Attorney General Cuomo Announces $35 Million Settlement With Managed Care Provider Healthfirst

ALBANY, NY (September 3, 2008) Attorney General Andrew M. Cuomo today announced a $35 million settlement with Healthfirst, the largest Medicaid Managed Care provider in New York State.  AG Cuomo also announced the indictment earlier this year of James Boothe, a former senior executive of Healthfirst.  The settlement was achieved with the assistance of Healthfirst's new management.

The investigation by the AGs Medicaid Fraud Control Unit centered on Healthfirsts practice from 1999 through 2003 of compensating its marketing representatives based on productivity, in violation of its contracts with State and local government agencies, and Healthfirst's false statements to those agencies about its marketing practices. 

This settlement and the corresponding indictment are a clear indication that my office will not tolerate any improper conduct by Medicaid providers, and we will fully prosecute any individuals who violate the law," said Attorney General Cuomo. "Medicaid providers engaged in prohibited compensation practices are committing an act of fraud against New York's taxpayers and Healthfirst's new management is rightfully taking responsibility and correcting the mistakes of the past. Marketing reps must not engage in a numbers game that could result in ineligible persons being enrolled in the Medicaid program and cost taxpayers more money.

Healthfirst violated its Medicaid managed care contract and paid bonuses or other compensation incentives to its employees based on the number of people Healthfirst enrolled from 1999 to September 2003.  At the time, the Medicaid managed care contract prohibited such compensation. Healthfirst also filed marketing plans with New York City and the New York State Department of Health, as well as local social services districts in Nassau and Suffolk County, which falsely represented that its marketing representatives were compensated based solely on qualitative criteria, when in fact its bonuses and other compensation incentives were based on productivity.  By this conduct, Healthfirst violated the integrity of the enrollment process.

In addition to the civil settlement, in May 2008, the AGs Medicaid Fraud Control Unit obtained an indictment charging James Boothe, the former Executive Vice President and Chief Operating Officer of Healthfirst, with Insurance Fraud in the First Degree, a Class B felony carrying a mandatory minimum prison term of 1-3 years, and a maximum of 8 1/3 to 25 years, Scheme to Defraud in the First Degree, Offering a False Instrument for Filing in the First Degree, and Falsifying Business Records in the First Degree, each of which carries a maximum sentence of four years imprisonment.  The indictment alleges that Boothe caused Healthfirst to submit false marketing plans to the State and to local government agencies, concealing the fact that Healthfirst was compensating its marketing representatives based on productivity. Boothe previously resigned his position with Healthfirst. The charges against Boothe are merely accusations and he is presumed innocent until proven guilty.

During the course of the Medicaid Fraud Control Units investigation, Healthfirst cooperated with the Attorney General's Office and disclosed certain matters concerning improper compensation practices and enrollment fraud committed by certain of its former marketing representatives.  Healthfirst has since retained a new President and Chief Executive Officer, a new Chief Operating Officer, commenced an extensive review of past and current practices and demonstrated its commitment to comply with all of its contractual obligations.

The Attorney General thanks the New York City Human Resources Administration for its help in supporting the investigation.

The criminal prosecution is being handled by Special Assistant Attorney General Bonnie Stein. The civil investigation was led by Special Assistant Attorney General Sherrie Brown.  Supervising Special Auditor Investigator Helen Long, Principal Special Auditors Emmanuel Archer and Jerome Hosinking, Associate Special Auditors Nancy Wickstrom and Anthony Spaventa, Senior Special Investigator Thomas Burke, Investigator Thomas Dowd and Jeanette Paris assisted in the investigation.  Electronic data analysis was conducted by Carolyn Pollard, Gail Lysiak and Matthew Toomey of the Medicaid Fraud Control Units Electronic Investigative Support Group.