A Medical Device Daily

Amerigroup (Virginia Beach, Virginia) has agreed to pay $225 million to resolve claims that it defrauded the Illinois Medicaid program, the Justice Department and the Attorney General of Illinois said. Amerigroup operates managed healthcare plans throughout the U.S.

The settlement resolves allegations that Amerigroup and its Illinois subsidiary systematically avoided enrolling pregnant women and unhealthy patients in its managed care program in Illinois.

The U.S. and the state paid the company to operate a Medicaid managed care health plan in Illinois to provide healthcare to low-income people. Amerigroup was required by law to enroll all eligible beneficiaries. The U.S. and the state of Illinois brought claims against the company alleging that it violated this requirement and avoided enrolling unhealthy patients, as well as pregnant women, who were more costly to treat and would have eroded the company's profit margin.

In October 2006, a jury found Amerigroup liable under the federal False Claims Act and the Illinois Whistleblower Reward and Protection Act. The court entered a $334 million judgment against Amerigroup, which then filed an appeal with the U.S. Court of Appeals for the Seventh Circuit in Chicago seeking a reversal of the judgment.

As part of the settlement, Amerigroup will dismiss its appeal and has agreed to enter into a Corporate Integrity Agreement (CIA) with the Office of Inspector General for the U.S. Department of Health and Human Services (HHS).

"The Justice Department is committed to ensuring that recipients of federal health care funds adhere to the law, so that appropriate health care services are provided to all eligible patients," said Gregory Katsas, assistant attorney general for the civil division.

"A settlement of this magnitude sends the clear message that this office takes healthcare fraud very seriously," said Patrick Fitzgerald, U.S. Attorney for the Northern District of Illinois. "This case also illustrates the perils a defendant faces in taking a case such as this to trial."

"This settlement should send a clear message that the state of Illinois will not tolerate illegal conduct in the provision of healthcare for Illinoisans," said Illinois Attorney General Lisa Madigan. "I am pleased that our work on this case will bring millions of dollars to the State of Illinois."

The agreement between Amerigroup and its subsidiary health plans and the Office of Inspector General requires the company to adopt policies and procedures, and a code of conduct designed to prevent improper discrimination against federal health care program beneficiaries in its marketing and enrollment practices. The CIA applies to Amerigroup's managed care plans in all 11 states in which the company does business during the term of the agreement. In addition, Amerigroup must hire an independent organization to annually review its marketing practices and enrollment initiatives, and its board of directors must certify the effectiveness of its compliance program each year.

"This Corporate Integrity Agreement will help ensure that our most vulnerable beneficiaries have access to needed Medicaid HMO plans in the future," said HHS Inspector General Daniel Levinson.

Cleveland Tyson, a former Amerigroup employee, originally filed the lawsuit against the company. Tyson will receive $56.25 million.

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