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Justice News

Department of Justice
U.S. Attorney’s Office
Southern District of New York

FOR IMMEDIATE RELEASE
Wednesday, July 29, 2020

Manhattan U.S. Attorney Announces $2.775 Million Settlement Of Medicaid Billing Fraud Case Against New York City And Computer Sciences Corporation

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and Scott Lampert, the Special Agent in Charge for the New York Office of Inspector General of the U.S. Department of Health and Human Services (“HHS-OIG”), announced today the entry of two settlements in a Medicaid billing fraud lawsuit against New York City (the “City”) and Computer Sciences Corporation (“CSC”).  The settlements resolved allegations brought by the United States and the State of New York that defendants knowingly failed to take reasonable measures to obtain private insurance coverage before billing Medicaid for early intervention program (“EIP”) services, such as speech and physical therapy, for young children. 

Under the settlements, which were approved yesterday by U.S. District Judge Jed S. Rakoff, the City and CSC agreed to pay a total sum of $2.775 million, with $1,585,435 being paid to the United States and the remaining amount to the State of New York.  As part of the settlements, defendants admitted, acknowledged, and accepted responsibility for conduct that resulted in the City having received payments from Medicaid for EIP services that Medicaid would not otherwise have made pursuant to its payment regulations and procedures.

 Acting U.S. Attorney Audrey Strauss said:  “Medicaid covers vitally needed medical care for millions of people in New York.  Compliance with billing requirements ensures the financial integrity of the Medicaid program.  This Office is committed to holding recipients of Medicaid funding and their billing agents responsible for complying with these billing requirements.”

HHS-OIG Special Agent in Charge Scott J. Lampert said:  “Millions of people in New York depend on Medicaid for vital services, and taxpayers across the state pay for that care.  HHS-OIG will continue close cooperation with our State and Federal law enforcement partners to preserve this essential funding and ensure that it is used properly.”

As alleged in the complaint filed by the United States in September 2016, the City was responsible for paying for EIP services for young children in New York City and then was permitted to seek reimbursement from private insurers, Medicaid, and other funding sources.  In 2007, the City retained CSC as its billing agent to submit EIP reimbursement claims.  Although the City and CSC knew that Medicaid rules required them to take reasonable measures to obtain private insurance coverage before submitting EIP claims to Medicaid, they frequently ignored that billing requirement.  For example, although the City knew that it received no response from private insurers for many EIP claims, the City and CSC failed to contact those insurers in a significant number of cases to follow up on the claims and determine the reason for the lack of a response.  Instead, the City instructed CSC to treat those claims as having been denied by the private insurers and submit them to Medicaid using a code – known as “0Fill” – to indicate there was in fact no private insurance coverage.

In the two settlements, the City and CSC made numerous factual admissions.  The City admitted, acknowledged, and accepted responsibility for, among others, the following conduct:

  • the City was responsible for the provision of EIP services to eligible children in New York City, including preparing individualized family service plans, contracting with and paying treating providers such as audiologists and speech therapists who delivered EIP services, and seeking reimbursement for the EIP services provided to eligible children;
  • in 2005, the City issued a request for proposal for a new fiscal agent for EIP, and a corporate predecessor of CSC responded to that request for proposal;
  • between 2005 and 2007, the City and CSC engaged in discussions about the City’s expectations for CSC as the City’s EIP fiscal agent, during which the City advised CSC that when seeking reimbursement for EIP services for an eligible child with health coverage from both private insurance and Medicaid (“dual-eligible EIP beneficiaries”), the sequence of billing was to be: 1) private insurance, 2) Medicaid, and 3) EIP funds from New York State;
  • in September 2007, the City and CSC signed a fiscal agent contract, after which CSC began developing systems and computer programs for the City; and
  • from 2009 to 2012, the City received reports from CSC regarding instances where there had been no responses from private insurers for EIP claims involving dual-eligible beneficiaries; in a significant number of such cases, the City did not inquire with private insurers to determine the cause(s) for their lack of response, and did not direct CSC to so inquire.

CSC also admitted, acknowledged, and accepted responsibility for, among others, the following:

  • in or about September 2010, CSC and the City discussed a plan to develop a procedure for designating claims as “denied” in CSC’s internal EIP database once those claims had been pending with private insurers for 90 days without an adjudication;
  • the City approved that plan, and CSC proceeded to populate the claims that had received no response from private insurers after 90 days with the “denial” designation in its claims database;
  • CSC also obtained permission from the City to submit those claims to Medicaid with the “0Fill” modifier – which, according to Medicaid’s claim submission guide, was to be used either for “when it is known that the primary payer or any other payer prior to Medicaid[] does not cover the services and so will not pay any amount towards the claim,” or for claims that “have been denied (the services were not covered) or were paid zero (the entire charge was adjusted, for example, applied to deductible) by any prior payer;” and
  • as result, the City received payments from Medicaid for EIP services that Medicaid would not otherwise have made pursuant to its payment regulations and procedures.

These settlements arise from a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act, which allow private persons – known as “relators” – to file civil actions on behalf of the United States and share in any recovery.  

Ms. Strauss praised the outstanding investigative work of the HHS-OIG, and she thanked the Medicaid Fraud Control Unit at the New York State Attorney General’s Office for its extensive collaboration in the investigation and litigation of this case.

This case is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorneys Li Yu and Arastu Chaudhury are in charge of this case.

Topic(s): 
Health Care Fraud
Contact: 
Jim Margolin, Nicholas Biase (212) 637-2600
Press Release Number: 
20-157
Updated July 29, 2020