FOR IMMEDIATE RELEASE WEDNESDAY, JANUARY 18, 1995

CIV (202) 616-2765 TDD (202) 514-1888

BLUE CROSS BLUE SHIELD OF MICHIGAN PAYS U.S. $27.6 MILLION FOR SUBMITTING FALSE MEDICARE DATA WASHINGTON, D.C. -- Blue Cross Blue Shield of Michigan Inc. will pay the United States $27.6 million to settle civil claims it improperly billed and submitted false documentation to the government as the fiscal intermediary of the Medicare program in Michigan, the Department of Justice announced today. Assistant Attorney General Frank W. Hunger, in charge of the Civil Division, and U.S. Attorney Lynne A. Battaglia of Baltimore said the settlement resolves a qui tam complaint, United States ex rel. Darcy Flynn v. Blue Cross Blue Shield of Michigan, that was filed in U.S. District Court in Baltimore on August 4, 1992. Blue Cross Blue Shield, under a contract with the Health Care Financing Administration, managed the Medicare Part A program and was required to audit the cost reports of participating hospitals, determine which costs were authorized under the Medicare regulations and make the appropriate payments. HCFA, the federal agency which administers the Medicare program, monitored Blue Cross by reviewing a sample of the audits. The complaint alleged that Blue Cross Blue Shield, which is headquartered in Detroit, defrauded the government by performing cursory and inadequate audits. When HCFA asked to review specific audits, a federal investigation revealed, Blue Cross Blue Shield "corrected" the audits and backdated revised work papers to conceal the fact that the original audits were inadequate and poorly done. HCFA, based on the "corrected" audits, concluded that Blue Cross Blue Shield was performing its audits responsibly when in fact Blue Cross Blue Shield was not identifying hospital payment claims that did not qualify for Medicare reimbursement, causing the improper payment of federal funds to the hospitals. "It is particularly disappointing that one of the very fiscal intermediaries that HCFA relied on to administer the Medicare program would defraud Medicare by the way it carried out its contractual obligations," said Hunger. Under the qui tam provisions of the act, Darcy Flynn, a former Blue Cross auditor who filed the original action on behalf of the government, will receive 20 percent of the proceeds. The False Claims Act permits the government to recover three times the amount of its actual loss plus civil penalties of $5,000 to $10,000 for each false claim. In addition, HCFA has cancelled both the Part A and Part B contracts it had with Blue Cross Blue Shield. Earlier today, Blue Cross Blue Shield paid the United States $24 million to settle a federal lawsuit for illegally billing Medicare for health insurance claims that should have been paid by Blue Cross. ##### 95-032