Purpose

To determine whether Long Island Laparoscopic Surgery, PLLC waived Empire Plan members’ out-of-pocket costs, and if so, to quantify the overpayments made by United HealthCare resulting from this practice. The audit covered the period July 1, 2011 through March 31, 2015.

Background

The New York State Health Insurance Program (NYSHIP) provides health insurance coverage to active and retired State, participating local government, and school district employees, as well as their dependents. The Empire Plan is the primary health benefits plan for NYSHIP, covering a range of services from inpatient hospital care to outpatient surgical procedures and physician office visits. The New York State Department of Civil Service contracts with United HealthCare (United) to process and pay medical claims from health care providers for services provided to Empire Plan members.

United contracts with in-network participating providers who agree to accept payments, at rates established by United, to furnish medical services to Empire Plan members. Members pay a nominal co-payment to the participating provider for the services rendered. Members may also choose to receive services from out-of-network non-participating providers. United reimburses claims from non-participating providers at amounts that are generally higher (and often significantly higher) than the rates participating providers agree to accept for the same services. Consequently, to encourage members to use less costly participating providers, the Empire Plan requires members to pay higher out-of-pocket costs (deductibles and co-insurance) when they use non-participating providers.

In accordance with the Empire Plan’s requirements, when United processes a non-participating provider’s claims, it is with the understanding that Empire Plan members are liable for a portion of the claimed amount, representing members’ out-of-pocket cost-sharing obligations. However, if a non-participating provider does not collect (i.e., waives) the member’s out-of-pocket costs, it will result in United making an excessive payment on the claim.

Our audit focused on claims submitted to United by Long Island Laparoscopic Surgery, PLLC (Long Island Laparoscopic), a non-participating provider located in Long Island, New York. During the period July 1, 2011 through March 31, 2015, United paid claims totaling $16 million for services provided by Long Island Laparoscopic to Empire Plan members.

Key Findings

• Long Island Laparoscopic routinely failed to pursue collection of out-of-pocket cost-sharing obligations from Empire Plan members and, as such, we concluded Long Island Laparoscopic waived these amounts. Consequently, United made overpayments on claims submitted by Long Island Laparoscopic. Further, by not collecting members’ out-of-pocket costs, Long Island Laparoscopic negated the incentive for certain members to use participating providers. This likely increased costs to the Empire Plan and, consequently, to taxpayers and Plan members in general.
• From a random sample, we identified overpayments totaling $294,596 that resulted from claims that were excessive due to the routine waiving of members’ cost-sharing obligations. Based on a statistical projection of the sample overpayments to the population of Long Island Laparoscopic’s claims, we determined United overpaid $1,100,655 during the period July 1, 2011 through March 31, 2015.
• On one claim, for example, Long Island Laparoscopic charged $27,000 and, based on this, United allowed $13,500 as the reasonable and customary rate for the service. As a result, United paid $10,800 on the claim and the member’s out-of-pocket portion of the claim should have been $2,700. However, Long Island Laparoscopic accepted the $10,800 as payment-in-full and did not pursue collection of the $2,700 due from the member. Because Long Island Laparoscopic accepted $10,800 as the full payment, United should have only paid $8,640 on the claim. This resulted in an overpayment by United of $2,160 ($10,800 - $8,640). At the time of our audit testing, three years passed since the date of the service with no effort by Long Island Laparoscopic to collect the amount otherwise due from the member. Therefore, we concluded Long Island Laparoscopic waived the member’s out-of-pocket cost obligation.

Key Recommendations

• Recover the $1,100,655 in overpayments from Long Island Laparoscopic and refund the State accordingly.
• Work with the Department of Civil Service to pursue an appropriate course of action designed to prevent Long Island Laparoscopic from waiving Empire Plan members’ out-of-pocket costs. This may include steps to bring Long Island Laparoscopic into the Empire Plan’s participating provider network.

Other Related Audits/Reports of Interest

New York State Health Insurance Program: United HealthCare - Overpayments for Services at the Capital Region Ambulatory Surgery Center (2007-S-72)
New York State Health Insurance Program: United HealthCare - Overpayments for Services at the Endoscopy Center of Long Island (2007-S-73)
New York State Health Insurance Program: United HealthCare - Overpayments for Services at the South Shore Ambulatory Surgery Center (2008-S-11)