Amerigroup Corp. Liability $334 Million for Actions in Ill.

March 15, 2007

A federal judge’s ruling brought to more than $334 million the amount that insurance company Amerigroup Corp. and its Illinois affiliate owe in damages and penalties for discriminating against pregnant women.

U.S. District Judge Harry D. Leinenweber levied more than $190 million in civil penalties against Amerigroup and the affiliate.

He said the companies’ actions “constituted a several years long, institution-wide goal to fleece defendants’ pockets at the expense of the government, the Medicaid system and the avoided pregnant women” and others with expensive health conditions.

Virginia Beach, Va.-based Amerigroup specializes in health care for low-income patients. Its CEO promised an aggressive appeal; the company has hired former U.S. Solicitor General Theodore B. Olson to lead its appeals team.

Following a three-week trial, a federal jury in October returned a verdict against the company and called for $48 million in damages, an amount that was tripled to $144 million under the federal False Claims Act.

Federal and state prosecutors as well as whistleblower Cleveland Tyson said that while marketing its services in Illinois, Amerigroup avoided pregnant women and others with possibly expensive medical conditions.

That cheated the government, which subsidized the company to market its services evenly among all low-income patients regardless of whether they were pregnant or had costly illnesses, the attorneys said.

Attorneys for Amerigroup denied any fraud was involved, saying the company had publicly stated it was trying to reduce the number of third-trimester women signed up to ensure “continuity of care.”

They said state officials even had urged the company to do so.

The jury found that between April 2000 and July 2003 Amerigroup made 18,130 false claims against Medicaid _ a state administered program for low-income patients that is subsidized by the federal government.

Leinenweber ended up assessing a penalty of $10,500 for each false claim, resulting in civil penalties of $190,365,000.

Jeffrey L. McWaters, Amerigroup’s chairman and chief executive officer, said the company’s Illinois affiliate acted with the knowledge and under the direction of the state Department of Public Aid, now known as the Department of Healthcare and Family Services.

“For more than 12 years, we have focused on providing compassionate, quality care to mothers and children in need,” McWaters said in a statement.

McWaters noted the lawsuit originally was filed by Tyson, Amerigroup Illinois’ former head of government relations, not state authorities.

“The (public aid department) was an aggressive regulator of health plans and renewed our contract numerous times over an 11-year period,” McWaters said. “We believe there were no false claims and that the court allowed erroneous liability and damages theories, as well as evidence to be presented against our company that was inaccurate (and) incomplete.”

The U.S. Department of Justice and the Illinois Attorney General Lisa Madigan’s office joined Tyson’s case in 2005.

Madigan said in a statement that the judge’s ruling “sends a strong message that companies who contract with the state of Illinois to provide healthcare to its neediest residents cannot discriminate against those residents who are most in need of that care.”

According to U.S. Attorney Patrick Fitzgerald’s office, Tyson is entitled to between 15 and 25 percent of the total damages awarded in the case. Whistleblowers are rewarded under the law with a portion of the damages awarded by a jury.

The company currently operates in 10 states, serving 1.3 million low-income Americans enrolled in publicly funded programs such as Medicaid, according to company spokesman Kent Jenkins.

It no longer operates in Illinois; Jenkins said the decision had nothing to do with the federal case.

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