Medicare deals violated federal rules, GAO says

Administration accused of bypassing lawyers in overpayment disputes


WASHINGTON -- The Clinton administration improperly forgave hundreds of millions of dollars of debts owed to the government by health care providers for Medicare overpayments and allowed them to continue billing Medicare for some of the questionable expenses, federal investigators have found.

The investigators, from the General Accounting Office, said Medicare officials had ignored their own rules and procedures in negotiating secret deals to settle the debts -- the three largest Medicare overpayment cases of the past decade.

Two of the deals involved health care organizations in New York, and the other was with the county health department in Los Angeles. Medicare said it had overpaid the providers by $332 million. It settled the cases for a total of $120 million.

Clinton administration officials said they had agreed to the settlements as a way to help hospitals that serve large numbers of poor people. In each case, the government and the health care provider agreed that the settlement would be kept secret. The government said it wanted to avoid setting precedents that could be invoked by Medicare providers in other cases.

The settlements will be the subject of a hearing Tuesday before the Senate Permanent Subcommittee on Investigations, headed by Sen. Susan Collins, a Maine Republican.

The General Accounting Office, an investigative arm of Congress, said the New York City Health and Hospitals Corp. received the largest financial benefits in the deals. The corporation runs public hospitals and clinics that treat 1.5 million New Yorkers a year.

Despite their size and significance, investigators said, the settlements were not reviewed or approved by any lawyer in the federal government. Medicare rules require such reviews, the accounting office said.

In a report describing the deals, the General Accounting Office said Medicare officials "knew that the settlements were not in the best interest of the government."

Medicare officials accepted payments of $25 million of the $155 million owed by the Health and Hospitals Corp.; $67 million of the $98 million owed by the Visiting Nurse Service of New York, and $28 million of the $79.4 million owed by the Los Angeles County Department of Health Services.

The federal government settled these cases for 36 cents on the dollar even though it could have collected much more, the report said.

Medicare spends more than $200 billion a year to provide health care to people who are elderly or disabled. Health care providers have many disputes with the government over Medicare payments and often negotiate settlements or take their claims to an administrative tribunal at the Department of Health and Human Services. But these three cases were far bigger than any others, and the settlement agreements were the only ones not shown to health department lawyers.

A Medicare official who worked on the cases said he feared that the "deals would go up in smoke" if he sought approval from lawyers at the Justice Department or the Department of Health and Human Services, the report said.

The General Accounting Office said the health care providers had used their "political influence" to short-circuit the normal procedures for resolving disputes over Medicare reimbursement.

It said that top Medicare officials, including Bruce C. Vladeck, who was head of the Health Care Financing Administration from 1993 to 1997, put pressure on subordinates to settle politically sensitive cases after being contacted directly by health care providers.

The accounting office did not accuse the providers of wrongdoing. It did criticize Medicare officials, saying they had "acted improperly" in accepting the settlements without proper scrutiny. Federal officials generally need Justice Department approval to settle or compromise any claim exceeding $100,000, the GAO said.

In an interview last week, Collins said: "Lower-level Medicare employees tried to sound the alarm. They protested the special treatment given to these three providers. But their concerns were ignored or suppressed."

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