Purpose

To determine the extent of implementation of the three recommendations included in our initial audit report, United HealthCare - Payments for Fraudulent and Improper Claims Submitted by Davis Ethical Pharmacy (Report 2012-S-10).

Background

Our initial audit report, which was issued on August 13, 2013, determined that, for the period January 1, 2008 through December 13, 2011, the New York State Health Insurance Plan (NYSHIP) made improper payments totaling $137,459 to Davis Ethical Pharmacy. Based on information obtained from the prescribers (the physicians indicated on the claims), auditors determined that Davis Ethical likely fabricated nearly all of the improper claims. Davis Ethical processed many of the improper claims well outside of normal business hours and often lacked records verifying that patients actually picked-up the drugs billed to United HealthCare (United). Moreover, as a result of our audit, we concluded that Davis Ethical routinely submitted fraudulent claims to NYSHIP and received payments for those claims.

We coordinated our audit and investigative work with the Nassau County District Attorney and the New York State Department of Financial Services. On December 10, 2015, William Davis, former owner Davis Ethical Pharmacy, pleaded guilty to Grand Larceny in the Second Degree in Nassau County District Court. William Davis was sentenced on February 9, 2016 and made restitution of $231,919 to the State, of which $137,459 was paid to NYSHIP for the improper payments identified in the initial audit report. We recommended that the United recover the improper payments we identified, formally assess the payments we did not test, and formally assess the conduct of William Davis.

Key Finding

United officials made progress addressing the problems we identified in our initial audit report.  At the time of our follow-up review, William Davis made full restitution of $231,919 to the State, of which $137,459 was paid to NYSHIP for the improper payments identified in the initial audit report  United also recovered $85,502 in prescription payments that we did not test.  Of the initial report’s three audit recommendations, two were implemented and one is no longer applicable.

Key Recommendations

None

Other Related Audit/Report of Interest

New York State Health Insurance Plan: United HealthCare - Payments for Fraudulent and Improper Claims Submitted by Davis Ethical Pharmacy (2012-S-10)