Amerigroup to settle fraud allegations for $225 million

Amerigroup Corp. will pay $225 million to resolve allegations that it defrauded the state of Illinois Medicaid program, the Justice Department and Illinois attorney general confirmed in a joint statement Thursday.

Cleveland Tyson, a former Amerigroup employee who filed the whistle-blower lawsuit in federal court in Chicago, will collect a $56.25 million share of the payment, the Justice Department and Illinois attorney general said.

Amerigroup, they said, was required to enroll all eligible beneficiaries in its Medicaid managed-care program in Illinois. However, the federal government and Illinois contended that Virginia Beach-based Amerigroup avoided enrolling unhealthy patients and pregnant women, who were more costly to treat.

Amerigroup, which specializes in managed-care programs for beneficiaries of Medicaid and other government-funded programs, said in July that it planned to pay the $225 million after negotiating with the Justice Department and state of Illinois. Amerigroup no longer operates in Illinois.

"The Justice Department is committed to ensuring that recipients of federal health care funds adhere to the law, so that the appropriate health care services are provided to all eligible patients," Gregory Katsas, assistant attorney general for the department's Civil Division, said in a statement.

Amerigroup operates plans in 11 states, including Virginia, with a combined enrollment of almost 1.7 million members.

As part of the settlement, Amerigroup has agreed to enter into a "corporate integrity agreement" with the U.S. Health and Human Services Department's Office of Inspector General.

The agreement applies to all states in which Amerigroup does business. It requires the company to adopt policies, procedures and a code of conduct designed to prevent discrimination in its marketing and enrollment practices. It also must hire an independent auditor to review those practices annually.

Tyson originally filed the suit on behalf of the government. Under both federal and Illinois statutes, the whistle-blower is entitled to a share of any recovery.

During a trial in October 2006, a jury found that Amerigroup defrauded the Illinois Department of Public Aid and the federal government. The judge entered a $334 million judgment against the company.

Amerigroup appealed the decision, and that appeal was still pending as the sides met to discuss a settlement. The appeal is to be dismissed as part of the settlement.

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