Health Care and Insurance and Government

WellPoint company slapped over Medicare: AdminaStar Federal agrees to pay $6 million to resolve old fraud allegations

October 3, 2005

A WellPoint Inc. subsidiary has agreed to pay $6 million to the federal government to resolve whistleblower accusations of rampant Medicare fraud over a seven-year span in the 1990s.

AdminaStar Federal altered claims information, overcharged the government, and even hung up on customers to reduce call times and improve evaluations, according to civil lawsuits filed by several whistleblowers in 1999 and 2000 in U.S. District Court for the Western District of Kentucky.

The Indianapolis-based company administers and processes Medicare claims in 10 states and Washington, D.C. Most of the problems occurred in Kentucky, according to Hancy Jones III, assistant U.S. attorney for the Western District of Kentucky.

The U.S. Departments of Justice and Health and Human Services investigated the case. The Department of Justice negotiated the settlement, which resolves the lawsuits.

"This type of Medicare fraud is not one I've seen very often," Justice Department spokesman Charles Miller said, adding that many cases involve billing for a higherreimbursing illness than what was treated.

WellPoint spokesman Jim Kappel said the company resolved the matters raised in the lawsuits long ago. He said AdminaStar decided to make the payment to "close the book on these issues.

"It was important to put this behind us," he said

The whistleblower suits had accused AdminaStar of a wide range of improper conduct involving Medicare, the federal health insurance program for people age 65 and over and the disabled.

One suit, filed by former AdminaStar executive Gary Calabrese, accused the company of overcharging the government for data processing and double-charging for rejected claims.

It also accused customer service representatives of "slamming" phone calls or hanging up on people. That shortened the amount of time employees spent on the phone and made them look more efficient, Jones said.

AdminaStar managers also tampered with sample claims the U.S. Health Care Financing Administration ran through its system to test processing, a suit alleged. Managers made manual corrections to the forms "to show falsely that AdminaStar had properly processed the claims, when in fact it had not," it states.

AdminaStar and United Government Services are WellPoint's Medicare processing businesses, Kappel said.

WellPoint doesn't break out revenue figures for AdminaStar. But fact sheets posted on its Web site show it processed more than 70 million claims last year and administered more than $23.6 billion in Medicare benefits.

It has worked as a Medicare contractor since 1966 and employs 2,100 people. It processes claims for several Midwestern states, including Indiana, Illinois and Wisconsin.

AdminaStar has improved its operations since the late 1990s, adding employee training and a companywide ethics and compliance program. It also has launched accuracy checks and regular reviews to ensure it's in compliance with its contracts.

"There has been a very aggressive quality and compliance program that's been in place for close to eight years now," Kappel said.

Most of AdminaStar's $6 million payment will go to the U.S. Treasury and the Medicare Program.

Miller said AdminaStar's $6 million is nowhere near the biggest the government has collected in a Medicare fraud investigation. Tennessee-based HCA Inc., for instance, once paid $1.7 billion.

"We've had several that are in the $700 million to $800 million range, too," he added.

Kappel said the fine will not affect AdminaStar's operations, and shouldn't affect its relationship with Medicare. In fact, he noted, the U.S. Centers for Medicare & Medicaid Services now recognizes AdminaStar's ethics and compliance program as an industry "best practice."
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