In Settling Fraud Case, N.Y. Medicare Advantage Insurer, CEO Will Pay Up to $100M

This is a story from MedPage Today.

A Western New York senior health insurance provider and the CEO of its medical analytics arm have agreed to pay a total of up to $100 million to settle Justice Department allegations of fraudulent billing for exaggerated or nonexistent health conditions.

The Independent Health Association of Buffalo, which operates two Medicare Advantage plans, will pay up to $98 million. Betsy Gaffney, CEO of medical records review company DxID, will pay $2 million, according to the settlement agreement. Neither admitted wrongdoing.

“Today’s outcome sends a clear message to the Medicare Advantage community that the United States will take appropriate action against those who knowingly submit inflated claims,” Michael Granston, assistant attorney general for the Department of Justice (DOJ), said in announcing the settlement on December 20.

Frank Sava, a spokesperson for Independent Health, said in a statement: “The DOJ’s assertions are only allegations, and no liability has been determined. This settlement does not constitute an admission of wrongdoing; rather, it allows us to avoid the additional disruption, expense and uncertainty associated with litigation in a matter that has lasted more than a decade.

As part of the settlement, Independent Health will make “guaranteed payments” of $34.5 million in installments from 2024 to 2028. Payment of the maximum amount provided in the settlement will depend on the financial performance of the health plan.

Michael Ronickher, an attorney for whistleblower Teresa Ross, called the settlement “historic,” saying it was the largest payment ever made by a health plan based solely on a whistleblower’s allegations of fraud. He was also one of the first to accuse a data mining company of helping a health plan overbill.

The settlement is the latest in a series of whistleblower actions alleging billing fraud by a Medicare Advantage insurer. Medicare Advantage plans are private health plans that cover more than 33 million members, more than half of all people eligible for Medicare. They are expected to grow further under the new Trump administration.

But as Medicare Advantage grew in popularity, CMS regulators struggled to prevent health plans from exaggerating patients’ health status in order to increase revenue.

Whistleblowers such as Ross, a former medical coding professional, helped the government recover hundreds of millions of dollars in overpayments related to alleged coding abuses. Ross will receive at least $8.2 million, according to the Justice Department.

Ross said CMS “created a premium” for health plans that added medical diagnosis codes when reviewing patient records — and whether or not those codes were accurate “didn’t seem to bother some people.”

“Billions of dollars are being paid by CMS for diagnostics that don’t exist,” Ross said. KFF Health News in an interview.

Data mining

The DOJ’s civil complaint, filed in September 2021, was unusual in that it targeted a data analytics company – and its top executive – for allegedly obtaining false payments.

DxID specialized in leveraging electronic health records to capture new diagnoses for patients — pocketing up to 20% of the money generated for the health plan, according to the suit, which says Independent Health used the company from 2010 to 2017. DxID closed its doors in 2021.

Gaffney pitched his services to Medicare Advantage plans as “too attractive to pass up,” according to the Justice Department’s complaint.

“There are no upfront fees, we don’t get paid until you get paid, and we work on a percentage of actual proven recoveries,” Gaffney said, according to the complaint. Timothy Hoover, Gaffney’s attorney, said in a statement that the settlement “does not constitute an admission of liability on the part of Ms. Gaffney. The settlement merely resolves a dispute and brings closure to the parties.”

“A ton of money”

CMS uses a complex formula that pays health plans higher rates for sicker patients and lower rates for healthy people. Health plans must maintain medical records that document all diagnoses they highlight for reimbursement.

Independent Health violated these rules by billing Medicare for a series of medical issues that were either exaggerated or not supported by patients’ medical records, such as billing for treatment of chronic depression that had been resolved, according to the complaint. In one case, an 87-year-old man was coded as having “major depressive disorder” even though his medical records indicated the problem was “transient,” according to the complaint.

DxID also cited chronic kidney disease or kidney failure “in the absence of any documentation suggesting that a patient suffered from these conditions,” according to the complaint. Previous conditions, such as heart attacks, that did not require current treatment were also coded, according to the DOJ.

The suit alleges that Gaffney said the kidney failure diagnoses were “worth a ton of money to IH.” [Independent Health] and the majority of people over 70 have it to some degree. »

Ross filed a lawsuit in 2012 against Group Health Cooperative in Seattle, one of the nation’s oldest managed care groups.

Ross, a former medical coding manager there, alleged that DxID submitted more than $30 million in illness claims — many of which were invalid — on behalf of Group Health for 2010 and 2011. For example, Ross alleged that the plan billed for “major depression” in a patient described by his doctor as having an “incredibly sunny disposition.”

Group Health, now known as Kaiser Foundation Health Plan of Washington, has denied any wrongdoing. But he settled the civil case in November 2020 by agreeing to pay $6.3 million. The DOJ filed a second complaint in 2021, against Independent Health, which also used DxID’s services.

Ross said she lost her job after her lawsuit became public in 2019 and was unable to get another one in the medical coding field.

“It was tough at times, but we got through it,” she said. Ross, 60, said she was now “happily retired”.

False allegations

Whistleblowers sue under the False Claims Act, a Civil War-era federal law that allows private citizens to report fraud against the government and share in any recovery.

At least two dozen such lawsuits, some dating back to 2009, have targeted Medicare Advantage plans for overestimating the severity of health conditions, a practice known in the industry as “upcoding.” Previous settlements resulting from such lawsuits have totaled more than $600 million.

Whistleblowers have played a key role in holding health insurers accountable.

While dozens of CMS audits have concluded that health plans were charging the government too much, the agency has done little to get the money back from the U.S. Treasury.

In a surprise action in late January 2023, CMS announced it would accept a fraction of the tens of millions of dollars in overpayments discovered during its audits dating back to 2011 and would not impose major financial penalties on health plans until after a series of audits for the 2018 payments, which have not yet been completed. It’s unclear how much the plans will ultimately pay back.

“I think CMS should do more,” said Max Voldman, an attorney who represents Ross.

KFF Health News is a national newsroom that produces in-depth journalism on health issues and is one of KFF’s primary operating programs – an independent source of health policy research, polling and journalism. Learn more about KFF.