DOJ’s New Healthcare Fraud Target—Medicare Advantage Insurers

Merle M. DeLancey Jr.

The government continues to seek ways to rein in healthcare costs. Now it has set its sights on the Medicare Advantage Program. Medicare Advantage Plans, sometimes called “Part C” or “MA Plans,” are offered by private companies approved by Medicare. If you join a Medicare Advantage Plan, you still have Medicare, but you get your Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance) coverage from the Medicare Advantage Plan and not original Medicare. Medicare Advantage Plans may also offer extra coverage like dental, vision, hearing, and wellness programs.

Private insurers apply to Medicare to offer Medicare Advantage Plans. As part of the application process, among other information, these companies represent to the Centers for Medicare & Medicaid Services (“CMS”) the scope and content of their provider networks as well as diagnosis codes for Plan beneficiaries. CMS uses diagnosis codes to calculate risk scores for its beneficiaries. The risk scores are used to determine the insurer’s reimbursement level. The higher the risk score, the higher the insurer’s reimbursement. Insurers are paid a flat amount per beneficiary per month for coverage under a Medicare Advantage plan.

On May 30, 2017, the Department of Justice (“DOJ”) announced a $32.5 million settlement with Medicare Advantage Insurer Freedom Health and its numerous related corporate entities. The settlement demonstrates DOJ’s more recent focus on managed care providers participating in the Medicare Advantage Program. Recently, DOJ joined in two qui tam suits against United Healthcare alleging United Healthcare fraudulently inflated its Medicare Advantage risk scores resulting in overbilling Medicare by more than $1 billion. Similarly, according to DOJ, Freedom Health submitted unsupported diagnosis codes which resulted in overbilling CMS. Freedom Health’s settlement was also based upon its misrepresentation of the scope and content of its provider networks when it applied to expand its Medicare Advantage services to new counties in Florida.

For years, with little success, Medicare has tried to appropriately reimburse private insurers offering Medicaid Advantage Plans. Many thought private insurers were immune from false claims act allegations given the inherent uncertainty in estimating healthcare costs reimbursed on the basis of a capitated flat monthly payment. Clearly, this no longer holds true. Misrepresentations made to the government and upon which the government relies to set private insurer reimbursement levels are now being highly scrutinized.

Private insurers participating or seeking to participate in Medicare Advantage should take away three important lessons from this post:

  • First, when submitting network information and diagnosis codes to the government, document and save all of the backup and related information. If the government or private qui tam lawyers come looking, you need to be able to demonstrate the factual support for your submission and any reasonable assumptions you may have made;
  • Second, be vigilant communicating and listening to your employees. Both the Freedom Health and United Healthcare matters arose from whistleblower employees. Implementing an open, non-retaliatory communication line with employees to air their grievances and concerns and demonstrating you take such information seriously by acting upon the information could fend off a future government investigation or private qui tam case; and
  • Third, if it seems too good to be true, it probably is. Generally, government contracts are not the most lucrative. If your contract with the government seems too profitable, you need to perform an internal review. The government routinely uses computer programs to test for outliers—g., Medicare Advantage carriers with abnormally high risk codes receiving correspondingly abnormally high reimbursement.

Merle DeLancey is a partner in Blank Rome, LLP’s Government Contracts Practice. He routinely defends healthcare clients in connection with government healthcare program investigations and compliance with government healthcare program requirements.

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