Medical Services Company to Pay $54 Million to Settle Whistleblower's Prior Authorization Fraud Case

On May 11, 2017, the United States Attorney for the Southern District of New York announced that it reached a $54 million False Claims Act settlement with medical services company CareCore National LLC (CareCore) to resolve claims that CareCore improperly authorized medical diagnostic procedures paid for with Medicare and Medicaid funds over a period of at least eight years without properly assessing whether the procedures were necessary or reasonable.

The case was originally filed under the qui tam provisions of the False Claims Act, which allows private individuals with knowledge of fraud against the government to file a lawsuit on behalf of the United States.  Such individuals, known as “relators” are then eligible to receive between 15-30% of the total funds recovered by the United States.  In this case, relator John Miller, filed a qui tam lawsuit and will be eligible for a percentage of the $54 million settlement.

The settlement announced in this case resolves allegations that starting in as early as 2005, CareCore, which performs prior authorization review for diagnostic procedures on behalf of many insurers, including those providing insurance through Medicare Part C and Medicaid Managed Care, was unable to review prior authorization requests in a timely fashion.  In order to avoid contractual penalties for failing to process the requests on time, CareCore instituted a practice of improperly approving prior authorization requests.  By 2007, CareCore had formalized this practice into an internal protocol called the “Process As Directed” or “PAD program.”

The PAD Program consisted of CareCore Clinical Reviewers improperly approving certain prior authorization requests without having obtained required new objective medical information about the request, and without a CareCore Medical Director having independently reviewed the prior authorization request.  Under this practice, CareCore improperly approved between 200,000 and 300,000 prior authorization requests.  For each of these prior authorization requests, CareCore certified that it had performed the required independent assessment of the validity of the specific diagnostic procedure.  By falsely certifying that it had done so, CareCore’s conduct implicated the Federal False Claims Act, leading to this lawsuit and the ultimate $54 million settlement.

Therefore, by putting its own corporate objectives of avoiding contractual delay penalties ahead of its duties to appropriately review medical prior authorizations, CareCore not only imparted the costs of hundreds of thousands potentially inappropriate medical procedures to the taxpayers but also improperly charged for its’ cost of actually performing the prior authorization process.  As such, CareCore was paid for a job it did not do.

Frohsin Barger & Walthall would like to thank and congratulate the Department of Justice, the United States Attorney’s Office for the Southern District of New York, and the U.S. Department of Health and Human Services, Office of Inspector General for investigating and prosecuting this case as well as Mr. John Miller and his attorneys for bringing this fraud to light and returning $54 million to the taxpayers of the United States.

For more information about Medicare and Medicaid fraud and prior authorization fraud, please contact Frohsin Barger & Walthall.

Read the full Department of Justice Press Release here