Purpose

To determine whether Long Island Bone and Joint, 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 Long Island Bone and Joint, LLP (LI Bone and Joint), a non-participating provider located at three sites in Suffolk County, New York (Southampton, Riverhead, and Port Jefferson). During the period January 1, 2011 through October 31, 2015, United paid claims totaling $8 million for services provided by LI Bone and Joint to Empire Plan members. 

Key Findings

• LI Bone and Joint routinely waived Empire Plan members’ required out-of-pocket cost-sharing obligations for services provided. Consequently, United made overpayments on claims submitted by LI Bone and Joint. Further, by not collecting members’ out-of-pocket costs, LI Bone and Joint 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 $143,266 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 LI Bone and Joint’s claims, we determined United overpaid $507,530 during the period January 1, 2011 through October 31, 2015.
• On one claim, for example, LI Bone and Joint charged $9,400 and, based on this, United allowed $9,200 for the service. As a result, United paid $7,360 on the claim, and the member’s out-of-pocket portion of the claim should have been $1,840. However, LI Bone and Joint accepted the $7,360 as payment-in-full and waived the $1,840 due from the member. LI Bone and Joint wrote off all charges in excess of United’s payment from the member’s patient account. Because LI Bone and Joint accepted $7,360 as the full payment, United should have only paid $5,888 on the claim. This resulted in an overpayment by United of $1,472 ($7,360 - $5,888).
• In another matter, auditors identified a claim from 2013 in which LI Bone and Joint identified No-Fault insurance as the primary insurance covering the services. This information was not properly noted on the claim to United, thereby causing United to issue a check for $25,798 for the claim. Auditors determined that the claim check had not been cashed or canceled. Based on the information provided by the auditors, United canceled the check and reprocessed the claim, resulting in no payment to LI Bone and Joint for the services in question.

Key Recommendations

• Review the $507,530 in improper payments identified by the audit and recover overpayments from LI Bone and Joint, as appropriate. Refund the State accordingly.
• Work with the Department of Civil Service to pursue an appropriate course of action designed to prevent LI Bone and Joint from waiving Empire Plan members’ out-of-pocket costs. This may include taking steps to bring LI Bone and Joint 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)
United HealthCare: New York State Health Insurance Program - Overpayments for Services at the Endoscopy Center of Long Island (2007-S-73)
United HealthCare: New York State Health Insurance Program - Overpayments for Services at the South Shore Ambulatory Surgery Center (2008-S-11)