A federal judge has dismissed Highmark Blue Cross and Blue Shield's claims that HCFA unfairly excluded the Pennsylvania insurer from a fraud-fighting Medicare contract because it had recently settled fraud allegations.
In September 1998, the Camp Hill, Pa.-based insurer agreed to pay $38.5 million in civil fines to settle allegations that its predecessor, Pennsylvania Blue Shield, lied to HCFA about its Medicare claims-processing performance. Pennsylvania Blue Shield and Blue Cross of Western Pennsylvania merged to form Highmark in 1996.
Highmark suffered another blow in May, when HCFA decided not to include the insurer in an elite group of contractors charged with finding and fighting Medicare fraud.
Highmark sued HCFA in June, alleging the agency would have included it in the contracting pool if not for the settlement, which was signed two years after the alleged activities ceased. The settlement, Highmark contended, prohibited HCFA from excluding the company from any Medicare work.
HCFA said it would consider Highmark for future Medicare work when it has shown compliance with the year-old agreement.
U.S. District Judge James McClure Jr. in Harrisburg, Pa., said the government was well within its legal rights to wait until Highmark has shown compliance before awarding it any fraud-fighting contracts, which are expected to pay out $500 million over the next five years.
Highmark spokesman Brian Herrmann said the company was disappointed with the judge's decision.
"Highmark currently serves the government responsibly as a contractor and, through the settlement, should be considered for future business based solely on its existing merit and current performance," Herrmann said. "Contractors who volunteer information and cooperate in investigations should not be precluded from future bids. The message that this sends to other contractors is not to cooperate and not to disclose information."
The judge's decision came four days after U.S. Attorney David Barasch charged two former Highmark executives in a separate criminal investigation of former Highmark officials, which has continued since the civil settlement.
Everett Bryant of Raleigh, N.C., who once worked for HCFA's Philadelphia office, and Robert Warren of Shiremanstown, Pa., have agreed to plead guilty and are cooperating with the investigation, Barasch's office said.
Three other former Highmark employees have been criminally charged in the probe, and two of them have pleaded guilty.