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NYS Comptroller

THOMAS P. DiNAPOLI

Taxpayers' Guide to State and Local Audits

New York State Health Insurance Program
United HealthCare: Overpayments for Services Provided by Orthopedic
Associates of Long Island


Issued: May 05, 2016
Link to full audit report 2015-S-29
Link to 90-day response

Purpose
To determine whether Orthopedic Associates of Long Island, 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 December 31, 2014.

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 and 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 (or “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 Orthopedic Associates of Long Island, LLP (Orthopedic Associates), a non-participating provider located in Long Island, New York. During the period January 1, 2011 through December 31, 2014, United paid claims totaling $18.4 million for services provided by Orthopedic Associates to Empire Plan members.

Key Findings

  • Orthopedic Associates routinely failed to pursue collection of out-of-pocket cost-sharing obligations from Empire Plan members and, as such, we concluded Orthopedic Associates waived these amounts. Consequently, United made overpayments on claims submitted by Orthopedic Associates. Further, by not collecting members’ out-of-pocket costs, Orthopedic Associates 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 $229,088 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 Orthopedic Associates’ claims, we determined United overpaid $872,373 during the period January 1, 2011 through December 31, 2014.
  • On one claim, for example, Orthopedic Associates charged $19,289 and, based on this, United allowed $8,665 as the reasonable and customary rate for the service. As a result, United paid $6,932 on the claim and the member’s out-of-pocket portion of the claim should have been $1,733. However, Orthopedic Associates accepted the $6,932 as payment-in-full and waived the $1,733 due from the member. Orthopedic Associates wrote off the $1,733 as an “Insurance Adjustment.” Because Orthopedic Associates accepted $6,932 as the full payment, United should have only paid $5,546 on the claim. This resulted in an overpayment by United of $1,386 ($6,932 - $5,546).

Key Recommendations

  • Recover the $872,373 in overpayments from Orthopedic Associates and refund the State accordingly.
  • Work with the Department of Civil Service to pursue an appropriate course of action designed to prevent Orthopedic Associates from waiving Empire Plan members’ out-of-pocket costs. This may include taking steps to bring Orthopedic Associates into the Empire Plan’s participating provider network.

Other Related Audit/Report 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)


State Government Accountability Contact Information:
Audit Director: Andrea Inman
Phone: (518) 474-3271; Email: StateGovernmentAccountability@osc.state.ny.us
Address: Office of the State Comptroller; Division of State Government Accountability; 110 State Street, 11th Floor; Albany, NY 12236