HealthNow sued in whistleblower case for $85 millions in overpayments

Buffalo’s largest health plan is facing a federal whistleblower lawsuit, accused of overcharging school districts and the state and federal government by more than $85 million.

The complaint against HealthNow New York, the parent company of BlueCross BlueShield of Western New York, comes from Madelyn Barnes, a retired auditor from the company. The complaint was filed Feb. 3, 2016 under seal in U.S. District Court for Western New York. She is represented in the suit, which was unsealed Oct. 7, by Lippes Mathias Wexler Friedman LLP.

The suit accuses HealthNow of perpetrating a five-year "scheme" through 2013 tied to services billed to hospitals, skilled nursing facilities, ambulatory surgery centers and home health care providers that paid inflated reimbursements despite language limiting payments to lesser rates. The result, the suit says, were “significant overpayments” to facilities across the state.

An analysis identified $52 million in overpayments during 2013 for both private commercial and government Medicare/Medicaid claims; and more than $33 million in overpayments in 2014 after the problem was discovered, according to the suit.

Julie Snyder, senior vice president and chief marketing and communications officer for HealthNow New York, said in an email statement that the company only received a copy of the complaint Oct. 8 and is now reviewing the allegations. The company was aware of the allegations, however, during an investigation by the U.S. Attorney's Office and the New York State Attorney General.

Snyder issued an updated statement this evening: "The facts underlying the complaint have been known to HealthNow for several years. Our attorneys continue to review the lengthy complaint, but our initial review suggests that it is full of oversimplifications and misstatements of a very complicated set of facts. The damages the plaintiff alleges, for example, are highly exaggerated. HealthNow has at all times worked to resolve the billing errors identified by its auditors in the most fair and comprehensive way. Further, we fully cooperated with government authorities, and from our investigation, found no evidence of any significant cost to any state or federal health care program resulting from HealthNow policies."

HealthNow is the region's largest commercial health plan, with 2018 revenue of $2.6 billion and net income of $47 million. In addition to its BlueCross BlueShield division in Buffalo, the company operates a second division in the Albany market, BlueShield of Northeastern New York. Both markets were affected by the overpayment, the suit said.

According to the court filing, the discrepancy was discovered in 2013 by HealthNow’s reimbursement integrity unit, where Barnes worked, during routine internal auditing that found the company had disregarded or ignored its contractual provisions for at least 16 years.

Barnes told investigators she continued to push for review of contracts to determine the scope of the overpayments and to push for repayment, but HealthNow’s administrators directed that the issue be dropped and stated that only very limited recoveries would be pursued.

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