Financial Fraud: CaRECORE NATIONAL LLC (“CARECORE”) Filed And Settled a Civil Fraud Lawsuit Against Benefits Management Company

Acting U.S. Attorney Announces $54 Million Settlement Of Civil Fraud Lawsuit Against Benefits Management Company For Improper Authorization Of Medical Procedures

CareCore Admits to Improperly Authorizing Over 200,000 Procedures Paid For With Medicare and Medicaid Funds<

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and Scott Lampert, Special Agent in Charge of the New York Regional Office for the Office of Inspector General for the Department of Health and Human Services (“HHS-OIG”), announced today that the United States simultaneously filed and settled a civil fraud lawsuit against benefits management company CaRECORE NATIONAL LLC (“CARECORE”), now part of eviCore healthcare, for authorizing medical diagnostic procedures paid for with Medicare and Medicaid funds over a period of at least eight years without properly assessing whether the procedures were necessary or reasonable. The settlement, approved in Manhattan federal court by U.S. District Judge Richard J. Sullivan, resolves CARECORE’s civil liabilities to the United States under the federal False Claims Act. Under the settlement, CARECORE must pay a total of $54 million, of which $45 million will be paid to the United States and $9 million will be paid to the states that are named as plaintiffs in the suit. CARECORE also admitted and accepted responsibility for, among other things, improperly approving prior authorizations requests for hundreds of thousands of diagnostic procedures paid for with Medicare Part C and Medicaid funds.

Acting U.S. Attorney Joon H. Kim said: “Benefit management companies are supposed to determine whether medical diagnostic procedures paid for with Medicare and Medicaid funds are necessary and reasonable. Instead, CareCore blindly approved hundreds of thousands of medical procedures over a period of many years, leaving Medicare and Medicaid to foot the bill. This lawsuit and settlement shows our commitment to ensuring that fraud and waste involving federal funds will be identified and stopped.”

HHS-OIG Special Agent in Charge Scott J. Lampert said: “CareCore’s irresponsible behavior compromised the integrity of the Medicare and Medicaid programs, and wasted millions of taxpayer dollars. HHS-OIG will continue to ensure that companies that do business with federally-funded health care programs do so in an honest fashion.”

The United States Complaint-In-Intervention (the “Complaint”) alleges that starting in as early as 2005, CARECORE, which performs prior authorization review for diagnostic procedures on behalf of many insurers, including those providing insurance through Medicare Part C and Medicaid Managed Care, was unable to review prior authorization requests in a timely fashion, and in order to avoid contractual penalties for failing to timely process the requests, CARECORE instituted a practice of improperly approving prior authorization requests. By 2007, CARECORE had formalized this practice into the “PAD program.” Between 2007 and 2013, through the PAD program, CARECORE improperly authorized over 200,000 diagnostic procedures.

As part of the settlement, CARECORE must pay $54,000,000 to resolve both federal and state false claims act claims, the latter of which will be the subject of a separate settlement agreement between CARECORE and the states. In the settlement, CARECORE admits, acknowledges and accepts responsibility for the following conduct:

1. CARECORE provides services to health insurers, including managed care organizations that provide services to beneficiaries of the Medicare Part C and Medicaid programs (collectively, “MCOs”). CARECORE provides prior authorization services, which consist of screening prior authorization requests for certain procedures for medical reasonableness and necessity. During the times pertinent to this matter, CARECORE’s Clinical Reviewers, who generally were nurses, received information from the treating physicians and input that information into CARECARE’s proprietary software system. That software system, based on the information provided, either recommended approval of the prior authorization or recommended further review by a physician.

2. Under the applicable regulations and contractual provisions, if a plan decides to implement prior medical necessity review in order to cover physician-ordered services, only a physician or other appropriate health care professional with sufficient expertise has the authority to deny a procedure. Thus, if a prior authorization could not be issued based on the information currently supplied by the treating physician, the prior authorization request, including all of the related information, was placed in an electronic queue, the Medical Review Queue. The prior authorization request could be accessed in the Medical Review Queue by a CAERCORE Medical Director, who is a physician retained by CARECORE, who would review the information and determine whether to conduct a peer call with the treating physician or appraise information gathered after the initial request in order to determine whether prior authorization of the procedure was appropriate, or should be denied.

3. In order for the MCOs to meet timelines in the applicable regulations and/or pursuant to its contractual obligations and provisions, CARECORE was required to issue a determination on prior authorization requests within fixed time periods known as “Turn Around Times,” or “TATs”, often as little as 4 hours for urgent requests, and 48 hours for non-urgent requests. CARECORE was also subject to contractual monetary penalties if it failed to maintain performance standards, including meeting the processing deadlines set forth in the regulations and contracts.

4. Starting in at least 2007, CARECORE developed the “Process As Directed,” or “PAD” Program. Under the PAD Program, CARECORE’s Clinical Reviewers would approve certain prior authorization requests awaiting physician review that had been on the queue for nearly the entire applicable TAT. The PAD Program consisted of Clinical Reviewers improperly approving certain prior authorization requests on the Medical Review Queue without having obtained any new objective medical information about the request, and without a Medical Director having independently reviewed the prior authorization request. These prior authorization requests (“padded requests”) were then transmitted to CARECORE’s client insurers, including MCOs, as preauthorized requests.

5. In 2007, the PAD Program was formalized into corporate policy, which included detailed training materials and daily reporting of the number of padded requests to high-level executives then-employed at CARECORE. When daily regular review of the Medical Review Queue showed the volume of cases in the Medical Review Queue was too high to make a timely decision for a significant volume of requests for prior authorization, certain Clinical Reviewers were directed by then-management to approve requests for prior authorization without obtaining or considering any new medical information.

6. From 2007 through June 13, 2013, CARECORE padded between 200,000 and 300,000 prior authorization requests.

7. In CARECORE’s role managing the prior authorization process, it had medical information of the beneficiaries seeking prior authorization. When CARECORE approved padded requests, CARECORE made a representation that it had appropriately reviewed the requests when it knew it had not. Thus, those padded requests incorporated CARECORE’s false representation that it had approved a case after completing the required review process. The MCOs thereafter provided coverage based on CARECORE’s approval of the prior authorizations.

8. MCOs would only pay for procedures that require a prior authorization if the prior authorization was granted in a manner consistent with the MCO’s policies and procedures. Thus, the PAD Program resulted in insurance claims related to the padded requests being presented to the MCOs for payment with federal and/or state government funds, and MCOs actually paid insurance claims made in connection with the padded requests.

The Complaint in this case was filed under the federal False Claims Act, which punishes violators who submit false claims or make false statements material to claims submitted to entities administering programs funded by the government. The allegations of fraud stated in the Complaint were first brought to the attention of the government by a whistleblower, who filed a lawsuit under the qui tam provisions of the False Claims Act. Those provisions allow private parties who have knowledge of fraud committed against the government to file suit on behalf of the government and share in any recovery. The United States may then intervene and file a complaint, as it did here.

Mr. Kim praised the investigative work of the Offices of the State Attorneys General of the 29 states also named as plaintiffs in the qui tam complaint. He also thanked the U.S. Department of Health and Human Services, Office of Inspector General, for its assistance in this case.

The case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorney Arastu K. Chaudhury is in charge of this matter.

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