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Report: Caremark Probe Widens in Michigan

November 18, 1994

CHICAGO (AP) _ Federal authorities have widened their criminal investigation of Caremark International Inc. to include possible overbilling of insurers, including the Medicaid program, a newspaper reported Thursday.

Caremark, a supplier of home medical services, said in a statement it does not submit inflated bills to insurers.

The company would neither confirm nor deny a Wall Street Journal report that federal investigators in Michigan have delivered subpoenas to Caremark’s Detroit-area office, focusing on whether allegedly false bills may constitute federal crimes by violating guidelines of the federal Medicaid program, which serves poor people, and Blue Cross Blue Shield of Michigan, a large private health insurer.

Caremark, based in the Chicago suburb of Northbrook, is the target of a three-year national investigation into alleged kickbacks paid to doctors for patient referrals.

Caremark has denied the allegations. It blames its legal problems largely on fuzzy regulation and misunderstanding of home infusion, or in-home delivery of intravenous medication, a rapidly growing business Caremark pioneered.

The Journal, citing information from unidentified people knowledgeable about the inquiry, reported that Blue Cross auditors concluded Caremark overbilled the insurer millions of dollars by substantially marking up charges for medicine.

Blue Cross’ policy is to pay only the ″net acquisition cost″ - or cost of the drugs - plus a handling fee. The federal Medicaid insurance program has the same policy.

Caremark said such policies are geared toward reimbursement of drugs purchased from retail pharmacies. It said home infusion also includes custom mixing of intravenous solutions, nursing services, 24-hour on-call capabilities and quality assurance programs that are not covered by traditional reimbursement plans.

″If you’re billing only for the cost of drugs, you are unable to bill for other services these patients must receive to receive home infusion,″ the company said. Caremark said insurers ″recognize that difference by accepting and paying bills which include these additional services.″

Blue Cross declined to comment on the report. Sandy Palazzolo of the U.S. attorney’s office in Detroit said she couldn’t comment on investigations.

The Journal also reported authorities are investigating whether Caremark broke the law by failing to collect co-payments from Medicaid patients. Co- payments are percentages of medical costs that patients are supposed to pay.

Caremark said its policy is to collect co-payments and deductibles from patients unless they prove financial distress.

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