The health insurance plan for state employees and teachers overpaid N.C. Baptist Hospital $1.34 million over a five-year period, the State Auditor's Office said in an audit released Wednesday.
The hospital in Winston-Salem has denied any wrongdoing and has not refunded any money to the state.
And the hospital has sued its former employee who alerted the state health plan to the overpayments in the first place.
Joe Vincoli, the hospital's former director of managed care, told the health plan about the overpayments in 2009. Plan administrators were not tracking what was being charged by the hospital, which had been raising its rates each year.
In a November 2009 online complaint to the N.C. Department of Justice, Vincoli alleged that the hospital was committing fraud against the taxpayer. He also sent email to several state legislators.
"In the spring of 2007 I became aware that the hospital was being overpaid and reported it to the hospital's legal counsel and CFO," according to one email message. "They advised me not to notify the State Health Plan stating 'let sleeping dogs lie.' "
State health plan administrators began an audit to see whether such payments were widespread. They identified $4.4 million in overpayments to 30 hospitals. So far, the health plan has recovered about $837,000 from other hospitals, but none from Baptist.
The health plan's audit identified $638,000 in overpayments to Baptist. The state auditor's report , however, put the overpayment at $1.34 million.
The health plan covers 663,000 state employees, dependents and retirees. Legislators recently had to make changes to the plan to fix a projected $515 million shortfall.
The overpayments identified Wednesday by the Auditor's Office stemmed from a contract that Baptist Hospital signed in 2003 with the state health plan. The hospital agreed to give a percentage discount on all outpatient bills for members of the plan. Over the years, the hospital increased its rates, thereby increasing the amount paid by the state health plan.
Given the higher prices, the health plan could have demanded a higher discount, but failed to monitor the contract and the charges, the audit said.
N.C. Baptist did not notify the health plan of its rate increases, saying the contract did not require it to do so. The hospital said it did notify BlueCross BlueShield of North Carolina, which administered the plan.
"There were no overpayments to the medical center and we did not overcharge the Plan members for the services that we provided to them," the hospital said in a statement issued Wednesday. Hospital officials declined to be interviewed and would not discuss the lawsuit.
Lacey Barnes, the director of the state health plan, said she doesn't expect to get any money back from Baptist Hospital.
The hospital's lawsuit alleges that Vincoli "provided disparaging and/or confidential information" that violated a settlement he struck with the hospital after the hospital fired him in 2007.
Vincoli's actions have caused the hospital to suffer embarrassment and negative false publicity, the lawsuit said.
Vincoli declined to discuss the lawsuit.
"Joe Vincoli is someone who, if he becomes aware that the state is being defrauded, he believes it is his duty to report it to the state," said his lawyer, Philip Michael.
The State Employees Association of North Carolina voted to contribute $5,000 to a fund to help Vincoli defend himself against the lawsuit.
"We think it's the big corporate giant versus the taxpayer and the little guy who blows the whistle," said Dana Cope, president of the state employees association. "This is nothing but a lawsuit to intimidate him or other employees trying to do a public service and protect taxpayer dollars."
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