When Medicare fiscal intermediaries commit fraud or fail to detect it, they benefit, and so do hospitals.
That is what a former whistleblower and another whistleblower's lawyer told the House Commerce Committee's oversight panel last week.
The committee is considering whether new legislation is needed to crack down on Medicare contractors' fraud and other misbehavior.
Intermediaries would rather pay claims than find fraud, turning a blind eye to potentially padded claims from providers, said Ronald Osman, the Marion, Ill., lawyer who represented whistleblower Evelyn Knoob in her case against Blue Cross and Blue Shield of Illinois.
That approach to claims processing can be a boon to hospitals, which can get away with improperly billing Medicare when the program should have paid them less, said Darcy Flynn, the whistleblower whose False Claims Act lawsuit alleged fraud at Blue Cross and Blue Shield of Michigan.
"Where the money was really lost was in the 45 audits (submitted to HCFA by the Michigan Blues) per year that were not selected by HCFA for review, which would have likely received (poor) scores signaling huge overpayments to the hospitals," Flynn said.
Flynn also told Congress that the Michigan Blues made it easier for hospitals to repay huge overpayments to Medicare by allowing them more time.
"The Medicare program lost millions of dollars in interest income as a result of this 'suspense account' practice," Flynn said.
The Michigan Blues did not admit any wrongdoing in its $27.6 million civil settlement in 1995 (Jan. 23, 1995, p. 10). The Illinois Blues pleaded guilty to eight counts of fraud and paid criminal and civil fines totaling $144 million (July 20, 1998, p. 3).
Steven Hess, senior vice president and general counsel for the Michigan Blues, said the insurer's internal audit identified some "shortcuts" that helped hospitals return overpayments over a longer period of time.
"This is a regrettable activity in the history of the company, which we have long put behind us," Hess said.