Federal officials filed a lawsuit Monday against the city of New York and a private contractor for a five-year long scheme that defrauded Medicaid’s computerized billing system of tens of millions of dollars.
The U.S. attorney’s office for the Southern District of New York charged New York’s Department of Health and Mental Hygiene and its contractor, Computer Sciences Corporation, with gaming the federal Medicaid system to trigger federal reimbursements to the city for tens of thousands of false claims for an early intervention program for infants and toddlers.
The program offers services to small children diagnosed with a condition that causes developmental delay. Under federal Medicaid law, New York City will seek coverage for the children from private insurers if at all possible — and can bill Medicaid if it exhausts all private insurance options.
According to the Justice Department, NYC and its contractor on the project, Computer Sciences Corporation (CSC), built two computer programs to up the number of children who would be rejected by private insurers and shunted into Medicaid — which would bring the city larger federal reimbursements than private coverage. DOJ alleges that New York essentially bought CSC’s participation in the scheme by offering bonuses when they recouped more in Medicaid payments for the city than expected — 15 percent of any extra payments over the threshold.
The first fraudulent computer program allegedly identified any children in the program whose state-issued policy IDs were missing or incomplete and filled them in with a default policy number, which New York City and CSC “knew would result in denials by private insurers.” The program led to “tens of thousands of false claims to Medicaid,” even though the state could have easily found the children private coverage.
Then CSC built a program that would take all claims that had been pending with a private insurer for a certain amount of time — first 90 days, then 120 days — and submitted them to Medicaid by improperly using a code that claimed the insurer had rejected the patient. The system, which the Justice Department filing slammed as a “dummy denial” program, rejected patients even when insurer were waiting on outdated requests from New York City itself.
And if that weren’t enough, DOJ charged the company with building a computer system that automatically changed diagnosis codes submitted by health care providers of the children in the early intervention program that it expected Medicaid to reject with a different code, a generic diagnoses coded 315.9, which Medicaid would accept.
The U.S. attorney is suing the city of New York and Computer Sciences Corporation for three times the amount they defrauded from federal taxpayers, although it’s not clear how much that is. But the lawsuit charges that in just four days in April 2009, the schemes falsely charge Medicaid for over 600,000 claims, which earned the city $49 million from Medicaid.
“As alleged, CSC and the City created computer programs that systematically, and fraudulently, altered billing data in order to get paid by Medicaid as quickly as possible and as much as possible,” said U.S. attorney Preet Bharara in a statement. “Billing frauds like those alleged undermine the integrity of public healthcare programs like Medicaid.”
New York City and Computer Sciences Corporation denied the charges.
Fraud in Medicaid and Medicare programs has been going on for years and has cost federal taxpayers millions. As far back as 2005, former New York City Medicaid fraud investigator, James Mehmet, told The New York Times that as much as 40 percent of all the city’s Medicaid claims are “questionable,” whether suspected fraud or abuse. That would have been $18 billion in 2005 — and the program’s expanded significantly since.
In a more conservative estimate, the federal General Accountability Office reported that the federal Medicaid authority, the Centers for Medicare and Medicaid Services, gave out $14.4 billion in improper payments in 2013.