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February 1, 2013


DiNapoli: Empire BlueCross BlueShield Paying Hospitals Windfalls for Special Medical Items

New York State health insurance provider Empire BlueCross BlueShield has routinely allowed hospitals to charge excessive amounts for special medical items such as implants, drugs and blood, because they did not sign agreements to limit reimbursement for those items, according to an audit of the New York State Health Insurance Program (NYSHIP) released today by State Comptroller Thomas P. DiNapoli.  
“New York is in a tough fiscal situation. It can’t afford to pay the exorbitant charges being billed by many hospitals for special items,” DiNapoli said. “Empire needs to stop paying excessive hospital charges and make sure it has agreements with every hospital it does business with to keep payments for special items within reason.”

DiNapoli’s auditors reviewed claims for a series of special items, finding Empire paid hospitals on average 344 percent more than the costs of the items in question. While the details of the special items cannot be disclosed due to proprietary concerns, examples of Empire’s excessive payments include:

Claim Example

Amount Empire Paid Hospital for Special Items

Hospitals’ Purchase /
Acquisition Cost

Excess to Hospital



























DiNapoli’s auditors were unable to obtain supporting documentation from 13 hospitals for 44 selected claims for special items because Empire cannot compel the hospitals to submit that information. If Empire paid these hospitals 344 percent more than the costs of the items, the hospitals could have generated profits of nearly $1.6 million on these claims, auditors estimated.

NYSHIP provides health insurance coverage to active and retired state, participating local government and school district employees and their dependents. The Department of Civil Service contracts with Empire Blue Cross and Blue Shield (Empire) to provide hospitalization coverage under the Empire Plan, the largest insurance option provided by NYSHIP. Empire processes Plan claims for hospital services and medical items in accordance with agreements it negotiates with participating hospitals. Empire’s hospital agreements provide for additional payments for certain special items. Agreements with many member hospitals often limit payments for special items, but others do not. For the period January 1, 2011 through March 31, 2011, Empire paid 246,870 claims totaling over $529 million for services provided to plan members. This included payments totaling $24 million for 12,990 claims for special items submitted by hospitals whose agreements did not limit Empire’s reimbursements for such items.

DiNapoli’s auditors recommended Empire:

  • Ensure that future agreements with hospitals contain language that specifies the basis of reimbursement for the purchase and acquisition of special items; and require hospitals to provide appropriate support documentation (including invoices for special items) upon request; and
  • Develop and implement internal controls to ensure that payments for special items are made in accordance with hospital agreements.

For a copy of the roll-up report documenting the findings on 15 hospitals visit:

The audits of 11 other individual hospitals with special item payment agreements can be found under the NYSHIP section at:



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