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Provider Network Pays $270 Million for Medicare Advantage Fraud

Medicare Advantage is a government funded health care program that contracts with private insurers to offer Medicare benefits to over 18 million seniors. In recent years, Medicare Advantage plans (MA Plans) have been faced with intense scrutiny for engaging in fraudulent billing practices to enhance government payments. A number of whistleblowers have initiated actions against insurers for using false data to collect inflated fees. Now a whistleblower allegation against Healthcare Partners Holdings LLC (HealthCare Partners) has resulted in a hefty $270 million settlement arising from unlawful medical coding practices between 2007 and 2014. This is the largest settlement of its kind under the False Claims Act (FCA).

Health Care Services Under Medicare Advantage

Medicare Advantage provides Medicare-qualified beneficiaries with the option to receive their health care services from MA Plans managed by special provider networks, known as Medicare Advantage Organizations (MAOs). MAOs can hire healthcare providers directly or engage the services of Medical Service Organizations (MSOs) and other physician networks, which provide managed healthcare services to enrolled beneficiaries. Medicare pays MA Plans a predetermined amount to provide care to beneficiaries enrolled in the plan regardless of the type of services they render to patients. To adequately compensate MA Plans for services provided to patients with more complex health needs, Medicare payments are “risk adjusted” for beneficiaries. As a result, MAOs receive higher payments for patients that necessitate additional medical services and care. Allegations against MSOs and physician networks have focused on a variety of fraudulent activities including failure to ensure the validity of diagnosis codes, “upcoding” diagnosis codes to overstate a patient’s condition, providing inaccurate risk-adjustment data, and submitting claims for conditions that patients either were not treated for or were never diagnosed with – all the while collecting exorbitant amounts in reimbursements.

DaVita Medical Holdings LLC Discloses Fraudulent Practices

DaVita Medical Holdings LLC (DaVita) operated an MSO and contracted with MAOs in various states to provide healthcare. DaVita submitted diagnoses to the MAO and in turn received a portion of the payments that the MAOs collected for providing care to patients. Under this arrangement, DaVita acquired HealthCare Partners, a physician network based in California, in 2012.

After years of improper activity, DaVita disclosed that its affiliate orchestrated the submission of fraudulent diagnostic codes to collect excessive payments that it shared with DaVita. HealthCare Partners submitted diagnostic codes that were not factually supported. In one instance, HealthCare Partners directed its physicians to document a particular spine condition under a diagnosis code that would generate a higher payment. Further, once the patient’s diagnosis codes were improperly recorded, they were not rectified after a review of the patient’s medical conditions. Discovery of the errant codes was also never reported.

Ninth Circuit Decides Case Based on False Claims Act

In a related case that was also resolved under the DOJ settlement , Healthcare Partners was alleged to have engaged in “one-way” chart review – the practice of scanning records retroactively to submit high paying diagnosis codes that were missing and disregarding erroneous diagnoses that were made in the patient’s records. These claims were addressed in a lawsuit by whistleblower, James Swoben, an employee that conducted business with DaVita, under the qui tam provisions of the FCA. The FCA permits private claimants to bring actions on behalf of the government for false claims. In Mr. Swoben’s case, the Ninth Circuit determined that this type of retroactive review is fraudulent and reiterated that MAOs (and their healthcare providers) are required to exercise due diligence to confirm the accuracy and veracity of the information they submit for risk adjustment analysis. This standard also entails liability for reckless disregard and deliberate ignorance of falsified information.

DOJ Settlement for Medicare Advantage Fraud

The settlement between HealthCare Partners and the Department of Justice (DOJ) based on information provided by DaVita resolves allegations that it submitted falsified and inaccurate data and failed to correct misleading information. HealthCare Partners did not acknowledge any wrongdoing. The settlement is a significant step toward addressing deceptive practices that seek to unjustly enrich MSOs and physician networks and defraud federally funded healthcare programs. Whistleblowers can continue to rely on the FCA as a tool for pursuing perpetrators of Medicare Advantage fraud.

If you have information related to Medicare Advantage fraud, give us a call at (800) 315-3806today for a free confidential consultation and case review with an experienced whistleblower attorney. The whistleblower attorneys at Levy Konigsberg, LLP can help determine your eligibility to bring a case.

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