Evelyn Knoob's Story
| Blue Cross whistle-blower reaps rewards |
CONSEQUENCES of
destroying records.
| "No Case" to $144,000,000 court ruling. |
| WHISTLEBLOWER'S JOURNEY - Blue Cross - Blue Shield case |
| Courageous tenacious woman prevails. |
KNOOB.TXT or KNOB.HTM files on DOWNLOAD
KNOOB PRESS INFORMATION - Ronald
E. Osman
INTRODUCTION:
Below is OCR derived TEXT obtained from a 12 page
document.
KNOOB PRESS INFORMATION INTRODUCTION
On Friday, October 23, 1992, Evelyn Knoob's ninth
anniversary of
employment with Health Care Service Corporation,
a/k/a Blue
Cross/Blue Shield of Illinois ("HCSC"), she was
forced to
witness her supervisor shred medicare beneficiary
claims.
This single event eventually led Mrs. Knoob to
the law offices of
Ronald E. Osman and Associates, Ltd. in Marion,
Illinois. After
an extensive investigation by Attorneys Ronald
E. Osman and
Timothy Keller which disclosed massive fraud which
HCSC had
committed against the government, a Qui Tam complaint
was
filed against HCSC in the Southern District of
Illinois
in March of 1995.
Today, we announce that as a result of Mrs. Knoob's
actions,
the dedication and perseverance of the investigating
agents,
the Government Attorneys and Attorneys Osman and
Keller, and
the recovery vehicle provided by the Federal False
Claims Act
which President Abraham Lincoln pushed through
Congress in 1863,
HCSC has agreed to pay $140,000,000.00 to the
government in full
settlement of the Qui Tam action.
WHISTLE BLOWER
Evelyn Knoob is a 54 year-old resident of Herrin,
Illinois.
Evelyn and her husband, George, have been married
for 36 years,
have five children, ranging in age from 27 to
35 years,
and six grandchildren.
Evelyn began her employment with HCSC on October
24, 1983 as a
claims examiner. Evelyn worked in several different
departments
during her career with HCSC. She was promoted
to Supervisor in
February, 1986, a title which she held proudly
and competently
until August 16, 1993.
On September 21, 1992, Evelyn became the supervisor
of the HCSC
Mail Room at Marion, Illinois and reported to
and received
instructions from her manager Don Heinle (hereafter
"Heinle").
On Friday, October 23, 1992, three mailroom employees
found a
large box of three-month old retired railroad
worker beneficiary
claims (hereafter the "Claim") which had not been
forwarded to
Travelers Insurance Company as required. The box
contained
approximately 10,000 Claims. Evelyn immediately
contacted
Heinle, informed him of the discovery of the Claims,
and
requested his direction in handling the situation.
At approximately 3:30 p.m., after all other Mail
Room employees
had left for the day, Heinle contacted Evelyn
and directed her
to bring the box of Claims to his office. Both
the Mail Room
and Heinle's office were located at HCSC's Site
Two in the
Town and Country Shopping Center in Marion, Illinois.
Because the box was full and extremely heavy, Evelyn
was only
able to carry the box part of the way and was
forced to push it
the rest of the way. When she reached Heinle's
office, she
noticed a paper shredder was sitting over a waste
basket.
Heinle informed Evelyn that the two of them were
going to shred
the Claims. Evelyn emphatically stated she would
not assist him
in shredding the Claims and that it was wrong.
She suggested
they contact HCSC officials Bill Gowan, the HCSC
Director
of Operations, (hereafter "Gowan") or Barbara
Harrigan
for instructions on how to proceed.
Heinle refused and instructed Evelyn that she was
never to tell
anyone about the Claims shredding. If she did,
he said he would
say she was the one who had actually shredded
the Claims
and everyone would believe him rather then her.
Evelyn responded by again stressing that she did
not want
to be involved with the shredding because it was
wrong.
Evelyn attempted to leave Heinle's office, but
was
told to consider herself fired if she did.
Accordingly, Evelyn had no other choice but to
watch as Heinle
began shredding the Claims. During the next three
hours of
shredding, Evelyn again requested several times
that Heinle
contact HCSC officials concerning the Claims but
he refused.
After shredding the last claim, Heinle placed the
Claims scraps
in ten to twelve green lawn-size garbage bags
which he discarded
in a dumpster located at the back of the building.
When Evelyn reported for work the following Monday,
October 26,
1992, she went to Heinle to discuss her concerns
about the Claim
shredding. She told Heinle that destroying the
Claims was
improper and illegal and would prevent the beneficiaries
from
receiving their Medicare benefits. In response,
Heinle again
threatened that if Evelyn ever reported his actions
he would tell
everyone that she had been the one who did the
shredding and he
personally would insure that she went to prison.
Evelyn ultimately went directly to Mr. William
Gowan, HCSC's
vice-president of Medicare Part B operations and
former Director
of Operations, to report the destruction of the
Claims.
Gowan, however, participated in the cover-up of
the shredding
and declined to take any action against Heinle
for his actions.
He instructed Evelyn that she should cease worrying
about the
Claims because he had found out, through HCFA
and Travelers,
that the Claims had been resubmitted. Evelyn knew
however,
this was not true. Since the Claims had not been
controlled
or microfilmed, there was no way of verifying
whether
the Claims had actually been resubmitted.
Prior to the Claim shredding, Evelyn had been an
exemplary
supervisory HCSC employee receiving several commendations
and superior performance evaluations. After the
shredding
this changed dramatically. The evidence indicates
that HCSC,
through its managerial employees, embarked on
a concerted
and intentional effort to malign her work performance
and
place her in stressful work positions with which
they
were aware she was not comfortable.
Prior to the shredding, Evelyn had consistently
received
favorable employee evaluations annually pursuant
to HCSC policy.
After the shredding, however, over two years elapsed
before she
received her next performance evaluation. HCSC
supervisory
employees also began placing derogatory memorandums
into Evelyn's
employee file. Interestingly, at least seven of
these negative
memos were drafted on October 11, 1994 by Marjorie
Wright.
On this same day, Wright informed Evelyn she was
being placed on
stress leave. That was Evelyn's last regular day
of work at HCSC.
Evelyn sums up how HCSC has affected her life
as follows:
"The shredding of the claims was the
beginning of the end, it destroyed my life."
MEDICARE
Overall responsibility for the administration of
the Medicare
program resides with the Secretary of the Department
of Health
and Human Services ("HHS"). Within HHS the responsibility
for
administration of the Medicare program has been
delegated to the
Health Care Financing Administration ("HCFA").
In accordance with
Title XVIII of the Social Security Act as amended,
42 U.S.C.
Section 301 et seq., HCFA contracts with private
insurers to
process Medicare claims and to make benefit payments
on
behalf of the Government. Medicare claims are
divided
into Part A and Part B claims depending on the
type of services and/or the type of provider.
Part A claims generally involve payment for Medicare
covered
inpatient facility services. Part B claims involve
payment for
items such as, but not limited to, Medicare covered
outpatient
services, physician services and a Medicare beneficiary's
use of
home medical equipment in their home. Private
insurers which
contract with the government to process and pay
Part B Medicare
claims are known as Carriers, while those contracting
entities
processing Part A Medicare claims are known as
Intermediaries.
HEALTH CARE SERVICE CORPORATION
Health Care Service Corporation ("HCSC"), the official
corporate
name for Blue Cross Blue Shield of Illinois, is
an Illinois
mutual legal reserve company. HCSC was initially
organized as a
not-for-profit service corporation on October
1, 1936.
HCSC is the largest health care insurer in the
State of Illinois
which, with over 2.7 million members, provides
coverage to
approximately 22% of the State's insured population.
HCSC is
ranked as the 368th largest enterprise in the
United States with
annual sales in excess of $4,478,400,000.00.
HCSC's annual report for the year ended on December
31, 1997
indicates a total policyholders surplus of $991,654,131.00
which is in addition to the required reserves
for accident and
health policies. HCSC's net income for 1997 was
$71,115,663.00
resulting in total reported assets as of December
31, 1997 of
$2,074,149,825.00. HCSC is currently attempting
to merge with
Texas Blue Cross/Blue Shield which would make
in the third
largest Blue Cross plan in the nation.
ILLINOIS CARRIER CONTRACT
By contract dated March 31, 1984, the government
contracts
division of HCSC, was awarded the Carrier contract
to process
Medicare Part B claims for the State of Illinois.
The initial
contract was a fixed price contract periodically
renewed and
amended through March 30, 1989. HCFA's decision
to replace the
previous carrier, Electronic Data Processing ("EDS"),
was based
in part upon EDS's below average performance as
measured by the
annual Contractor Performance Evaluation Program
("CPEP").
CPEP is an evaluation program utilized by HCFA
to gauge a
Carrier's conformance with the standards and criteria
published
annually in the Federal Register by HCFA, which
HCSC is required
to meet as established by section 1842(b)(2) of
the Social
Security Act. The results of the OPEP are reported
annually for
the fiscal year beginning on the 1st day of October
and ending on
the 30th day of September of each year. Through
fiscal year 1991
the annual HCFA report summarizing the CPEP results
was known as
the Annual Contractor Evaluation Report ("ACER")
and thereafter
the Report of Contractor Performance ("RCP").
HCSC's initial performance as the Illinois Carrier
was dismal.
Its overall efficiency rating as reported in the
1985 ACER was
79% while 1986 only improved to 88%. Likewise
the 1985 and 1986
ACER reported beneficiary services of 86.5% and
87% respectively.
Correspondence from HCFA and HHS both indicate
HCSC was in dire
jeopardy of losing its Carrier Contract had performance
not
significantly improved. HCFA had a practice of
ranking its
Carrier's nationwide by performance. For fiscal
year 1985, HCSC
was in the bottom 10%. In 1987, it ranked 17 out
of 48. In 1986
it improved to 11 out of 48. Its evaluations continued
to improve
and eventually it received the number 2 ranking
nationwide out of
48 Carriers for fiscal year 1991. As explained
later, however,
HCSC had only learned how to take the test. Other
HCSC in house
criteria unavailable to HOFA at the time, indicates
actual
performance continued to be substandard.
As a result of its alleged outstanding performance,
HCSC was
awarded a special section 6215 cost reimbursement
contract
beginning March 31, 1989 under which it continued
to operate
through 1998. In this regard the ACER for the
1988 fiscal year
reported that: "In view of HCSC's level of performance,
in FY
1988 HCFA decided to negotiate a cost reimbursement
contract
with HCSC to succeed the fixed-price contract
scheduled
to expire March 31, l989."
The cost reimbursement contract awarded HCSC varied
"from the standard cost
reimbursement contract in that
it will contain provisions
for incentive payments for
superior performance
in key pre-determined tasks, and
HCSC will receive a bottom
line level of funding with
the previous restrictions
on fund transfer between line
items removed."
ACER for 1990 fiscal year, Unit Cost Functional
Criterion-Comments, page 2.2. For fiscal year
1991,
HCSC was the only carrier nationwide allowed to
operate
under the special section 6215 reimbursement contract.
ACER for 1991 fiscal year, page iii.
In 1994, HCSC was also awarded the Carrier Contract
for the State
of Michigan. The previous Carrier, Blue Cross
Blue Shield of
Michigan, Inc. had foregone renewal of its contract
in connection
with a False Claims Action filed against it alleging
fraud.
HCSC continued to operate pursuant to the cost
reimbursement
contract through 1998 at which time it voluntarily
resigned. As
the Illinois Carrier, it paid out in excess of
13.3 billion
dollars in Medicare benefits beginning in fiscal
year 1985
through fiscal year 1996. For its administrative
services HCSC
allegedly provided, it was paid approximately
350 million dollars
by the government through the end of fiscal year
1995. During
this same period, HCSC also received incentive
payments of
approximately 2.8 million dollars due to its alleged
superior
performance.
THE QUI TAM ACTION
The office of Ronald E. Osman and Associates, Ltd.,
filed a
complaint pursuant to the Federal False Claims
Act, 29 U.S.C. S
3729 et seq. (hereafter "FCA"), on behalf of the
Relator, Evelyn
M. Knoob, on March 14, 1995 in the United States
District Court
for the Southern District of Illinois in Benton,
Illinois.
The original complaint consisting of 7 counts contained
74 pages
of allegations. Simultaneously with the complaint
filing,
Mr. Ronald Osman, Relator's attorney, forwarded
to the Attorney
General and United States Attorney's, W. Charles
Grace's,
offices, a Disclosure of Substantially All Material
Evidence
and Information in accordance with the FCA. Thereafter,
the
Government began its investigation while Relator's
attorneys,
Ronald Osman and Timothy Keller, continued theirs.
The FCA only provides the government 60 days in
which to
investigate the complaint allegations and determine
whether or
not to intervene and take over prosecution of
the action. In
almost all cases, this is not sufficient time
to complete the
investigation and the Government usually moves
for an extension
of the statutory seal. In this case, the government
sought and
was granted extensions keeping the case sealed
through July 16,
1998 during which an extensive investigation and
settlement
negotiations continued.
Department of Justice ("DOJ") guidelines requires
all FCA
complaints be forwarded to the criminal division
to determine
whether or not the alleged fraudulent conduct
is criminal.
At the time of the initial filing of Relator's
+suit against
HCSC, the criminal division of the DOJ had received
and reviewed
the original complaint and determined, based upon
the information
available at that time, that no criminal action
was involved.
Therefore responsibility for the prosecution of
the case rested
primarily with the DOJ civil division and Relator.
Assistant
United States Attorney Laura J. Jones was responsible
for the
civil prosecution on behalf of the U. S. Attorney's
office,
while Patricia Hanower and Stephanie Jackson were
the DOJ attorneys handling the matter.
The HHS Office of Inspector General ("HHS-OIG")
issued its first
subpoena in the case on August 15, 1995. The subpoena
sought
information on 60 Part B claim reviews which had
been selected
for grading in connection with the 1993 CPEP.
Relator's
attorney's had developed evidence indicating that
17 of the
60 reviews had been manipulated in an attempt
to pass CPEP.
The documents produced by HCSC in response to the
subpoena
verified the review documents had been altered.
The government or relator often request a partial
unsealing of
the FCA complaint to allow disclosure to the defendant
for
purposes of settlement discussions. In this case,
the Court
granted the Government's motion seeking a partial
unsealing of
the complaint on September 26, 1995. On October
12, 1995, a
meeting was convened at the HHS-OIG office in
Chicago, Illinois
attended by government investigators, the Department
of Justice
civil attorney, Sally Strauss, Attorney Hanower's
predecessor ,
and Relators' attorneys, to discuss the complaint
allegations
and the ongoing government investigation.
Mr. Osman and Mr. Keller related the evidence they
had gathered
in support of the allegations of the complaint.
Specific aspects
of the investigation were discussed such as persons
to interview
and documents which should be requested.
A second HHS-OIG subpoena was issued to HCSC on
October 20, 1995
requesting specific documents relating to the
complaint
allegations. Investigator Gary Klos, HHS-OIG,
conducted
the initial interviews of fourteen HCSC
employees during the
week of March 6, 1996.
HCSC hired the national law firm of Kirkland and
Ellis to
coordinate its defense of the FCA action. Larry
Urgenson, a
former assistant U5. Attorney from the Eastern
District of
New York and Acting Deputy Assistant Attorney
General,
Criminal Division of DOJ from 1990 to 1992,
spearheaded the defense.
Attorney Kathleen Buck another Kirkland and Ellis
Partner, former
Department of Defense General Counsel, Department
of Air Force
General Counsel, Assistant General Counsel for
the Department
of Defense, and an expert in government contract
debarment,
was also brought in on the defense team.
By early 1996, Kirkland and Ellis had completed
its own
investigation into the allegations of Relator's
complaint
and prepared a report summarizing its findings.
A meeting was held on March 12, 1996 in Washington,
D.C. to
discuss settlement of the action attended by Attorneys
Ronald
Osman and Timothy Keller on behalf of the Relator,
Attorney
Patricia Hanower on behalf of the DOJ civil division,
an HCFA
representative, an attorney on behalf of HCSC,
and Attorneys
Urgenson and Buck. HCSC's attorneys summarized
the results
of their investigation into the complaint allegations
and offered a minimum amount to settle the action.
In response, Attorney Hanower indicated the government
would
have to conduct its own damage analysis before
it could
formally respond to the offer. Attorney Ronald
Osman,
however, left no doubt in anyone's mind that HCSC's
offer was not even in the ball park.
Although DOJ had initially refused to take the
case criminally,
the Relators' Attorneys uncovered evidence of
what Mr. Osman felt
constituted criminal activity including the falsification
of
government reports. Mr. Osman therefore requested
a meeting
with United States Attorney W. Charles Grace and
his staff
to specifically bring the evidence to the United
States
Attorney's attention.
On March 21, 1996 a meeting was held in Benton,
Illinois
attended by Attorneys W. Charles Grace, Laura
Jones, Mike Carr,
Bob Simpson, Ronald Osman, and Timothy Keller.
Attorney Grace
agreed the matter required further attention and
instituted a
criminal investigation from his district, the
Southern District
of Illinois. Additional agents from the Federal
Bureau of
Investigation ("FBI"), the HHS-OIG, and the Postal
Service
were assigned to the criminal investigation. The
top notch
investigative team assembled to inquire into the
complaint
allegations included Jan Burris, John Durso, Clinton
Binghiman
and Greg Holston with the FBI, Gary Holst, David
Groupner, and
Gary Klos with HHS-OIG, and. Dana Kimbrough, a
Postal Inspector
agent. Assistant United States Attorney Thomas
M. Daly, assisted
by Assistant United States Attorneys Robert T.
Coleman and
Michael J. Quinley, led the criminal prosecution
on behalf of the
government while Assistant United States Attorney
Laura J. Jones,
head of the civil division for the Southern District
of Illinois,
prosecuted the civil action.. An attorney from
the criminal
division of DOJ, Mr. Michael F. Ruggio, was also
assigned to
assist in the criminal prosecution.
Ongoinq meetings were held with the investigators,
government
attorneys, Relator, and her attorneys for the
purpose of
coordinating the continuing investigations. Relators'
counsel
alone conducted 32 in person witness interviews
and 208 witness
phone conferences, attended 34 government meetings
and
participated in over 515 phone conferences with
government
investigators and/or attorneys. Additional HHS-OIG
subpoenas
were served on HCSC which resulted in the production
of 268 banker boxes of documents.
Relator's counsel were allowed access to those
portions of the
subpoenaed documents which the government deemed
did not contain
confidential information. Based on their detailed
review of these
documents, Attorney Osman and Keller were able
to prepare
detailed graphs and charts summarizing HCSC's
actual contractual
performance based upon its own internal evaluations
and HCSC's
reported contractual performance. The difference
between these
criteria referenced as HCSC's substandard performance,
was
utilized extensively in development of the Relator's
and later the government's damage analyses.
The extensive investigation conducted by the government
personnel
and Relator's attorneys revealed HCSC's performance
of the
Carrier contract was replete with fraudulent activity.
The
evidence indicated the fraud involved the following
actions:
1. Beginning in April 1989 HCSC did
not send Medicare Secondary
Payor ("MSP") first claim
development letters to new
medicare beneficiaries
for use in ascertaining whether or
not Medicare was primarily
responsible for payment of the
beneficiaries' health
costs.
2. On October 23, 1992, Evelyn Knoob
was forced to witness her
manager, Don Heinle,
shred an entire box of retired railroad
worker beneficiary medicare
claims consisting of
approximately 10,000
claims.
3. HCSC was required to report its
level of phone service to
HCFA on a monthly basis.
From at least 1986 through 1993
HCSC submitted false
phone records in which the service
level and the down time
were intentionally misreported.
HCSC also installed a
shut off switch on the beneficiary
lines which supervisors
would utilize to disable the phones
during times of high
volume. This action resulted in the
beneficiaries receiving
a busy signal when calling the
Carrier for assistance.
4. Since at least 1984, HCSC instructed
certain of its claims
examining employees to
pay all submitted medicare claims
under $50.00 regardless
of whether or not the claim should
have been developed for
payment.
5. HCSC requested employees to take
medicare claims home to
pre-code, however claims
were not properly accounted for or
controlled which, in
one instance, resulted with a
terminated employee retaining
20,000 to 30,000 claims in her
basement.
6. From 1986 through 1992, HCSC deleted
medicare claims which
contained incorrect Health
Insurance Claims ("HIC") numbers
and other information
rather then contacting the physician
or beneficiary and requesting
the correct information as
required by the regulations.
7. In preparation for the 1993 CPEP,
HCSC changed or otherwise
manipulated 17 claims
review files which contained errors
out of the sample of
60 that HCFA had selected for auditing.
HCSC also altered and
rewrote correspondence which was
purportedly sent to physicians,
beneficiaries and others
so the letter would comply
with HCFA regulations.
8. HCSC falsified documents and manipulated
other information
submitted to HCFA in
relation to the weekly Post Payment
Quality Assurance Program
"PPQA". The PPQA program was the
primary method by which
HCFA estimated the incorrect
payments made by the
Carrier. In 1992 the fraud was further
refined when Don Heinle
discovered the formula HCFA used in
selecting the PPQA subsample.
This allowed HCSC to determine
which PPQA cases HCFA
would select for review which were
then altered and/or submitted
to HCFA as error free
processed claims when
in fact they were not. The submission
of false reports and
adulterated PPQA subsamples resulted in
HCSC receiving unwarranted
incentive payments.
9. HCSC intentionally manipulated the
manner in which it
processed medicare claims
during the annual CPEP. The
actions included:
a. Allowing
only its best claims examiners and reviewers
to process claims during the CPEP period.
b. Preparing
an adulterated sample containing only
uncomplicated reviews and claims from which HOFA
auditors selected the CPEP sample documents.
c. Hiding
unprocessed claims resulting from backlogs
in employee vehicles or HCSC warehouses during
the HCFA CPEP on site visits.
d. Only prepared
responsive correspondence to the
beneficiaries during the CPEP period.
e. Placing
"blackdots" on incorrectly processed financial
files which were hidden from the CPEP auditors.
10. HCSC submitted false monthly timeliness
reports on which it
was required to relate
the age of its unprocessed claims
inventory and the processing
timeliness of the previous
month's processed claims.
11. HCSC submitted false MSP savings reports
in which it
inflated the actual savings
resulting from the MSP program.
12. Instructed claims examiners to improperly
process durable
medical equipment ("DME")
claims for items such as
wheelchairs in times
of high claims inventory. Employees
were instructed to forego
portions of the processing and
development required
by the Medicare regulations.
13. Instructed its employees to place the
incorrect Julienne
date on telephone review
inquiries so the documents appeared
to be in compliance with
timeliness processing requirements.
14. Turned off the computer edits and audits
designed to
automatically suspend
defective or improper claims resulting
in the erroneous payment
of claims.
15. Improperly manipulated the annual computer
systems test
utilized by HCFA to evaluate
the effectiveness of computer
edits and audits.
16. Utilized dummy beneficiary names and
HIC numbers in order to
reconcile the number
of issued internal control numbers with
the number of actual
telephone inquiries for mandatory HCFA
reports.
17. Utilized dummy provider numbers on nonassigned
medicare
claims rather then developing
the claim and acquiring the
missing information.
18. Falsified information relating to issuance
of provider
numbers in the provider
certification unit.
As a result of additional evidence Relator's counsel
uncovered
during their investigation, an amended complaint
was filed with
the Court on July 22, 1997 by Relator. The amended
pleading was
expanded to include 12 different counts addressing
different
areas of alleged fraud totaling 142 pages. Notably,
the scope of
the fraud allegations were further expanded to
include
improprieties relating to HCSC'5 Michigan Carrier
contract.
On October 1, 1997, the court granted Relator's
motion seeking a
partial unsealing of the amended complaint allowing
Relator's
attorney to forward a copy of the amended pleading
to HCSC so
settlement discussions could continue.
During the second week of November, 1997, FBI and
HHS-OIG agents
traveled to HCSC's processing center at the Illinois
Centre Mall
in Marion, Illinois and made an unannounced seizure
of additional
documents relating to the Carrier's provider certification
unit.
Documents from this surprise raid indicated HCSC
was
continuing to falsify certain government reports
as late as September of 1997.
On December 31, 1997, HCFA announced that HCSC
had voluntarily
decided to not renew its Illinois or Michigan
Carrier contracts.
HCFA later announced that Wisconsin Physician
Services
had been awarded the Illinois Carrier contract.
SETTLEMENT NEGOTIATIONS
Serious settlement negotiations began during the
fall of 1997.
Meetings to which the Government and Relator attorneys
invited
HCSC's counsel occurred on October 22, 1997 in
Washington, D.C.,
November 12, 1997 in Fairview Heights, Illinois,
and February 12
and 24, 1998 in Fairview Heights, Illinois. A
global settlement
was tentatively reached in April 1998 in which
HCSC agreed to
pay the government $140 million dollars pursuant
to the FCA
and four million dollars in criminal penalties.
Attorney Daly's criminal prosecution led to the
corporation's
agreeing to plead to one count of conspiracy,
one count of
obstructing a federal audit and six counts of
filing false
statements with the United States.
HCSC also agreed to enter into an extensive voluntary
compliance plan with HOFA which requires periodic
and specialized reports and audits.
On April 30, 1998, Nancy Lea Martin, a former HCSC
manager,
pled guilty to conspiracy and obstruction of a
Federal Audit in
the Southern District of Illinois. Donald Heinle,
another former
HCSC manager, likewise pled guilty to conspiracy,
wire fraud,
and obstruction of a federal audit on April 30,
1998.
Due to the cooperation of Ms. Martin and Mr. Heinle,
the
government entered into a plea agreement with
both Defendants.
Sentencing of the these defendants has not yet
occurred.
Additionally, on July 8, 1998, Attorney Grace's
office
filed a 14 count criminal indictment against
key HCSC management level employees.
Those charged in the indictment include:
* Thomas F. Bartels-Director
for Michigan Medicare B
Operations through May
of 1996;
* Barbara G. Harrigan-Director
for Illinois Medicare Part B
Operations through June
30, 1996; Bruce W. Davis - Manager
of Medicare Part B Technical
Services through July 8, 1998;
* Barbara J. Hardcastle - Manager
over the Medicare Part B
Provider Assistance Unit
through March 1, 1995; and,
* Joan R. Davis - Manager for
Claims and Appeals in Mattoon,
Illinois through July
8, 1998.
The indictment involves charges of conspiracy,
obstruction of a
federal audit, mail fraud, wire fraud, and, making
false
statements. It is anticipated that additional
criminal
indictments will be filed by Attorney Grace's
office.
The Amended Complaint also sought compensation
for the emotional
distress Relator suffered as a result of HCSC's
actions. No
settlement has been reached on Mrs. Knoob's personal
claims,
however, negotiations are ongoing with HCSC.
The Government elected to intervene in Counts I
through VII
and XI through XII on April 24, 1998 leaving Relator
free to prosecute the remaining counts.
The court subsequently granted extensions of the
seal for the
purpose of finalizing the tentative settlement.
Settlement
agreements were duly executed on July 16, 1998.
The FCA provides that a Relator is entitled to
receive
between 15 to 25 percent of the proceeds the government
realizes in qui tam actions in which it intervenes.
The Settlement Agreement provides Relator will
initially receive
15% of the $140,000,000 settlement, the statutory
minimum.
The Government and Relators' counsel continue to
negotiate the
additional amounts to be paid Relator as a result
of the large
amount of work and assistance Relator and her
counsel devoted
to the investigation and prosecution of this case.
CONCLUSION
HCSC engaged in fraudulent performance of its Medicare
contract unbeknownst to the Government for at
least
ten (10) years prior to Evelyn Knoob's qui tam
filing.
Due to the consistency of the fraudulent information
being
submitted by HCSC, the Government was of the opinion
that HCSC
was one of the top Medicare Carriers in the nation.
The Government had shown its appreciation for HCSC's
"outstanding" performance through incentive payments,
contract renewals and the. award of the Michigan
Medicare
Contract over the ten (10) year period.
Had Mrs. Knoob not filed her qui tam complaint,
it is likely
HCSC's corrupt practices would be continuing today.
This case is a textbook example of how effective
the Federal
False Claims Act can be in discovering and prosecuting
fraud.
The symbiotic relationship which the statute creates
between the
government and the private sector has, as of October
of 1997,
resulted in the recovery of over $1.8 billion
dollars since the
1986 amendments to the Act co-sponsored by Senator
Charles
Grassed and Representative Glickman.
During 1997, health care fraud was involved in
approximately 54%
of the filed qui tam cases. The Act is under attack
by special
interest groups however, such as the American
Hospital
Association, who seek to carve out safe-harbor
fraud
exceptions applicable only to the health care
industry.
Due to Mrs. Knoob's actions, the perseverance of
her attorneys,
Ronald Osman and Timothy Keller, the government
attorneys
and investigators, and especially the leadership
of
United States Attorney W. Charles Grace, the
rampant fraud of HCSC has been halted.
A new Carrier has replaced Blue Cross/Blue Shield
which
will treat Illinois and Michigan medicare beneficiaries
and providers fairly as intended by Congress.
Over $140 million dollars has been returned and
a clear and
important message has been sent to the health
care industry
and its individual employees HEALTHCARE FRAUD
WILL NOT
BE TOLERATED IN THE SOUTHERN DISTRICT OF ILLINOIS.
For further information, contact
Ronald E. Osman or Timothy Keller at Ronald E.
Osman and
Associates, LED, Marion, Illinois at (618) 997-5151.