NYS Comptroller to Audit a Non-Participating Provider of Medical Services

Late last year, a decision was rendered by the Appellate Division, Third Department, which reversed a lower court, and upheld the authority of the NYS Comptroller to audit a non-participating provider of medical services to beneficiaries of the Empire Plan.  Under the Empire Plan, the New York State Insurance Program contracts with United Health Care Insurance Company of New York, a commercial insurer, to provide health insurance coverage to State employees and retirees.  The Court held that “the fact that the state funds passed through United’s hands en route to [the provider] did not negate the Comptroller’s audit authority to confirm that the payments made by the state were proper.”  This decision has the potential to negatively impact health providers in New York that treat Empire Plan beneficiaries on an “out-of-network” basis, by subjecting them to overpayment audits by the State Comptroller.  Another significant aspect of the case was that the allegation of misconduct by the provider was that he was “routinely waiving out-of-pocket costs” to patients.  This was considered by the court to be improper and could subject the provider to civil and criminal penalties for insurance fraud under Insurance Law § 403[c] and Penal Law § 176.05[2], because it allegedly artificially inflates the amounts claimed for medical services, and causes overpayments. The argument, by way of example, is that if a non-participating provider charges $100 for a procedure performed on an Empire Plan beneficiary, the patient is responsible to pay the provider a 20% co-payment ($20) and the Empire Plan is responsible for 80% ($80).  If the non-participating provider is routinely waiving the 20% co-pay, then the actual charge is only $80, and the Empire Plan should only be responsible for $64 (80% of $80).  Thus, the NYS Comptroller argued that Empire Plan has made a 16% overpayment.  Of course, this same allegation of insurance fraud, by routinely waiving patient’s co-payments, is applicable to all Payors, both governmental and commercial.  All health care providers should be aware that the routine waiver of co-pay amounts could lead to investigations, disciplinary action, audits, civil and criminal liability.