- The Washington Times - Sunday, May 4, 2003

  D.C. and federal officials said yesterday a billing contractor has agreed to pay $13 million to settle a long-standing civil suit involving Medicaid fraud and abuse charges.
  The dispute started in 1993 when computer problems at First Health Services Inc. cost the city millions in medical expenses. As a result, the company will pay the D.C. and federal governments $6.5 million each.
  “From 1993 to 1996, the software operated by First Health contained a flaw that caused thousands of unqualified claimants to be covered under the city’s Medicaid program,” said Roscoe C. Howard, U.S. attorney for the District.
   He said the flaw was a typographical error in the software that substituted a default date of Dec. 31, 1999, for a claimant’s eligibility-expiration date.
  Mr. Howard said his office and the D.C. inspector general had sufficient evidence to prove First Healthrecklessly disregarded its responsibilities when it created the program error in the software.
  He also said according to the federal statute, the company “knowingly” allowed the errors to persist and the faulty claims to be submitted and paid.
  Mayor Anthony A. Williams called the settlement a “triumph for District taxpayers.”
  However, Mr. Howard said the $13 million settlement was likely much less than the amount lost, though the actual loss could not be calculated. He also said the company, which processed the city’s claims for 17 years, received no financial gains from the fraud.
  “This settlement shows how diligently my office and the U.S. attorney have worked since we established the Medicaid Fraud Control unit three years ago,” said D.C. Inspector General Charles C. Maddox.
  Parent company First Health Group Corp. has denied liability in the case and issued a statement saying it acquired First Health Services in 1997 from First Data Corp.
  In the statement, Chief Executive Officer Joseph E. Whitters said First Data will pay $7.5 million and First Health will pay $5.5 million of the $13 million settlement.
  “When we acquired Services in 1997, we were aware of the pre-existing D.C. Medicaid issues,” he said. “This issue is now resolved, and there is no impact on First Health’s results, since the amount had been previously fully reserved.”
  First Health Services President Teresa DiMarco said payments made by the company were accurate and based upon established eligibility determinations and policies.
  She also said D.C. employees retroactively changed the eligibility dates, but First Health Services settled the dispute to avoid the cost of further litigation.
  D.C. officials declined to answer questions about why the city continued with the contract after the error was detected.
  The city’s contract with the company will expire in July, and Affiliated Computer Services — the company that runs its traffic ticket-payment processing and automated traffic enforcement — will take over Medicaid billing for the District.
  This is the first Medicaid-fraud investigation completed by the inspector general’s Medicaid Fraud Control unit, but there are several others still pending, said officials in the office.

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