Cigna Pays to Settle Medicare Charges

Cigna Corp., one of the nation’s largest health insurers, paid the federal government $24.5 million to resolve allegations that its hospital in New Mexico submitted a decade’s worth of false cost reports to increase Medicare reimbursements, federal officials said Wednesday.

The case was brought by an Orange County man who filed a whistle-blower lawsuit against Cigna’s Lovelace Health Systems, a health plan and 225-bed hospital in Albuquerque.

Although there have been numerous Medicare fraud settlements, Justice Department officials in Los Angeles, who pursued the case, said the settlement was the largest paid by a hospital involving allegations of Medicare cost-reporting fraud.

Mark Razin of Laguna Beach filed the lawsuit against Lovelace in 1998 in federal district court in Los Angeles. Razin was then an employee of Healthcare Financial Advisors, a Medicare reimbursement consultant in Newport Beach that advised Lovelace in the handling of certain cost reports.

Wendy Weiss, an assistant U.S. attorney in Los Angeles, said Lovelace Health improperly received millions of dollars in Medicare reimbursements by shifting certain costs to higher forms of payments and by concealing overpayments. The false reports, she said, covered Medicare claims from 1988 to 1998.

Philadelphia-based Cigna settled without admitting any wrongdoing and said Wednesday that its internal review of the reports in question did not turn up fraud. Cigna, which has been beset by financial and regulatory problems recently, boosted reserves by $9 million in the third quarter to help cover the expected costs of the case.

Cigna spokesman Wendell Potter said that Lovelace is the company’s only hospital and that it has a deal to sell the facility.

Healthcare Financial Advisors was not a party in the settlement. However, Justice Department officials in their news release noted the consultant’s role in certain submissions of reports by Lovelace and said federal officials searched Healthcare’s office in Orange County in February 1999.

Healthcare Financial merged with Certus Corp. of Irvine in the fall of 1998. Certus executives were not available for comment.

Justice officials declined to say whether Certus was under investigation. They said, though, that this year another client of Healthcare Financial, a Houston hospital, paid $1.5 million to settle a similar Medicare cost-report case.

Mary Inman, an attorney for Razin, the Orange County whistle-blower, said her client would receive 20% of the settlement amount, or $4.9 million. Razin, who Inman said is in his early 30s, left Healthcare Financial shortly after he filed suit and is operating a sunglass business.

Shares of Cigna fell 18 cents to $42.98 on the New York Stock Exchange.