This month, the Department of Justice (“DOJ”) made its first intervention into a whistleblower False Claims Act (“FCA”) suit that alleges fraud against the Medicare Advantage Program. The California case, U.S. ex rel. Swoben v. Secure Horizons, et al., involves claims that insurer UnitedHealth Group, Inc., knowingly submitted false or fraudulent information to the government and received inflated Medicare payments as a result.
As the Complaint explains, Medicare Advantage allows individuals to receive Medicare benefits through private health-insurance organizations. It works like this: Medicare beneficiaries enroll in Medicare Advantage insurance plans that are owned by Medicare Advantage Organizations (“MAOs”), of which UnitedHealth is the largest in the country. For each of its Medicare beneficiaries, a MAO receives a fixed monthly payment from CMS. To determine the amount of that payment, CMS requires MAOs to submit health information called “diagnosis codes” for each of their Medicare beneficiaries. CMS relies on that information to determine a beneficiary-specific “risk” score, from which CMS determines what amount to pay the MAO for each beneficiary.
The goal of this system is to ensure that CMS pays MAOs a per-beneficiary amount that actually corresponds to each individual’s expected healthcare cost. In general, that means lower payments for those with lower health risks and higher payments for those with higher risk. However, in its Complaint, the DOJ warns that “[t]his payment model creates powerful incentives for [MAOs] to over-report diagnosis codes in order to exaggerate the expected healthcare costs for their enrollees.” To avoid over-reporting, diagnosis codes must be corroborated by the beneficiary’s medical records, and MAOs are required not only to certify that the codes are accurate and truthful but to maintain an “effective compliance program” to prevent, detect, and correct non-compliance, fraud, waste, and abuse.
The Swoben Complaint alleges that UnitedHealth knew that many of the diagnosis codes submitted to CMS were unsupported, and that it was obligated to identify and remove such codes but “turned a blind eye” to this information and failed to take adequate corrective action. The Complaint also alleges that UnitedHealth engaged in various activities that encouraged the over-reporting of beneficiaries’ diagnoses codes, thereby causing the submission of false claims and increasing CMS’s payments to UnitedHealth.
In a press release, the Acting U.S. Attorney for the Central District of California, Sandra R. Brown, explained, “This action sends a warning that our office will continue to scrutinize and hold accountable Medicare Advantage insurers to safeguard the integrity of the Medicare program.” Given the risk of fraud in this area, the government’s intervention in Swoben likely signals the first step in increased enforcement activity regarding Medicare Advantage in the future.