Purpose

To determine whether Eastern Orange Ambulatory Surgery Center, LLC 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 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 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 Eastern Orange Ambulatory Surgery Center, LLC (Eastern Orange), a non-participating provider located in Cornwall, New York. During the period January 1, 2011 through March 31, 2015, United paid claims totaling $6.6 million for services provided by Eastern Orange to Empire Plan members.

Key Findings

• Eastern Orange routinely waived Empire Plan members’ required out-of-pocket cost-sharing obligations for services provided. Consequently, United made overpayments on claims submitted by Eastern Orange. Further, by not collecting members’ out-of-pocket costs, Eastern Orange 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 $217,187 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 Eastern Orange’s claims, we determined United overpaid $1,378,178 during the period January 1, 2011 through March 31, 2015.
• On one claim, for example, Eastern Orange charged $11,295 and, based on this, United allowed $7,400 for the service. As a result, United paid $5,920 on the claim and the member’s out-of-pocket portion of the claim should have been $1,480. However, Eastern Orange accepted the $5,920 as payment-in-full and waived the $1,480 due from the member. Eastern Orange wrote off all charges in excess of United’s payment from the member’s patient account. Because Eastern Orange accepted $5,920 as the full payment, United should have only paid $4,736 on the claim. This resulted in an overpayment by United of $1,184 ($5,920 - $4,736).
• Prior to our audit, United identified Eastern Orange as a provider that routinely waived members’ out-of-pocket costs. To limit the negative financial impact to the Empire Plan, United reduced its payments on Eastern Orange’s claims. However, Eastern Orange continued its practice of waiving members’ out-of-pocket costs and accepted United’s reduced payments as payment-in-full. This caused United to continue to make overpayments. At the time of our audit fieldwork, United was negotiating with Eastern Orange to join the Empire Plan’s participating provider network. If these negotiations are successful, United’s (and the State’s) exposure to inflated costs from members’ waived out-of-pocket costs will be reduced.

Key Recommendations

• Recover the $1,378,178 in overpayments from Eastern Orange and refund the State accordingly.
• Work with the Department of Civil Service to pursue an appropriate course of action designed to prevent Eastern Orange from waiving Empire Plan members’ out-of-pocket costs. Continue efforts to bring Eastern Orange 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)