FOR IMMEDIATE RELEASE                                                   CIV
WEDNESDAY, JANUARY 18, 1995                                  (202) 616-2765
                                                         TDD (202) 514-1888


    WASHINGTON, D.C. -- Blue Cross Blue Shield of Michigan Inc.
will pay the United States $27.6 million to settle civil claims
it improperly billed and submitted false documentation to the
government as the fiscal intermediary of the Medicare program in
Michigan, the Department of Justice announced today.  
    Assistant Attorney General Frank W. Hunger, in charge of the
Civil Division, and U.S. Attorney Lynne A. Battaglia of Baltimore
said the settlement resolves a qui tam complaint, United States
ex rel. Darcy Flynn v. Blue Cross Blue Shield of Michigan, that
was filed in U.S. District Court in Baltimore on August 4, 1992.  
     Blue Cross Blue Shield, under a contract with the Health
Care Financing Administration, managed the Medicare Part A
program and was required to audit the cost reports of
participating hospitals, determine which costs were authorized
under the Medicare regulations and make the appropriate payments. 
HCFA, the federal agency which administers the Medicare program,
monitored Blue Cross by reviewing a sample of the audits. 
     The complaint alleged that Blue Cross Blue Shield, which is
headquartered in Detroit, defrauded the government by performing
cursory and inadequate audits.  When HCFA asked to review
specific audits, a federal investigation revealed, Blue Cross
Blue Shield "corrected" the audits and backdated revised work
papers to conceal the fact that the original audits were
inadequate and poorly done.  
     HCFA, based on the "corrected" audits, concluded that Blue
Cross Blue Shield was performing its audits responsibly when in
fact Blue Cross Blue Shield was not identifying hospital payment
claims that did not qualify for Medicare reimbursement, causing
the improper payment of federal funds to the hospitals.
    "It is particularly disappointing that one of the very fiscal
intermediaries that HCFA relied on to administer the Medicare
program would defraud Medicare by the way it carried out its
contractual obligations," said Hunger.  
     Under the qui tam provisions of the act, Darcy Flynn, a
former Blue Cross auditor who filed the original action on behalf
of the government, will receive 20 percent of the proceeds.  The
False Claims Act permits the government to recover three times
the amount of its actual loss plus civil penalties of $5,000 to
$10,000 for each false claim.
    In addition, HCFA has cancelled both the Part A and Part B
contracts it had with Blue Cross Blue Shield.  
     Earlier today, Blue Cross Blue Shield paid the United States
$24 million to settle a federal lawsuit for illegally billing
Medicare for health insurance claims that should have been paid
by Blue Cross.