BlueCross BlueShield of Tennessee (BCBS-T) has agreed to pay the United States $2.1 million to settle allegations of violating the False Claims Act, the Justice Department announced today.

BCBS-T, which is headquartered in Chattanooga, operates as Riverbend Government Benefit Administrators.

BlueCross officials said, "DOJ has not alleged that BlueCross BlueShield of Tennessee (BCBST) committed any fraud and BCBST has denied liability and any intentional misconduct in connection with the administrative delays. BCBST agreed to settle the dispute because its goal to perform all aspects of its New Jersey Fiscal Intermediary contract – and indeed all its commercial and government contracts – in a manner that reflected its enduring commitment to excellence had not been fully met during the initial years of the contract."

The settlement resolves allegations that BCBS-T, while the primary Medicare Part A Fiscal Intermediary for the state of New Jersey, failed to adjust the cost-to-charge ratios for many New Jersey hospitals in a timely manner between 2000 and 2002 that resulted in the payment of excessive "outlier payments" by Medicare program to those medical facilities. A Part A Fiscal Intermediary is a private insurance company that processes and pays Medicare claims.

In addition to its standard payment system, Medicare provides supplemental reimbursement, called outlier payments, to hospitals in cases where the cost of care is unusually high.

Congress enacted the supplemental outlier payment system to ensure that hospitals possess the incentive to treat inpatients whose care requires unusually high costs.

"Today's settlement demonstrates that the Justice Department will be vigilant in protecting the Medicare program from all who abuse it, including contractors that falsely bill for crucial tasks that they do not perform," said Gregory G. Katsas, Assistant Attorney General of the Civil Division.

"The United States relies extensively upon trusted contractors to uphold the integrity of the Medicare system within New Jersey, and any abuse of that trust will be sharply addressed," said Christopher J. Christie, U.S. Attorney for the District of New Jersey.

The settlement with BCBS-T was the result of a coordinated effort among the Justice Department's Civil Division's Commercial Litigation Branch; the U.S. Attorney's Office for the District of New Jersey, Affirmative Civil Enforcement Unit; the Department of Health and Human Services, Office of Inspector General and Office of Counsel to the Inspector General; the Centers for Medicare and Medicaid Services; and the FBI, in investigating and resolving the allegations.