Purpose

To determine whether Hudson Valley Bone and Joint Surgeons, LLP 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 January 1, 2011 through October 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 Hudson Valley Bone and Joint Surgeons, LLP (Hudson Valley), a non-participating provider that has two offices located in Westchester County, New York. During the period January 1, 2011 through October 31, 2015, United paid claims totaling $8.7 million for services provided by Hudson Valley to Empire Plan members. 

Key Findings

• Hudson Valley routinely waived Empire Plan members’ required out-of-pocket cost-sharing obligations for services provided. Consequently, United made overpayments on claims submitted by Hudson Valley. Further, by not collecting members’ out-of-pocket costs, Hudson Valley negated the incentive for members to use participating providers. This likely resulted in additional increased costs to the Empire Plan and, consequently, taxpayers.
• From a random sample, we identified overpayments totaling $202,209 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 Hudson Valley’s claims, we determined United overpaid $566,126 during the period January 1, 2011 through October 31, 2015.
• On one claim, for example, Hudson Valley charged $2,074 and United allowed $1,318 as the reasonable and customary rate for the service. United paid $1,054 (80 percent of $1,318) and the member’s out-of-pocket portion of the claim should have been $264 (20 percent of $1,318). However, Hudson Valley accepted United’s payment of $1,054 as payment in full and waived the $264 due from the member. Hudson Valley wrote off all charges in excess of United’s payment from the patient’s account. Therefore, Hudson Valley’s actual charge for the service should have been $1,054, and United should have paid $843 (80 percent of $1,054). This resulted in an overpayment by United of $211 ($1,054 - $843).

Key Recommendations

• Recover the $566,126 in overpayments from Hudson Valley and refund the State accordingly.
• Work with the Department of Civil Service to pursue an appropriate course of action designed to prevent Hudson Valley from waiving Empire Plan members’ out-of-pocket costs. This may include efforts to bring Hudson Valley 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 Provided by Eastern Orange Ambulatory Surgery Center (2015-S-53)
New York State Health Insurance Program: United HealthCare – Overpayments for Services Provided by Long Island Spine Specialists (2015-S-28)
New York State Health Insurance Program: United HealthCare – Overpayments for Services Provided by Orthopedic Associates of Long Island (2015-S-29)
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)