Highmark, a successor company to two Pennsylvania Blues plans, has agreed to pay $38.5 million in civil fines, and a former vice president pleaded guilty in July to lying about the plan's Medicare claims processing performance, the U.S. government announced late last week.
Former Vice President Judith Krafsig-Kearney, of Mechanicsburg, Pa., who played an undercover role in the investigation, pleaded guilty July 23 to three counts of criminal fraud and faces a maximum of three years in prison and a $300,000 fine (See chart).
Krafsig-Kearney's plea agreement was signed July 23 but was not entered into the court record until last week.
In the agreement, Krafsig-Kearney said she would cooperate with investigators "by providing information concerning the unlawful activities of others," and she consented to "act in an undercover capacity" by allowing agents to monitor and tape her conversations.
U.S. Attorney David Barasch in Harrisburg, Pa., said his office expects to file criminal charges against others soon.
"This is not the first time this (type of settlement) has happened, and it won't be the last," Barasch told MODERN HEALTHCARE.
The Highmark investigation covered 1989 to 1996, a period during which Highmark's predecessor, Pennsylvania Blue Shield, handled Medicare claims in four states and the District of Columbia. Pennsylvania Blue Shield and Blue Cross of Western Pennsylvania merged to form Highmark in 1996.
Krafsig-Kearney and others not yet named allegedly falsified information given to HCFA auditors assessing the company's performance as a contractor from 1989 through 1996, the government contends.
A company spokesman said Pennsylvania Blue Shield discovered the scheme through an internal investigation and began cooperating with the government in late 1995. The insurer, then known as Highmark, began an aggressive compliance program in 1996, he said.
The Highmark case closely follows the largest settlement ever paid by a Medicare contractor in answer to fraud charges.
In July, Blue Cross and Blue Shield of Illinois agreed to pay a $144 million fine and pleaded guilty to eight counts of fraud (July 20, p. 3). Five company officers were indicted, and two others pleaded guilty in the Illinois case. The pair are awaiting sentencing.
Allegations that Krafsig-Kearney and others intentionally delayed the processing of paper claims in order to pass the government audit makes the case similar to the Illinois Blues matter.
In that case, employees were accused of lying to HCFA auditors and shredding Medicare claims to falsely improve the insurer's performance. Those employees were paid bonuses based on the lowered levels of the Blues' error rates.
Brian Herrmann, a Highmark spokesman, declined to comment on whether Krafsig-Kearney or others received bonuses based on Highmark's performance on HCFA audits.
No beneficiaries were harmed by the alleged fraud, Herrmann said.
Herrmann confirmed that Krafsig-Kearney was no longer employed at Highmark but declined to discuss whether others have left the company in connection with the alleged fraud.
Highmark intends to keep its Medicare contracts with the exception of its New Jersey contract, which it relinquished last month to Empire Blue Cross and Blue Shield of New York. That move was not prompted by the investigation, Herrmann said.
Herrmann stressed that overall, Highmark has performed well enough as a Medicare carrier to win national awards for its anti-fraud efforts.
Four whistleblowers-current and former employees Linda and Brent Hicks, Lynn Bultena and Susan Howell-will share a total of nearly $6 million for their contributions to the investigation. U.S. Attorney Barasch said his investigation began before the suits were filed, but said the four added details and new information to the case.