NEW YORK — Federal authorities have accused New York City officials of a five-year scheme to defraud Medicaid, working with a contractor to exploit loopholes in Medicaid’s computerized billing system to collect reimbursements that amount to tens of millions of dollars.
The office of Preet Bharara, the U.S. attorney for the Southern District of New York, said on Monday that the city’s Department of Health and Mental Hygiene and the contractor, Computer Sciences Corp., created schemes that would trigger reimbursements on tens of thousands of false claims for early intervention program services for infants and toddlers.
In one scheme, the city and the firm switched diagnosis codes on children, using a default code — 315.9, which designates an “unspecified delay in development” — that Medicaid would automatically approve, the prosecutor’s office said.
Other schemes were intended to circumvent Medicaid rules that required the city and the computer firm to exhaust private insurance coverage before billing Medicaid, Bharara’s office said.
If the city did not have adequate insurance information from the patient, it would not make any effort to find the correct policy information. Instead, a computer program was created that would automatically insert 999-999-999 as the purported policy number. Private insurers would quickly reject the claims, freeing the city to submit them to Medicaid.
The lawsuit, which follows a whistle-blower’s complaint, was filed under the False Claims Act. The lawsuit demands triple damages and penalties, but does not specify how much it is seeking. But in just one four-day period in April 2009, the lawsuit claims that the false diagnosis data was used on more than 600,000 claims, resulting in a $49 million payment from Medicaid to the city.
Bharara said that Computer Sciences and the city had “created computer programs that systematically, and fraudulently, altered billing data in order to get paid by Medicaid as quickly as possible.”
“Billing frauds like those alleged,” he added, “undermine the integrity of public health care programs.”
A spokesman for the city’s Law Department said the city had “cooperated fully” with the federal investigation. “But we strongly disagree with the allegations, which we believe involve technical billing issues, not fraud,” the Law Department said. “The Health Department acted appropriately and all services billed were authorized and provided.”
Computer Sciences said in a statement that it had worked cooperatively with Bharara’s office over the last two years, and had also conducted its own review of the claims. “We believe there is no factual or legal basis to support virtually all the allegations of which we have been made aware during the course of the inquiry, and that the complaint is without merit,” the company said.