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MASSACHUSETTS BLUE CROSS, BLUE SHIELD PAYS U.S. $2.75 MILLION TO SETTLE MEDICARE DISPUTE WASHINGTON, D.C. -- Blue Cross and Blue Shield of Massachusetts Inc. will pay the United States $2.75 million to settle allegations the company submitted false Medicare reports in processing Medicare claims for Massachusetts, Maine, New Hampshire and Vermont, the Department of Justice announced today. Assistant Attorney General Frank W. Hunger, head of the Civil Division, and Deputy U.S. Attorney Karen Green of Boston said the settlement resolves a qui tam lawsuit filed in U.S. District Court in Boston in 1993 by Mary Jane Backman, a former employee of C & S Administrative Services for Medicare. C & S is a subsidiary of Massachusetts Blue Shield that contracted with the Health Care Financing Administration to process Medicare claims. "Medicare contractors like Massachusetts Blue Cross are the critical first line of defense against fraud and abuse in federal health care programs," said Hunger. "They are paid by the United States to process claims and to detect fraud and abuse by health care providers such as hospitals and doctors. "Their importance to enforcement of Medicare rules and regulations cannot be emphasized too much. And if they fail in that important role then it makes it doubly hard for the federal government to detect those who would abuse the system," he said. In her suit, Backman alleged that Massachusetts Blue Shield, based in Boston, misrepresented and inflated the number of claims and reviews it processed in periodic reports submitted to HCFA. Since the federal agency used the information to determine the company's costs in administering Medicare, the false data resulted in larger reimbursements than Massachusetts Blue Shield was entitled to in 1991, 1992 and 1993, according to the suit. Massachusetts Blue Shield, as part of the settlement agreement, also agreed to hire more workers to detect and investigate allegations of fraud and abuse by Medicare providers. Massachusetts Blue Shield also agreed to cap the reimbursement it will seek from the Medicare program for the coming year. HCFA expects to realize cost savings of approximately $3.3 million as a result of this separate agreement by Massachusetts Blue Shield. The Department estimated the government suffered single damages of $1.4 million. Backman filed her suit under a provision of the False Claims Act that allows private parties to sue companies and individuals that have submitted false claims to the federal government. Of the amount paid to the United States, Backman will receive $550,000. The False Claims Act permits the recovery of three times the amount of actual loss to the government plus civil penalties of $5,000 to $10,000 for each act in violation of the law. The Office of the Inspector General for the Department of Health and Human Services, which investigates allegations of fraud and abuse in the Medicare program, and the U.S. Attorney in Boston investigated the case. #### 94-558