BLUE CROSS OF CALIFORNIA AND WELLPOINT HEALTH NETWORKS
TO PAY U.S. $9.25M TO SETTLE ALLEGATIONS OF MEDICARE FRAUD

WASHINGTON, DC – Blue Cross of California (BCC) and its parent company, WellPoint Health Networks, have agreed to pay the United States $9,250,000 to resolve allegations that BCC defrauded Medicare, the Justice Department announced today. BCC, which was under contract with the Centers for Medicare & Medicaid Services to process Medicare claims in California until December 2000 (Medicare Part A fiscal intermediary) is alleged to have knowingly falsified data regarding its performance of cost report audits for Medicare.

Blue Cross of California carried out watchdog services for the government with respect to Medicare fraud. BCC was responsible for, among other things, auditing cost reports submitted by hospitals and other Medicare providers to ensure that the providers were properly reporting their allowable costs and seeking accurate and appropriate reimbursements.

The allegations were originally brought in a qui tam or whistleblower case under the provisions of the False Claims Act by a former company auditor, Vipul Vaid. The lawsuit alleges that BCC falsified audit activity dates entered into an audit tracking database in an effort to deceive the government into believing that the company had performed more audit work than it actually performed during the pertinent fiscal year. The performance of required audit work was one of the criteria used by the government to evaluate BCC's performance, and renew its contract, as a fiscal intermediary each year.

"This settlement demonstrates that the government will continue to aggressively pursue health care fraud not only by providers but also by intermediaries or other contractors who submit false or fraudulent information to Medicare," said Robert D. McCallum, Assistant Attorney General for the Justice Department's Civil Division.

The settlement resolves claims submitted between 1990 and November 30, 2000 for the covered conduct. The case was handled jointly by the United States Attorney's Office in Los Angeles and the Civil Division of the U.S. Department of Justice. The government received investigative assistance from the Office of the Inspector General of the U.S. Department of Health and Human Services (HHS) and the FBI.

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