Computer Sciences Corporation Charged with Medicaid Fraud

Federal prosecutors in New York have charged Computer Sciences Corporation (CSC) and the City of New York with Medicaid fraud.

A lawsuit filed in federal court in Manhattan seeks treble damages and civil penalties under the False Claims Act against CSC and the City for orchestrating billing fraud schemes that used computer programs to automatically alter billing data.


Two of the schemes involved CSC and the City using computer programs to circumvent the requirement that Medicaid should be billed after private insurance coverage had been exhausted, and a third scheme involved the use of a defaulting program to systematically falsify diagnosis codes submitted to Medicaid.

Federal officials alleged that these fraud schemes caused the submission of tens of thousands of false claims to Medicaid and allowed the City, through CSC, improperly to obtain millions of dollars of Medicaid reimbursements.

“CSC and the City created computer programs that systematically, and fraudulently, altered billing data in order to get paid by Medicaid as quickly as possible and as much as possible,” said U.S. Attorney Preet Bharara. “Billing frauds like those alleged undermine the integrity of public healthcare programs like Medicaid.  All public healthcare program participants, whether they are healthcare providers, localities like the City, or contractors like CSC, should understand that they must comply with the applicable billing rules.”

In New York State, early intervention program (EIP) services are available to children under the age of three who demonstrated developmental delay or have been diagnosed with medical conditions likely to cause delay.

For children in New York City receiving EIP services, the City was responsible for processing and paying claims submitted by service providers, then seeking coverage from private insurers or Medicaid or billing New York State for its 49% share of the costs not covered by private insurance or Medicaid.

To minimize its share of the costs of the EIP services, the City set annual targets for Medicaid payments and made it a priority to obtain Medicaid payments as soon as possible and for as much as possible.

The City contracted with CSC to process service provider claims and then seek coverage from private insurers, Medicaid, or the State.

To ensure that CSC would focus on obtaining Medicaid payments, the City offered CSC financial incentives for exceeding certain targets for Medicaid payments and imposed penalties when CSC failed to meet the City’s goals for Medicaid payments.

To meet those targets, CSC and the City implemented billing fraud schemes using computer programs that automatically altered billing data.

Two of these schemes were designed to circumvent Medicaid’s secondary payor requirement, which required the City and CSC to exhaust private insurance coverage before billing Medicaid.

In the first scheme, rather than obtaining correct private insurance policy IDs for children who had missing or incomplete policy IDs, CSC developed a program to identify missing insurance policy IDs and then applied a default policy number of 999-999-999, which CSC and the City knew would result in denials by private insurers.

This scheme enabled CSC and the City to submit tens of thousands of false claims to Medicaid without exhausting private insurance coverage and to obtain millions of dollars from Medicaid improperly.

In a second scheme, CSC and the City used defaulting programs so that they could bypass waiting for private insurance claims to be adjudicated and, instead, submit claims to Medicaid before private insurers had made a determination regarding payment.

CSC developed computer programs that identified all private insurance claims that had been pending for a period of time (initially 90 days, and then 120 days) and then submitted those claims to Medicaid by improperly using a code – 0Fill – to indicate that private insurers either did not cover those services or had adjudicated the claims with zero payment.

CSC and the City did this even where they knew that the lack of adjudication was due to the City’s failure to respond to the private insurers’ requests for information from the City in connection with adjudicating the claims.

This scheme also resulted in the submission of tens of thousands of false claims to Medicaid without exhausting private insurance coverage and allowed the City improperly to obtain millions of dollars in Medicaid reimbursement in violation of Medicaid’s secondary payor requirement.

A third scheme was designed to enable CSC and the City to evade their responsibility to ensure that EIP service providers supplied accurate and complete diagnosis data, which was required before CSC or the City could seek Medicaid coverage on behalf of the providers.  Instead of setting up procedures for validating the diagnosis data supplied by service providers, CSC and the City developed computer programs to identify diagnosis codes from service providers that they expected Medicaid to reject and then replace those codes with 315.9, a generic diagnosis that CSC and the City knew would be accepted by Medicaid.

As part of this scheme, CSC and the City submitted tens of thousands of claims containing false diagnosis data, including diagnoses that were not accurate, to Medicaid.  This enabled the City to obtain millions of dollars from Medicaid improperly.

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