Department of Justice Seal

FOR IMMEDIATE RELEASE

CIV

WEDNESDAY, JULY 28, 1999

(202) 514-2007

WWW.USDOJ.GOV

TDD (202) 514-1888

SOUTHWESTERN FEDERAL MEDICARE CONTRACTORS ADMIT CONCEALING
EVIDENCE OF POOR PERFORMANCE AND OBSTRUCTING FEDERAL AUDITORS

WASHINGTON, D.C. -- The Justice Department today announced that Rocky Mountain Hospital and Medical Service d/b/a Blue Cross and Blue Shield of Colorado (BCBSC), and New Mexico Blue Cross and Blue Shield, Inc. (NMBCBS), each pleaded guilty to two felony counts of obstruction of a federal audit and conspiracy to obstruct a federal audit after admitting they concealed evidence of poor performance from federal auditors. Rocky Mountain Health Care Corporation (RMHCC), a related entity based in Denver, pleaded guilty to one count of conspiring to obstruct a federal audit.

As part of the criminal plea filed today in U.S. District Court in Santa Fe, N.M., the three companies agreed to pay a total of $1.5 million in criminal fines to the government. In addition to the criminal fines, BCBSC and NMBCBS are expected to pay nearly $12 million in a civil settlement to resolve their liability under the federal False Claims Act.

"Medicare contractors, as any other government contractors, must meet the highest standards of honesty and integrity," said David W. Ogden, Acting Assistant Attorney General of the Civil Division. "Those that do not can expect the Department to step in to protect Medicare beneficiaries and the American taxpayers."

U.S. Attorney Kelly said today, "The criminal conviction and civil settlement are significant to our community because they act not only as a deterrent to other like companies, but also carry a message to large corporations who are Medicare contractors that they must be vigilant in directing and supervising their employees in order to ensure that they honestly carry out their responsibilities to the United States."

From 1966 through 1994, BCBSC acted under contract with the Health Care Financing Administration (HCFA) to process claims submitted by Medicare beneficiaries and their doctors or other health care providers in accordance with Medicare coverage and payment rules.

NMBCBS, which was under contract with HCFA until 1995, administered the Medicare Part A program in Colorado and New Mexico. As the fiscal intermediary for those states, NMBCBS was responsible for auditing hospitals and other health care providers to ensure that those providers accurately reported their allowable costs. NMBCBS also was responsible for ensuring that the reimbursements requested by hospitals and paid by Medicare were accurate and appropriate.

RMHCC provided management services to BCBSC and NMBCBS and was jointly owned by both.

In addition to hearing the plea, the court today unsealed a complaint brought by two former employees of NMBCBS in May 1996. The lawsuit alleged that BCBSC and NMBCBS had, over the course of four years, altered documents and other information provided to HCFA concerning their performance. The case was brought in 1996, but has remained under seal until today while the government conducted an investigation into the allegations. After an investigation of the allegations, the government intervened and took over the lawsuit.

The complaint was filed under the provisions of the federal False Claims Act that permit a private citizen to sue on behalf of the United States alleging fraud against the government. Under the Act, the plaintiff, also know as a "relator" can recover 15 to 25 percent of the damages paid to the United states if the government intervenes in the action.

"Medicare contractors are the government's first line of defense against fraud, waste, and abuse, and when they fail to play by the rules, it's especially troubling," said Department of Health and Human Services Inspector General June Gibbs Brown. "If government contractors engage in Medicare fraud, they will be held accountable."

BCBSC withdrew from its Part B contract in 1994. NMBCBS withdrew from its Part A contract in 1995.

Both corporations have entered into Corporate Integrity Agreements with HHS.

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