Contractor Sentenced for $1.5M Ripoff of Pennsylvania Faculty Union Health Plan

Michael Buchanan had overbilling down to a fine science. He is now paying the price. On February 27, Buchanan, founder and former operator of a Harrisburg, Pa.-based dental and vision claims processing service, was sentenced in U.S. District Court for the Middle District of Pennsylvania to 37 months in prison, to be followed by three years of supervised release, for stealing nearly $1.5 million from a benefit fund sponsored by the Association of Pennsylvania State College and University Faculties. He also was ordered to pay full restitution, part of which will include his brokerage account funds. Buchanan had pleaded guilty last May to one count of health care fraud. The actions follow an investigation by the FBI and the U.S. Labor Department’s Office of Inspector General.  

The Association of Pennsylvania State College and University Faculties (APSCUF) for nearly 50 years has served as the collective bargaining representative for about 5,000 faculty and coaches employed at the 14 universities (formerly colleges) of the Pennsylvania State System of Higher Education. Like many unions, it has been on the receiving end of benefit fraud. In this case, the culprit was Michael Timothy Buchanan. According to prosecutors, Buchanan, now 69, a resident of Fishers (near Indianapolis), Indiana, used his position as head of Actuaries, Consultants and Administrators, Inc. (ACA), to defraud the APSCUF during 2007-17. The firm’s contract called for the association health plan to pay ACA $3.50 for each union member, $5.20 for each processed vision claim, and $8.10 for each processed dental claim. Buchanan, unfortunately, saw the agreement as a pretext for highly illegal billing and accounting practices.

Buchanan hatched a variety of schemes to generate extra income for ACA by duplicating or inventing patient claims. He would order his employees to count predeterminations, denials and returned X-rays as though they were approved claims. Any claim processed in over 10 minutes would be logged as two separate claims. Each dental claim containing over five lines, and vision claim containing over four lines, likewise would be treated as two claims. Buchanan even treated phone calls, regardless of purpose, as claims. The grand total for these scams: $1,493,629. The 37-month prison sentence, plus the restitution order, handed down by U.S. District Judge Sylvia Rambo would seem reasonable.

Federal officials involved in the investigation voiced approval of the latest action. “For a decade, Michael Buchanan orchestrated the overbilling of the faculty union,” said Tara McMahon, Acting Special Agent in Charge of the FBI’s Philadelphia Division. “His company deliberately and repeatedly submitted one false claim after the next, resulting in the theft of nearly $1.5 million. With this sentence, he’ll begin to answer for such brazen fraud.” U.S. Attorney David Freed noted: “We are pleased that Judge Rambo’s sentence recognized the serious nature of the defendant’s conduct, and that he has been ordered to pay back what he stole.”