manipulate the system. What this provider did is simply wrong. My office will keep working with the Insurance Department and the Department of Civil Service to stop this kind of behavior.”

Department of Civil Service Commissioner Nancy G. Groenwegen said: “This practice by non-participating health care providers of waiving patients’ normal out-of-pocket costs undercuts a key cost control feature of the Empire Plan. Fortunately, the system here worked to uncover the abuse. We brought the suspicions of our insurance carrier to the attention of the Office of the State Comptroller. Their auditors, who are funded partly by Empire Plan premium dollars expressly for this sort of work, verified that South Island was exploiting the system. Follow-up action by my department to redress this abuse and halt any similar practices elsewhere will be aggressive.”

When members of the Empire Plan, NYSHIP’s primary health benefits plan, receive services from a non-participating provider, they are responsible for paying a larger portion of their medical bill.
Auditors found South Island Orthopedic Group of Cedarhurst waived out-of-pocket costs for patients and passed those costs onto the state by submitting inflated bills to the Empire Plan.

The state Department of Civil Service contracts with United HeathCare (United) to process and pay medical claims submitted for Empire Plan members.

DiNapoli’s auditors found that from January 1, 2001 through October 31, 2008, South Island apparently waived the fees to attract patients who would not otherwise pay higher costs to see non-participating providers. This practice allowed South Island to remain a non-participating provider and collect significantly higher reimbursement rates.

The practice drives up costs for the state because it increases the likelihood that plan members will use non-participating providers.

Under New York State law, submitting an insurance claim with false information may constitute insurance fraud. DiNapoli has referred his findings to the Civil Service Department for appropriate action.

The audit recommends United:

  • Recover the $787,000 overpaid to South Island;
  • Formally advise South Island of the advantages of becoming a participating provider; and
  • Work with Civil Service to prevent South Island from waiving out-of-pocket costs in the future.

United determined, through its standard claims processing activities, there was significant risk South Island was routinely waiving members’ out-of-pocket costs and referred South Island to DiNapoli's auditors.

The Comptroller’s office conducts regular audits of NYSHIP. Recently auditors initiated a series of audits examining the practices of individual medical providers and have uncovered widespread problems.

In October, DiNapoli released a report that found 20 medical providers had routinely submitted inflated claims to the New York State Health Insurance Program (NYSHIP) after they inappropriately waived out-of-pocket costs for state and local government employees. The inflated claims cost the state almost $14 million.

NYSHIP is the largest public employer health insurance program in the nation, aside from the Federal government, providing health insurance to more than 1.2 million current and former state and local government employees.

Click here for a copy of the audit.


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