Menands

The auditors worked in a non-descript, three-story brick building near a warehouse district in Menands, a couple miles north of the state Capitol.

Their surroundings were ordinary, including hand-me-down state government furnishings. But their job was a crucial one: auditing the eligibility rates for recipients of New York's $22 billion-a-year Medicaid program.

For New York, the potential of paying tens of millions of dollars in penalties was at stake if their error rates exceeded a threshold set by the federal government. The audits were mandated by Congress, in part, to rein in the fraud and mistakes that have permeated the nation's massive health care system for people with low incomes.

Now, several current and former state employees, who were part of two federal lawsuits that alleged the state's Medicaid program is awash in fraud, are speaking out about their efforts to report the abuse. In one case, a group of auditors whose job it was to detect fraud said state Health Department managers unethically directed and altered their work results.

"People stopped us from doing it," said Patricia Monks, then a longtime state worker who questioned the interference. "I was fired after eight months because I 'didn't have the right attitude.' "

At the time, Monks, 68, worked in the Menands office for the Center for Development of Human Services, which was headquartered at SUNY Buffalo State and served as an arm of the quasi-public SUNY Research Foundation. The Research Foundation had won a contract with the state Health Department to do the work

In April 2008, with less than a year on the job, Monks and a supervisor in her office, Patrick Campion, complained to supervisors that state Health Department officials were interfering with their work and taking steps to manipulate the audit results. Monks said Diane Farrell, a DOH manager tasked with monitoring the work, was a fixture in the Menands office and met weekly in a conference room with a CDHS supervisor, Ann Marie Hutchinson.

"I saw her and Ann Marie in the conference room on several occasions. They had case files open," Monks said in an interview last week, marking her first public comments on the case. "I had discussions with Ann, specifically, about how unethical that was. ... The other thing they did was they destroyed records. Any of the cases I called in error, they destroyed, and did their own audit."

Less than a month after Campion and Monks reported their concerns, they were both fired, in April 2008, according to court records.

Monks brought her concerns to the U.S. Attorney's office in Albany, where she met with a former assistant U.S. Attorney, Sara Lord, who opened a criminal investigation that would languish for years as the case bounced to different attorneys in the office. Initially, several Health Department managers were told they were targets in the criminal probe, but no one was ever charged and the state would ultimately be absolved of wrongdoing.

Two years after she was fired, Monks and four other former Research Foundation employees in the audit unit, including Campion, filed a federal complaint, known as a qui tam, under the False Claims Act accusing their supervisors and state Health Department managers of undermining their work and manipulating the Medicaid error rates.

"Frankly, the entire Medicaid program is a sham in New York," Monks said. "People are getting Medicaid and maybe shouldn't be. ... Ninety percent of the cases I had I couldn't tell if they were eligible or not. We weren't allowed to contact anyone. We weren't allowed to write letters to anyone."

The state terminated its contract with the Research Foundation in 2010, a year after the U.S. Attorneys office in Albany launched its investigation of the workers' allegations. Five months ago, the civil claim filed by Monks and her colleagues ended with the Research Foundation agreeing to pay $3.75 million to settle the case. For its part, the state Health Department admitted no wrongdoing and was not listed as a defendant, but the Health Department is referenced more than 30 times in the 15-page complaint, which casts the DOH as a co-conspirator with the Research Foundation.

"CDHS got a bum rap," Monks said. "They took the heat for the Department of Health."

James Ryan, who quit the unit not long after Monks was fired, was one of the fivewho filed the civil complaint and split more than $800,000, which was their share of the settlement. Ryan, 65, who like Monks was also a longtime state worker, said federal regulators who were monitoring New York's Medicaid program "were not happy" about their lack of access to information. He said the state's error rate for Medicaid recipients was higher than 20 percent and the Health Department was "bound and determined to report five percent."

In a statement Friday, a Health Department spokesperson said: "The NYS DOH was not a party to the qui tam lawsuit. The SUNY Research Foundation was and settled the matter with the federal government. There has been no action brought against NYS DOH alleging any wrongdoing."

The federal case was not the only False Claims Act case targeting New York's Medicaid system.

The same year that Monks and her colleagues filed their claim, five state Health Department workers, including a pharmacist, a nurse and a Medicaid fraud investigator, filed a second complaint in U.S. District Court outlining allegations of fraud against Computer Sciences Corporation, a Nevada company that ran New York's Medicaid management system since 1986, according to court records.

The claim against CSC said the company, by virture of its contract with New York, "accepted the responsibility to screen out fraudulent claims by recipients and providers."

"During the course of their employment with the New York state Department of Health, relators have uncovered multitudinous instances in which Medicaid benefits were paid to residents of other states, deceased individuals, incarcerated individuals, or to individuals classified as 'undomiciled' or using bogus addresses or with invalid social security numbers," states the complaint, which was filed under seal in July 2010.

The case remained sealed until last October, when a federal judge ordered it opened two days after the U.S. Attorney's office notified the court that it would not pursue a fraud case against CSC.

A spokesman for U.S. Attorney Richard S. Hartunian declined comment, noting the civil case against CSC remains open. Federal prosecutors told the court they are reserving their right to pursue a case at a later time.

Harvey Brody, one of the claimants against CSC, is an investigator for the state Office of Medicaid Inspector General. For the past three years, he said, the state has paid him a salary even though he has not been allowed to return to work, has no duties, and still receives favorable job reviews annually.

"They were afraid of me and the other relators (complainants) because we found a pattern of false claims," Brody said. "We had actual evidence, documents ... showing that payments were made to people that didn't receive services. We think it was about $970 million over roughly a three-year period."

But their federal complaint lost footing after the U.S. Attorney's office declined to pursue the case, and their former attorney, state Assemblyman Phil Steck, filed papers asking a federal judge to dismiss the lawsuit.

"We don't have access to the government's investigation, so I can't tell you whether the allegations were completely false or just couldn't be substantiated," Steck said. "I think from a lawyer's point of view sometimes you can have enough probable cause to file a lawsuit, but ... it turns out you come to the realization that the case cannot be proven."

Steve Sumner, an attorney in Dallas, represented CSC in the case and said the allegations made by Brody and his colleagues were baseless.

"Those types of allegations were just off-the-charts inaccurate," Sumner said. "We were in real close contact with the U.S. Attorneys and DOH investigators, and in fact conducted some of the investigation with the government."

Patricia Pafundi, a pharmacist with the state Office of Medicaid Inspector General, was a complainant in the federal claim against CSC. She said that in her work checking prescriptions for accuracy she uncovered numerous instances of fraud, including claims paid to deceased individuals, ineligible recipients, residents of other countries and to pay for forged prescriptions. Abusing the Medicaid system is "like stealing candy from a baby," she said.

Pafundi said she reported the problems to everyone from former Senate Majority Leader Joseph L. Bruno to U.S. Sen. Kirsten Gillibrand.

"I think that was the most irritating thing is you would report these and nothing would get done and you continue to see it over and over again," she said. "The reality is every dollar that's stolen is another dollar that can't be spent on people who legitimately earned and need health care. ... It's a shame that people aren't concerned enough to stop what's going on."

blyons@timesunion.com • 518-454-5547 • @blyonswriter