Amerigroup will settle fraud suit for $225 million

VIRGINIA BEACH

Amerigroup Corp., which faced $334 million of damage awards and court-imposed penalties from a Medicaid fraud suit in Chicago, said Tuesday that it will pay the U.S. government and state of Illinois $225 million to settle the civil case.

As part of an agreement struck with federal and state agencies, the Virginia Beach-based health insurer said it also will pay $9 million in legal fees, but it will not admit any wrongdoing.

However, Amerigroup said it also will enter into a corporate-integrity agreement with the inspector general of the Department of Health and Human Services, the federal agency that provides part of the funding for state Medicaid programs. These agreements sometimes require that a health-care provider hire a compliance officer and appoint a compliance committee, develop written

standards and policies, and put in place a comprehensive employee training program.

Amerigroup specializes in providing managed care for beneficiaries of Medicaid and other government-funded health care programs. It currently has managed-care plans in 10 states, including Virginia, with a combined enrollment of almost 1.7 million members.

"We are concluding this litigation now to remove a source of significant legal and financial uncertainty for our organization," said Jim Carlson, Amerigroup's chairman and chief executive officer, in a statement. "With this matter resolved, we can concentrate fully on the business at hand - meeting the healthcare needs of our members and continuing to serve our government partners."

Amerigroup said its financial results for the April-through-June quarter will include a one-time after-tax charge of $199 million for the settlement. The company is scheduled to report its second-quarter results after the stock market closes today.

Amerigroup announced the settlement agreement after the market closed Tuesday. Its share price rose 68 cents to end the day at $25.35.

The suit's plaintiffs - a former Amerigroup employee, the state of Illinois and the federal government - said in federal court in Chicago that Amerigroup and its Chicago-area health care plan defrauded state and federal agencies by discouraging pregnant women and individuals with special needs from enrolling.

During a trial in October 2006, the jury found in favor of the plaintiffs and awarded damages of $48 million. That was tripled to $144 million because the suit had been filed under state and federal "whistle blower" statutes, which required that any damages be trebled. The judge also imposed $190 million of fraud-related penalties on the company.

Amerigroup argued during the trial that it discouraged pregnant women from enrolling in its Chicago health care plan because of concerns about the continuity of care they would receive. Afterward, it appealed the jury verdict and the judge's findings to the U.S. Court of Appeals for the 7th Circuit.

As part of the appeal process, Amerigroup posted a bond last year to cover the amount of damages and penalties. On Tuesday, the company said it will pay the settlement amount from those restricted funds, probably during the current quarter.

In a filing with the Securities and Exchange Commission, Amerigroup disclosed last week that it had been meeting with the plaintiffs as part of a court-ordered mediation program and that the parties had reached agreement on several issues. It asked the court for an additional 30 days to pursue these discussions.

Amerigroup closed its Chicago-area health care plan in July 2006. It cited the effects of funding cuts and uncertainty about an Illinois program that sought to expand coverage for uninsured children.

Tom Shean, (757) 446-2379, tom.shean@pilotonline.com