Department of Civil Service

New York State Health Insurance Program: Overpayments for Services Provided by South Island Orthopaedic Group, PC

In the New York State Health Insurance Program, the Department of Civil Service administers health insurance programs for active and retired State, local government and school district employees and their dependents. The primary such program is the Empire Plan, which provides services costing about $4 billion a year.

The South Island Orthopaedic Group (South Island) is a medical practice located in Cedarhurst, New York. South Island does not participate in the Empire Plan. Accordingly, if an Empire Plan member is treated by South Island, the Empire Plan will not reimburse South Island for its full charges. Rather, it will only reimburse a portion of these charges (generally 80 percent), and the member will have to pay the balance. However, we found that South Island was routinely waiving Empire Plan membersí out-of-pocket expenses. Such a practice may constitute billing fraud, as the Empire Plan was reimbursing 80 percent of what it understood to be South Islandís actual charges. We recommended the Empire Plan recover the inflated portion of South Islandís bills, an amount we calculated to be $787,134 for the eight-year period we audited (about 10 percent of the total $7.8 million that South Island billed to the Empire Plan during this period). We also referred the matter to the Department of Civil Service for appropriate follow-up action, because this billing practice results in other additional costs to the Empire Plan beyond the inflated portion of the bills, and should be actively discouraged.

For a complete copy of Report 2008-S-173 click here.