HCA Pays 840,000,000 to DOJ
2000 Health Care Fraud Recoveries
General American Life Insurance Company officials indicted
Richmond Indiana Dentist Pays For Fraud
Glendale Adventist Settles Billing Fraud Case
Hospital Chain Settles Billing Fraud Case
Orange County Case
Fraud on Postal Service Nets Settlement
September 1, 2001
HCA AGREES TO
PAY $840 MILLION IN GOVERNMENT'S LARGEST FRAUD SETTLEMENT EVER
Settlement Resolves Seven of the 27 Qui Tam Suits Filed Across the Country In
December 2000, DOJ reported that the nation's largest for-profit hospital chain,
HCA-The Health Company (formerly known as Columbia/HCA) agreed to pay $840
million in criminal and civil fines and penalties to resolve allegedly unlawful
billing of federally and state funded health care programs. $745 million, of
which $731.4 million will go to the Federal Government and $13.6 million to the
States, resolves only a portion of HCA's civil liability. The civil settlement
resolves allegations of billing for services provided to ineligible patients,
falsifying DRG codes, improperly billing for certain lab tests, and billing for
home health services that were medically unnecessary or never provided. The
agreement does not resolve allegations that HCA unlawfully included the costs of
running its hospitals on cost reports submitted to the Government, or that it
paid kickbacks to physicians to get Medicare and Medicaid patients referred to
its facilities. The criminal portion of the $840 million consists of a $95
million fine to be paid by HCA subsidiaries. The subsidiaries that have pled
guilty will be ineligible to participate in government health care programs.
The civil settlement includes the following: over $95 million to resolve
allegations of fraudulent laboratory billing practices; more than $403 million
to resolve allegations of upcoding; $50 million to resolve allegations that the
company claimed nonreimbursable marketing and advertising costs disguised as
community education; $90 million to resolve allegations of improper charges to
Medicare in the purchase of home health agencies; and, $106 million to resolve
allegations of billing for home health visits for nonqualified patients.
The settlement is the largest government fraud settlement ever reached by the
Justice Department and resolves seven of the 27 qui tam lawsuits filed in
various jurisdictions across the country, but consolidated in Washington, D.C.
As part of the settlement, HCA agreed to an eight-year corporate integrity
agreement, which according to HHS Inspector General June Gibbs Brown is
unprecedented in its scope and level of detail.
Senator Charles Grassley (R-IA), co-sponsor of the 1986 amendments to the
False Claims Act, believes that this settlement vindicates those who fought
efforts to gut the Act two years ago. Grassley stated: "Two years ago, hospitals
complained that prosecutors were after them for innocent billing mistakes. In
response, some legislators tried to gut the False Claims Act. Today's
announcement proves two things. One, outright fraud can masquerade as innocent
billing mistakes. Two, prosecutors know the difference, and they need a robust
False Claims Act to make their case." Former Attorney General Janet Reno
described the investigation into HCA's billing practices as "the largest
multiagency investigation of a healthcare provider ever undertaken by the U.S."
Significantly, the allegations not resolved by the civil settlement may
ultimately lead to HCA's greatest liability. The unresolved allegations, that
HCA unlawfully charged for the cost of running its hospitals on cost reports
submitted to the Government and paid kickbacks to physicians for referrals, are
likely to cost the company close to an additional $1 billion. Many of the
unresolved allegations are part of qui tam lawsuits filed by John Schilling, a
former reimbursement manager, and Jim Alderson, a former hospital CFO. Both
cases allege that HCA and its predecessor companies followed a policy of
including in their cost reports claims for reimbursement related to medical care
that they knew were inflated, unsupportable, or nonreimbursable. A major
allegation is that HCA then created "reserve" cost reports that itemized
improperly filed claims so that the money could be repaid to the government if
the fraud was ever discovered during an audit. In addition, HCA's hospitals
allegedly shifted purchase costs for home health agencies into management fees
in order to qualify for Medicare reimbursement.
False Claims Act
Recoveries Reach Record Level in 2000
2000, DOJ reported that the United States collected a record $1.5 billion in
civil fraud recoveries during the 2000 fiscal year—an increase of almost 50%
above the largest previous annual recovery in 1997.
$1.2 billion of the settlements and judgments were the result of qui tam
lawsuits. Payments to whistleblowers for the 2000 fiscal year totaled more than
fraud cases once again topped the list of annual recoveries, totaling more than
$840 million. This amount included what was the largest civil fraud recovery
ever (until record-breaking Columbia/HCA settlement in December 2000)—a $385
million settlement with Fresenius Medical Care to resolve four separate qui
tam lawsuits alleging various wrongdoing by its kidney dialysis subsidiary.
The largest of the four suits, which resulted in $253.3 million of the $385
million total settlement, involved allegations of fraudulent claims related to
intradialytic parenteral nutrition (IDPN), a therapy for patients undergoing
dialysis. The suit alleged that a Fresenius holding, NMC Homecare, Inc.
submitted claims for this nutritional treatment that were based on fraudulent
medical data, billed for equipment that was not used, and paid kickbacks to
facilities to induce referral of business for IDPN therapy. The relators were
former NMC employee Dana R. Austin, and a competitor of NMC, Ven-A-Care of Key
also recovered $170 million from Beverly Enterprises, Inc., the largest nursing
home operator in the United States, for alleged false billings to Medicare
involving over 400 nursing homes around the country. That suit, filed in 1995 by
Domenic Todarello, who formerly headed a number of Beverly nursing homes in
California and Arizona, alleged that Beverly billed Medicare for labor costs
incurred in treating non-Medicare beneficiaries and used phony documents to
support its claims for payment.
A health care
fraud settlement with Quorum Health Group, Inc., the nation's largest hospital
management chain, resolved 2 qui tam lawsuits. The largest of the suits
was filed in January 1993 by James Alderson, a former CFO for a Quorum-managed
hospital, and alleged that Quorum included non-reimbursable costs in its annual
cost reports and kept a secret set of cost report reserves identifying the
improper claims in case the scheme was uncovered.
Also in FY 2000,
GAMBRO Healthcare, Inc. and two subsidiaries agreed to pay a total of $53.1
million to settle a qui tam lawsuit alleging that the laboratories
submitted false claims for services provided to end stage renal disease
patients. The suit was filed by relators Jay Buford, William Schoff and Dianne
care, the largest category of fraud recoveries involved the production of oil
and other minerals from public lands. The Department recovered more than $243
million from companies alleged to have underpaid royalties on such production,
including $95 million from Chevron, $56 million from Shell, $43 million from
Texaco, $32 million from BP Amoco, $26 million from Conoco and $11.9 million
from Devon Energy. These settlements were all the result of a qui tam
lawsuit against 14 oil companies filed in 1996 by J. Benjamin Johnson and John
Martinek, former employees of Atlantic Richfield Co.
recoveries also included over $140 million in settlements with twenty-five
brokerage firms. These companies allegedly sold open market securities with
artificially low yields to municipalities refunding tax-exempt bonds, thereby
reducing the municipalities' purchase of special low-interest Treasury bonds.
The most significant "yield burning" settlement came from Solomon Smith Barney,
which agreed to pay $38.8 million to resolve these allegations.
procurement fraud accounted for another $100 million in recoveries, including
$54 million from the Boeing Corporation to resolve allegations that it placed
defective transmission gears in army Chinook helicopters. There is significant
evidence that the defective gears caused numerous accidents including a 1988
crash of a Chinook in Honduras in which five American soldiers were killed. The
settlement resolved two related qui tam actions filed by Brett Roby, a
former Quality Assurance Engineer for Boeing subcontractor SPECO Corp.
Also in fiscal
year 2000, Government contractor Jacobs Engineering Group, Inc. agreed to pay
$35 million to settle allegations that the company inflated lease payments under
its contracts with various government agencies. The settlement resolves a qui
tam action filed in 1997 by former Jacobs employee Edwin Bond. Bond was
subsequently dismissed from the action, but he has appealed.
for fiscal year 2001 began on a strong note with the largest FCA recovery ever,
a $745 million settlement with HCA-The Health Company (formerly
Columbia/HCA); a $30.6 million
settlement with LifeScan, Inc., and a $27 million settlement with National
Health Care Corp. The LifeScan settlement resolved a qui tam suit filed
in 1997 by two former employees, alleging that the company failed to file
medical device reports with the FDA advising it of the illnesses and injuries
resulting from defective blood glucose monitoring devices. According to DOJ, the
reports the company did file contained false, incomplete or misleading
information. The relators were Robert Konrad and John Pumphrey.
Care paid $27 million to settle allegations that it submitted inflate costs
reports to Medicare. The allegations came to light as a result of a qui tam
lawsuit filed by a former nursing home administrator for National Health Care's
Orlando facility, Philip Charles Braeuning.
Richmond Dentist Pays $2,500,000 to Government for Medicaid Fraud
April 17, 2001
Timothy M. Morrison, United States Attorney for the Southern District of
Indiana, announced that JAMES D. HERNLY, 56, Richmond, Indiana, was
sentenced to 33 months imprisonment today by U.S. District Judge S. Hugh
Dillin following his guilty pleas to six counts of mail fraud. This case was
the result of a 4-year investigation by the Indiana Attorney General's
Medicaid Fraud Control Unit in conjunction with the Federal Bureau of
Investigation, agencies participating in the Health Care Fraud Task Force
for the Southern District of Indiana.
HERNLY, a Richmond, Indiana dentist, was indicted in March, 1999 by a
federal grand jury in Indianapolis with six counts of mail fraud. HERNLY was
paid nearly $2.5 million over a five-year period by submitting false claims
to the Indiana Medicaid program. The claims were for procedures that were
never performed or for procedures more complex than actually performed.
According to Assistant United States Attorneys Sharon M. Jackson and Jill E.
Zengler, who prosecuted the case for the government, Judge Dillin also
imposed three years supervised release following HERNLY's release from
imprisonment. HERNLY was ordered to make restitution in the amount of
$963,148.32 and was fined in the amount of $25,000.00, ordered to pay
$600.00 in special assessments and also ordered to repay the state and
federal government $121,794.17 that was spent in investigating the case.
In addition to the criminal penalties, HERNLY also paid the United States
more than $1.8 million to settle civil causes of action resulting from his
conduct, including any liability that he may have under the civil False
Claims Act. Included in the $1.8 million is the restitution owed to the
government in the criminal case. Thus, the total sum paid by HERNLY to the
United States on this date, was just under $2 million for restitution, civil
settlement and criminal fines and costs.
According to United States Attorney Morrison, the civil False Claims Act was
enacted to deter fraud, waste and abuse of public monies and in federally
funded programs, like the Medicaid program. Under the False Claims Act, a
party who submits a false claim for payment is liable for three times the
amount of its loss, as well as a penalty of $5,500 to $11,000 for each false
claim that is submitted. As part of the civil settlement agreement, HERNLY
also agreed to be permanently excluded from participation in Medicare,
Medicaid and all other Federal health care programs.
In 1997, following execution of a search warrant on his office but prior to
HERNLY's indictment, the United States obtained a civil injunction to
maintain the majority of his assets under Court supervision during the
United States' investigation and to prevent Hernly from transferring any
property. As result of the injunction, the United States prevented the
dissipation of Hernly's assets and ensured that funds remained available to
repay the Medicaid program for the more than $960,000 loss that it suffered
as a result of his conduct.
Morrison stated, "This office is committed to the deterrence of fraud, waste
and abuse in government programs, like the Medicaid program, through full
application of both the civil and criminal remedies provided by Congress. In
this case, the government judiciously used its resources to ensure that
vital medical insurance programs, such as Medicaid, regain funds that were
unlawfully taken." Morrison commended the work of the investigators and
agents on the Task Force, noting that this case was extremely complex as the
investigators and agents had to determine whether dental services were
actually rendered and/or medically necessary.
GLENDALE ADVENTIST HOSPITAL'S PERINATAL MEDICAL GROUP
SETTLES WHISTLEBLOWER LAWSUIT ALLEGING MEDI-CAL FRAUD
A medical group associated with the Glendale Adventist Medical Center and a
doctor have agreed to pay $250,000 to resolve a “whistleblower” lawsuit alleging
fraudulent Medi-Cal billings for services provided to patients by residents at
the hospital, United States Attorney Alejandro N. Mayorkas announced today.
A settlement involving the Perinatal Medical Group and Dr. Hugo Riffel was
announced today when the United States Attorney's Office learned that a federal
judge had unsealed a lawsuit. The $250,000 settlement was paid last week.
The federal whistleblower lawsuit – technically a complaint filed pursuant to
the qui tam provisions of the False Claims Act – was filed by Dr. Caroline
Pieszak, who worked as a resident in the OB/GYN residency program at Glendale
Adventist Medical Center in 1995 and 1996. Dr. Pieszak alleged that Perinatal
Medical Group, Riffel and Glendale Adventist Medical Center routinely billed
Medi-Cal for simple vaginal deliveries conducted by residents enrolled in the
hospital's OB/GYN program but falsely represented that the services were
provided by licensed attending physicians.
Riffel was the director of the OB/GYN Teaching program at Glendale Adventist
Medical Center. The settlement resolves the allegations against Perinatal
Medical Group and Riffel, who did not admit any wrongdoing. The portion of the
lawsuit concerning Glendale Adventist Medical Center is still pending, although
the United States has elected not to intervene in the suit against the hospital,
but Dr. Pieszak has elected to pursue that portion of the lawsuit.
In exchange for the $250,000 payment, the United States has released Perinatal
Medical Group and Riffel from potential fraud claims and other claims that could
have been made under federal False Claims Act and other laws. In addition to the
payment, Perinatal Medical Group and Riffel have promised to comply with a
five-year Corporate Integrity Agreement with the Department of Health and Human
Services, Office of the Inspector General.
The investigation into Perinatal Medical Group and Dr. Riffel was conducted by
the Civil Fraud Section of the United States Attorney's Office in Los Angeles,
which received substantial assistance from the California Attorney General’s
Office and the Department of Health and Human Services, Office of the Inspector
The settlement agreement relates to United States and State of California ex
rel. Caroline Pieszak v. Glendale Adventist Medical Center, et al.,
CV98-6501-ABC. United States District Judge Audrey B. Collins unsealed the case
in an order filed on February 8.
Release No. 00-031
November 13, 2001
ORANGE COUNTY HEALTH CARE FIRM AGREES TO PAY $3.2 MILLION
TO SETTLE ‘WHISTLEBLOWER’ LAWSUIT
Covenant Care, Inc. has agreed to pay the United States $3.2 million to
settle a lawsuit that accused the Aliso Viejo health care company of
overcharging Medicare for its nursing services at more than 35 nursing
facilities it operates in California and other states.
United States Attorney John S. Gordon announced the settlement today after
learning late Friday that it had been approved by United States District Judge
Audrey B. Collins. Covenant Care paid the government half of the settlement on
October 29. Pursuant to the agreement, Covenant Care must pay the remaining $1.6
million, with interest, within one year.
Generally, Covenant Care nursing facilities provide residents with only
custodial care, which is not covered by Medicare. However, as is common in the
industry, the Covenant Care facilities set aside some beds that are certified
through Medicare to provide a higher level of medical care referred to as
“skilled nursing.” These skilled nursing beds are made available to Medicare
patients who typically have been discharged from hospitals and are transferred
to the nursing facilities to recover before returning home.
To ensure proper Medicare reimbursement for the skilled nursing, federal
regulations during the period 1995 through 1998, the time period covered by the
lawsuit, required that nursing facilities bill Medicare only for the “actual”
number of hours of nursing services that they provided Medicare patients and
that those hours be recorded and verifiable.
A federal investigation found that Covenant Care overcharged Medicare and
billed for nursing services that were really provided to non-Medicare residents.
The government found that Covenant Care knowingly reported to Medicare nursing
service hours that were not accurate. Those hours were not accurate for several
reasons, including: they were not recorded at the time the services were
performed; they were not recorded by, or obtained from, the nurses who performed
the services; they were based only on estimates or company targets as to the
amount of nursing that patients supposedly needed; and they could not be
verified by audits of reliable records.
The settlement in this case resolves a lawsuit filed in 1998 by Michael C.
McNall, the former controller of Covenant Care, under the qui tam, or
“whistleblower,” provisions of the False Claims Act. The United States
Attorney’s Office in Los Angeles investigated the charges and reached a
settlement with Covenant Care before intervening in the lawsuit.
In settling the lawsuit, Covenant Care denied any wrongdoing.
As part of the settlement, Covenant also entered into a Corporate Integrity
Agreement with the Office of Inspector General for the U.S. Department of Health
and Human Services. The CIA requires Covenant Care to implement a detailed
program to ensure that the company and its employees comply with federal health
care program requirements.
Under the False Claims Act, Mr. McNall will receive an award of between 15
percent and 25 percent of the proceeds from the fraud settlement.
The government investigation team in the case included agents from the San
Francisco Regional Office of Inspector General for the U.S. Department of Health
and Human Services. Also, assistance with financial analyses and cost audits was
provided by the United States Attorney’s Office for the Northern District of
California (San Francisco) and Medicare intermediary Mutual of Omaha.
Release No. 01-167
May 23, 2001
HOSPITAL CHAIN AGREES TO SETTLE GOVERNMENT’S CLAIM FOR
PHYSICIAN SELF-REFERRAL VIOLATIONS
Paracelsus Healthcare Corporation, a publicly traded hospital company, has
agreed to allow the United States’ claim for approximately $5.1 million as part
of Paracelsus’s bankruptcy plan of reorganization, pursuant to a negotiated
settlement of the United States’ Medicare fraud claims, United States Attorney
John S. Gordon announced today.
The government estimates that once Paracelsus’s reorganization plan is final,
the Medicare trust fund will recover between $2 and $3 million as the pro rata
share of its bankruptcy claim.
The government's fraud claims arose out of an investigation of allegations made
on behalf of the United States by a whistleblower in a civil suit filed under
seal in June 1998 in the United States District Court in Los Angeles pursuant to
the qui tam provisions of the False Claims Act.
The suit involved Paracelsus’ relationship with Alliance Healthcare
Corporation, a Los Angeles-based psychiatric services management company with
ties to board and care homes. The whistleblower alleged that Paracelcus gave
Alliance free office space and inflated management and director fees to induce
Alliance to funnel patients for psychiatric treatment to Hollywood Community
Hospital, a Paracelsus hospital in Van Nuys.
The government additionally claimed that Paracelsus knowingly made false claims
to the Medicare program for non-reimbursable items such as patient
transportation and Alliance’s office space.
Paracelsus has denied any wrongdoing.
Paracelsus currently owns and operates, through its subsidiaries, 10 hospitals
in seven states with a total of 1,287 beds. It filed for protection under
Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court for the Southern District of Texas on September 15, 2000.
The settlement announced today was approved by the Bankruptcy Court on Tuesday,
As part of the settlement, Paracelsus also has agreed to incorporate in its
reorganization plan a five-year Corporate Integrity Agreement with the Office of
Inspector General of the Department of Health and Human Services. The Corporate
Integrity Agreement requires Paracelsus to hire an independent auditing firm to
review, monitor and report on Paracelsus’s billings to federal health care
programs, and to continue training programs designed to ensure future compliance
with all federal health care program rules. Although Paracelsus’s bankruptcy
filing was limited to the parent company, the agreement also binds all of the
company’s subsidiary hospitals.
As part of the settlement, Paracelsus also has agreed to allow a $250,000 claim
by the whistleblower’s attorney, Mark Allen Kleiman, for attorneys’ fees. The
United States, the State of California and the whistleblower in turn have agreed
to grant Paracelsus certain releases and to dismiss claims against Paracelsus in
the litigation pending in Los Angeles.
United States Attorney Gordon said: "Payments to induce patient referrals
corrupt the professional judgment of health care providers and unnecessarily
deplete federal health care program funds. They are improper and illegal. Even
where the provider files for bankruptcy protection, we will seek to recover
losses to the Medicare program resulting from illegal physician self-referrals
and kickbacks for patient referrals. Along with possible criminal sanctions and
exclusion from federal health care programs, the False Claims Act is an
important tool in our ongoing effort to ensure that the health care services
given to Medicare beneficiaries are not corrupted by referral fees or other
financial incentives to physicians.”
The investigation of this matter was conducted by the United States Attorney’s
Office for the Central District of California, the Civil Division of the United
States Department of Justice, HHS-OIG Office of Investigations and Office of
Counsel, Blue Cross of California, and Transamerica Life Insurance Company.
Release No. 01-090
April 30, 2001
JUDGE UNSEALS FEDERAL 'WHISTLEBLOWER' SUIT ALLEGING PACIFIC
PRECISION METALS, INC. PROVIDED DEFECTIVE AND NONCONFORMING PRODUCTS TO THE
A federal judge in Los Angeles has unsealed a “whistleblower” lawsuit that
accuses the Azusa-based Pacific Precision Metals, Inc. (PPM) of providing the
United States Postal Service with thousands of defective and nonconforming
products used to process mail.
United States Attorney John S. Gordon today announced that the Government has
intervened in and taken over prosecution of the False Claims Act lawsuit filed
by a former quality assurance inspector of PPM’s Medcab Division in La Verne,
The lawsuit, originally filed by George Ocampo in December 1997, accuses
Medcab of providing the Postal Service with defective and nonconforming mail
drop units, and mail sorting cases and tables from approximately January 1997
through approximately November 1999.
According to the lawsuit, Medcab charged the Postal Service millions of dollars
its products and falsely certified that it complied with Postal Service contract
requirements. However, the company allegedly knew that it violated it four
contracts with the Postal Service in four ways: 1) by failing to manufacture its
products in accordance with Postal Service specifications and drawings; 2) by
failing to perform required inspections of its products prior to shipment; 3) by
failing to calibrate its measuring devices used to conduct inspections of its
products; and 4) by failing to correct the defective and nonconforming products
prior to shipment.
The lawsuit further alleges that Postal Service quality assurance inspectors
notified Medcab management in September 1997 that they would be visiting the La
Verne facility to review Medcab’s manufacturing and quality procedures for its
Postal Service contracts. In preparation for the Postal Service inspectors’
visit, Medcab management directed George Ocampo and other Medcab employees to
fabricate inspection records to make it appear to Postal Service inspectors that
Medcab had been conducting the required product inspections and measuring device
calibrations. As a result of this deception, Medcab was able to continue
furnishing defective and nonconforming products to the Postal Service.
The lawsuit, which was filed under seal pursuant to the qui tam provisions of
the False Claims Act, was unsealed on April 6 by United States District Judge
Lourdes G. Baird. The United States Attorney’s Office today filed an amended
complaint in the case. The case, United States of America, ex rel. George Ocampo
v. Pacific Precision Metals, Inc., CV98-4710-LGB, seeks damages and civil
The Government decided to intervene in this lawsuit following an investigation
by the United States Postal Service, Office of Inspector General.
Release No. 01-077
General American Life Insurance Company
For Immediate Release
GENERAL AMERICAN LIFE INSURANCE COMPANY, INC. EMPLOYEES ARE INDICTED FOR
FALSIFYING AND CONCEALING GENERAL AMERICAN'S ERROR RATES FROM MEDICARE
Missouri: United States Attorney Ray Gruender announced today that two
former employees of General American Life Insurance Company were indicted
today by a federal grand jury for conspiring to falsify and conceal from
federal auditors information about payment errors and other errors General
American made as a Medicare contractor.
MESSINA, 59, former Medicare Director at General American, was
indicted on one felony count of conspiring to falsify and conceal
information from federal auditors and two felony counts of making a false
statement to a federal agency.
WIMBLEY, 56 , former Medicare Manager at General American who reported
to Messina, was indicted on one felony count of conspiring to falsify and
conceal information from federal auditors and one felony count of making a
false statement to a federal agency.
convicted, Messina faces a maximum penalty of 15 years in prison and a
fine of $750,000 per count and Wimbley faces a maximum penalty of 10 years
in prison and a fine of $500,000 per count.
indictment alleges that Carl Messina and Mary Wimbley knowingly provided
false information to the Centers for Medicare & Medicaid Services
(formerly known as the Health Care Financing Administration), the agency
responsible for administering the Medicare program. The allegations were
originally brought in a "whistleblower" case under the qui tam provisions
of the False Claims Act by two former employees of General American, Harry
and Nancy Riggs. As part of the settlement of the civil "whistleblower"
suit in June 2002, the relators received 19 percent (or $14,440,000) of
the $76 million settlement announced by this office on June 25, 2002.
Medicare Part B carrier, General American acted under contract with the
Centers for Medicare & Medicaid Services to process claims submitted by
Medicare beneficiaries and their doctors or other health care providers in
accordance with Medicare coverage and payment rules. Under its contract
with the Centers for Medicare & Medicaid Services, General American was
responsible not only for making individual determinations regarding
eligibility and coverage, but also for processing approved claims for
payment from the Medicare trust fund. The Centers for Medicare & Medicaid
Services evaluated the adequacy of General American's claims processing
and related services through periodic performance audits.
indictment alleges that Carl Messina, the former Medicare Director at
General American, and Mary Wimbley, a former General American Medicare
manager, failed to report errors which they had identified in the quality
assurance process and further caused to be concealed General American's
true error rate by deleting claims selected for review by the Centers for
Medicare and Medicaid Service's Kansas City Regional Office. These former
employees also allegedly caused to be deleted those quality assurance
claims which they believed would adversely affect their error rate and
replaced the deleted claim files with claim files which they believed to
be satisfactory, i.e. ones which would not significantly affect their
error rate and ultimately their standing within the carrier rankings in
terms of performance. Additionally, they are alleged to have hidden
documents, altered other documents and falsified numerous reports mandated
by the Centers for Medicare & Medicaid Services.
disclosed in the government's prior settlement with General American, the
government contended that General American manipulated its quality
assurance data in order to maintain a high carrier ranking. In 1984, prior
to the implementation of the scheme, General American was the 38th ranked
Medicare carrier. Subsequent to implementation of the scheme, General
American rose, in 1986, to a ranking of number two. This favorable ranking
assisted General American in retaining its Medicare contract and competing
for additional contracts throughout the country.
American acted under contract with the Centers for Medicare & Medicaid
Services from 1966 through December 31, 1998. General American withdrew
from the Medicare program on December 31, 1998, prior to the filing of the
"Today's indictment of two former General American executives clearly
shows that the government will hold criminally responsible those
individuals who engage in corporate fraud - - even if the corporation pays
$76 million in restitution and penalties," said Ray Gruender, United
States Attorney for the Eastern District of Missouri.
commended the excellent work of the Federal Bureau of Investigation and
the Department of Health and Human Services Office of Inspector General
and Assistant United States Attorney Dorothy McMurtry who is handling the
set forth in an indictment are merely accusations, and each defendant is
presumed innocent until and unless proven guilty.