The Medicare Advantage program, which allows private insurance companies to offer and administer Medicare benefits, continues to be an area of sharp scrutiny for False Claims Act (FCA) enforcement despite some significant recent setbacks in pursuing FCA liability against Medicare Advantage Plans (MA Plans or Plans). In 2018, several district court decisions raised obstacles to the pursuit of FCA liability against MA Plans, and those decisions have continued to affect FCA enforcement efforts in the first half of 2019. Despite those setbacks, however, the prevalence of government enforcement actions involving Medicare Advantage illustrates that it remains an area of focus for the Department of Justice (DOJ).
Unlike traditional fee-for-service Medicare, MA Plans are compensated on a monthly basis through a fixed payment for each member. The amount of the monthly payment – known as a capitation payment – is determined for each payment year through a process called “risk adjustment” and is based on each individual member’s demographic information and data reflecting the member’s medical condition, as documented during the 12 months preceding the payment year. A member’s condition and medical diagnoses must be supported by a valid medical record.
MA Plans initially became a focus of FCA enforcement due to the perceived incentive for plans to ensure that they receive the maximum possible capitation payment for each Medicare beneficiary. Because data that Plans submit for use in risk adjustment determines the amount of reimbursement that the Plans receive, submitting inaccurate data theoretically can constitute the submission of false claims for payment to the government.
MA Plans’ desire to ensure that their members’ diagnoses are documented accurately each year has given rise to an industry of businesses providing services designed to capture and document a member’s comprehensive medical condition, such as retrospective chart reviews and individualized health assessments. Regardless of how risk adjustment data is obtained, however, Medicare regulations require that MA Plans (1) certify that the data they submit is accurate, complete, and truthful; (2) maintain an effective compliance program and (3) delete codes that they previously submitted but subsequently were determined to be inaccurate.
Several recent court decisions involving UnitedHealthcare have called into question the effectiveness of FCA enforcement actions based on the accuracy of risk adjustment data.
In U.S. ex rel. Poehling v. UnitedHealth Group, Inc. et al., the Central District of California in February 2018 dismissed the United States’ claims based on the theory that the defendants’ attestations as to the truth and accuracy of the risk adjustment data submitted were false. The court held that the government had failed to adequately plead that those attestations were material to Centers for Medicare and Medicaid Services’ (CMS) payment decision. Although the court granted the government leave to amend its complaint, the government did not do so and proceeded only on the reverse false claim theory that UnitedHealth failed to delete invalid diagnosis codes that it previously submitted for risk adjustment.
In UnitedHealthcare Insurance Company v. Azar, the District Court for the District of Columbia in September 2018 granted summary judgment in favor of UnitedHealthcare in a case that UnitedHealthcare had filed under the Administrative Procedure Act to challenge the 60-day repayment rule with respect to Medicare Advantage. The court held that the rule violated the “actuarial equivalence” requirement mandated by statute and represented a departure from prior policy that the government failed to adequately explain. Thus, the ruling vacated the 60-day repayment rule with respect to MA Plans. That decision is currently on appeal but is being held in abeyance pending the district court’s ruling on the government’s Rule 60(b) motion for partial reconsideration. The motion for partial reconsideration is also stayed pending an additional data release by the CMS.
On March 28, 2019, the ruling in Azar thwarted the United States’ effort to obtain summary judgment on its remaining claim in Poehling. With its’ motion, the government asked the court to determine whether UnitedHealth was required by regulation or contract to delete invalid diagnoses codes that it knew were not supported by medical records. In opposition, UnitedHealth argued that such a requirement would violate the actuarial equivalence and same methodology provisions of Section 1853 of the Medicare Act. Based in part on the decision in Azar, the Central District of California declined to rule as a matter of law that UnitedHealth was required to delete codes known to be inaccurate.
Nonetheless, the government appears to be continuing its enforcement efforts against MA Plans. In August 2018, the government filed a petition with the Southern District of New York to enforce a Civil Investigative Demand that had been issued to Anthem, Inc. to investigate whether Anthem had violated the FCA in relation to submitting risk adjustment data to CMS.
If the government has encountered setbacks in some recent cases against MA Plans, enforcement efforts against entities providing diagnosis information to the Plans may be trending in the opposite direction. Although recent successes came in the form of settlements rather than court rulings, a recent intervention decision may give rise to additional case law in this area.
In October 2018, DaVita Medical Holdings, LLC, which had acquired Healthcare Partners, a defendant in the now dismissed United States ex rel. Swoben v. Scan Health Plan litigation, reached a $270 million settlement to resolve allegations that it knowingly submitted unsupported and undocumented diagnosis codes and failed to delete such improper codes. Specifically, the United States alleged that the defendants promulgated improper coding guidance and conducted one-way chart reviews designed to uncover additional diagnosis codes but ignore previously submitted codes determined to be invalid, thereby causing overpayment to the MA Plans.
In April 2019, Sutter Health LLC and its affiliated entities agreed to pay $30 million to resolve allegations that certain of those entities—including hospitals and medical foundations—submitted unsupported diagnosis codes to MA Plans that inflated the risk adjustment scores of the Plans’ beneficiaries and caused overpayments to the Plans. Sutter received a share of the payments that the MA Plans received from CMS for services provided to the Plans’ beneficiaries.
Separate and apart from that settlement, the government in December 2018 intervened in a whistleblower lawsuit filed against Sutter and a separate affiliated entity, Palo Alto Medical Foundation (PAMF), asserting allegations similar to those resolved in the settlement. On March 4, 2019, the government filed a complaint in intervention alleging that Sutter and PAMF knowingly caused submission of false diagnosis codes and knowingly retained overpayments. The government alleges that Sutter and PAMF entered into gainsharing arrangements with the MA Plans that compensated the defendants based on what the MA Plans received from the government for the beneficiaries that the defendants treated. The complaint details efforts to capture certain high-value diagnoses and ignore several red flags regarding the accuracy of the diagnosis codes that were obtained.
Although the government and relators encountered some obstacles in Medicare Advantage enforcement efforts in 2018, ongoing efforts in the first part of this year suggest that this will continue to be an area of focus for enforcement both against MA Plans and the parties that provide the Plans with diagnosis information. As a result, all of these entities – particularly those engaged in diagnosing beneficiaries and providing risk adjustment data to the Plans – should take steps to ensure the accuracy of the diagnosis information that they generate and submit. In addition, to the extent MA Plans undertake efforts to ensure that they are capturing all of the appropriate diagnosis codes for their members, they should not willfully ignore indications that some other diagnosis codes may not be accurate.