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September 20, 2007


DiNapoli: Audit Finds Abusive, Potentially Fraudulent Billing
in New York State Health Insurance Program

Medical Provider Overbilled United Healthcare by $3.1 Million

Amityville-based Island Medical Associates inappropriately billed $3.1 million in out-of-network rates to United HealthCare for service provided by physicians participating in the state health insurance plan, according to an audit released today by State Comptroller Thomas P. DiNapoli. In this instance, the out-of-network rates were five times higher than network rates.

“This provider engaged in abusive and potentially fraudulent billing practices,” DiNapoli said. “This hurts taxpayers and drives up everyone’s health care costs. United HealthCare should recover these inappropriate payments and suspend all pending payments to Island Medical.

“These are tax dollars. This money is supposed to pay for the true costs of services. My office is working with the Department of Civil Service to closely scrutinize these expenses, so stay tuned. If there’s fraud, we’ll find it.”

“The Department of Civil Service, which oversees the health benefits plan that covers State and many local public employees, has long been committed to ensuring that health care dollars produce real benefits for workers and retirees,” said Civil Service Commissioner Nancy G. Groenwegen. “This joint effort with Comptroller DiNapoli has uncovered unacceptable provider billing practices that we are determined to have changed. We will continue to work cooperatively with the Comptroller on an ongoing basis to ensure that the financial interests of taxpayers and State and local governments will be protected.”

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, such as the Empire Plan, which are administered by different health care companies. United HealthCare is responsible for administering the medical/surgical and major medical portion of the Empire Plan. The New York State Department of Civil Service is responsible for overseeing the New York State Health Insurance Program (NYSHIP).

The Office of the State Comptroller has another six audits underway of NYSHIP, examining reimbursements to non-participating providers.

In the six-year period from January 2001 through December 2006 that auditors examined, United HealthCare paid a total of $3.9 million for physicians’ professional service claims submitted by Island Medical, all at out-of-network reimbursement rates. Island Medical operates a medical facility for urological services. Physicians who practice at this facility pay Island Medical a nominal one-time fee for unlimited lifetime use of the facility and equipment, and share in the corporation’s profits.

Auditors found that Island Medical submitted claims on behalf of physicians, who were participating physicians in the Empire Plan and practiced at the Island Medical facility, and inappropriately charged nonparticipating provider rates. Island Medical paid the physicians the smaller network allowance for the services and retained the balance for itself. Island Medical Associates is a nonparticipating provider. If the claims had been billed at network rates, United HealthCare would have paid only $800,000 – about $3.1 million less.

Island Medical claimed that these physicians actually worked for them; therefore, it could bill for their services. However, auditors reviewed the agreements between the physicians and Island Medical and determined that these physicians were not employees of Island Medical and should have billed for the services themselves. The agreement gave no authority to Island Medical to control or supervise the physicians’ treatment of patients, and physicians had to maintain their own liability insurance. Rather, the agreement allowed the physicians to simply use the corporation’s facilities and share in some of the profits.

Auditors referred their findings to United HealthCare officials who later informed auditors that they also believe that Island Medical’s claims were abusive and potentially fraudulent.

Auditors recommended that United HealthCare recover $3.1 million from Island Medical and suspend all pending payments until its status as a medical service provider has been clarified. Auditors also recommended that United HealthCare implement better controls to ensure that participating providers are not being inappropriately reimbursed at out-of-network rates.

Click here a copy of the audit.


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