Blue Cross sues Charlotte child therapy group, alleging over $1M in billing fraud

Blue Cross and Blue Shield of North Carolina is suing a Charlotte pediatric therapy practice over allegations of improper and fraudulent billing involving the submission of $1.1 million in unearned claims, according to state court records.

The health insurance giant filed the lawsuit against Child and Family Development, Inc. in early September in the Superior Court Division of Durham County. The case was subsequently assigned to the North Carolina Business Court, which handles complex business litigation.

Between August 2017 and July 2022, C&FD allegedly submitted evaluation and management services claims for administrative duties performed alongside main physical, occupational and speech therapy services, according to the lawsuit.

Blue Cross NC stated that there were discrepancies in some of the billing codes for evaluation and management services.

Blue Cross NC and its legal counsel did not provide a statement as of Monday evening.

Child and Family Development attorney Jared Gardner said his client denies the claims. “The accusation that there is any fraudulent conduct on behalf of or by Child and Family Development is utterly baseless,” Gardner said.

Gardner said that the insurer missed the standard two-year deadline to recover the money and is now labeling routine billing as fraud to avoid legal time limits.

The case has also involved several procedural disputes. For more than 20 years, therapy and health care providers, including C&FD, routinely billed evaluation and management codes along with their therapy services, according to Gardner. Around June 2021, Blue Cross NC changed its policy and stopped paying those codes, leading to disputes, he added.

Blue Cross NC tried to file its first lawsuit against C&FD in Mecklenburg County on April 17, according to Gardner.

C&FD filed a motion to dismiss on July 27, arguing that the lawsuit was never properly filed under North Carolina law and that the three-year statute of limitations expired on May 31.

On Sept. 2, Blue Cross NC filed its new lawsuit. Gardner called the second lawsuit a backup plan after Blue Cross NC realized its first attempt had procedural problems.

A few days later, Special Superior Court Judge Matthew Houston ordered both sides to file additional briefs on jurisdictional issues before he rules on C&FD’s motion to dismiss the first one.

In January 2023, Blue Cross NC’s special investigations unit flagged C&FD and requested medical, operational and credentialing records for a random sample of 419 member claims, according to the lawsuit.

In May 2023, Blue Cross NC told C&FD that its audit found none of the sampled claims were accurate, according to the lawsuit. The claims lacked proof of direct patient care, were billed by therapists for services outside their scope or listed the wrong provider.

During a late 2023 audit, C&FD representatives admitted that the codes were billed to generate more revenue because the practice was dissatisfied with the negotiated reimbursement rates for its core therapy services, according to the Blue Cross NC allegations.

After discussions and written submissions from C&FD, Blue Cross NC issued a formal repayment demand for $1.1 million. C&FD has refused to return the funds, according to the lawsuit.

Through its lawsuit, Blue Cross NC made several key claims against C&FD: that C&FD breached its contracts by billing for services that were not provided or were not eligible for payment, that it collected unauthorized costs from patients, and that it refused to return overpayments.

Blue Cross NC also alleged that C&FD submitted inaccurate claims describing the services as necessary, properly coded and supported by medical records. It also claimed that C&FD knowingly submitted false billing information to deceive Blue Cross NC and increase its revenue.

Blue Cross NC is asking the court to order C&FD to return the improper payments, including money collected from patients. Blue Cross NC is seeking at least $1.1 million in damages, along with interest, legal fees, court costs and punitive damages.

Founded in 1933 and headquartered in the Durham-Chapel Hill area, Blue Cross NC is affiliated with the national Blue Cross Blue Shield Association.

The insurer serves more than 5.8 million people across North Carolina. Its provider networks include doctors in all 100 counties, covering 95% of the state’s physicians and nearly all acute-care hospitals, according to its website.

C&FD was established in 1980 to assess the needs of children through recommended treatment plans. The company provides services for autism, counseling, education, occupational therapy, speech-language therapy and psychological needs. It operates two locations in Midtown and Pineville.

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