The False Claims Act covers all manner of fraud upon the Medicare system including fraud upon Medicare Advantage (Part C). Medicare Advantage is a public-private partnership whereby private insurance companies (acting as so-called Medicare Advantage Organizations or “MAOs”) offer healthcare plans funded by the federal Medicare program. Medicare Advantage is big business. Today, most (54%) of the Medicare-eligible population is covered by Medicare Advantage as opposed to traditional Medicare. That means that billions of dollars in taxpayer funds are being paid to private insurance companies ever year.
Given that MAOs are paid by the federal government, payments under the Medicare Advantage program fall within the scope of the False Claims Act. But, unlike traditional Medicare, which operates on a fee-for-service model, the Centers for Medicare and Medicaid Services (“CMS”) pays MAOs a per member per month (“PMPM”) capitated payment for the healthcare services that the beneficiary may require. The PMPM is determined through a complex algorithm, but a primary component of the calculation is the risk adjustment process, whereby each plan member is assigned a risk score reflecting the health of each plan member. A “sicker” patient means a higher risk score and a higher PMPM payment to the insurance company. The idea is that an MA plan that will need to provide care to less healthy individuals will need to spend more on patient care and thus should be paid more for shouldering that risk.
In an ideal world, MAOs provide the same suite of services as traditional Medicare but for less money, and all the while the federal government shifts insurance risks from the public to the private sector. But that is in an ideal world. Critics claim that Medicare Advantage has not lived up to its lofty goals. Patients often complain that MAOs throttle services to needy patients while MAOs have been accused of defrauding the federal government to illegally obtain higher payments from the government. The False Claims Act is a critical tool in ensuring that Medicare Advantage funds are appropriately spent.
Below are key fraud schemes that can affect the Medicare Advantage system and implicate the False Claims ACt:
Upcoding Pressure: MA plans may prod providers to inflate diagnostic data (e.g., Hierarchical Condition Category data) which is submitted to CMS. By inflating diagnostic data, an MA plan can make its patients appear less healthy to CMS and thus obtain higher PMPM payments. This may occur for a number of reasons. For example, a physician practice may be paid by MAOs (like MAOs are paid by CMS) in a manner that incorporates risk adjustment data. If that is the case, then providers are financially incentivized to upcode diagnostic data. Further, MA plans and insurers are often owned by common parent companies. That can lead to top-down pressure on providers to upcode diagnoses in order to increase revenue to the insurance division.
Chart Reviews, Chart Audits, and Data Mining: Insurance companies may perform reviews of medical records to add diagnoses that were not originally documented. A one-sided chart review (i.e., one that tends to result in charts reflecting more diagnoses while ignoring the need to remove improper diagnoses) is a common way that insurers engage in Medicare Advantage fraud. Further, MAOs may prod coders to improperly infer diagnoses (e.g., by looking at medication history to come up with new diagnoses not otherwise reflected in the medical record).
Coding Untreated or Resolved Diagnoses: When an outpatient provider codes a condition, the condition must have existed at the time of the visit. Further, to be eligible for the risk adjustment process, a diagnosis must have required treatment in the relevant year. MA plans and providers may document diagnostic data for a condition which either does not exist any longer (e.g., a broken bone or disease that has since resolved) or which exists but did not affect the provider’s care of the patient (e.g., a benign condition).
Ruled Out and Differential Diagnoses: Often providers have ruled out a medical condition or are in the process of considering multiple diagnoses (i.e., they offer a differential diagnosis). Such unconfirmed diagnoses are ineligible for consideration under the risk adjustment process, but MAOs and providers may improperly code for financial gain.
Erroneous Diagnostic Linking: MAOs and providers may engage in a specific form of upcoding where they claim that one condition is linked to another condition – even if that is not borne out by the record. Often conditions with certain complications can result in higher risk scores. So, there can be a financial benefit if an MAO or provider can claim that one condition is caused by (i.e., a complication of) another condition.
Medical Loss Ratio Manipulation: Under federal law, MAOs are required to spend 85% of healthcare premiums on medical care and efforts to improve the quality of care. This is called the Medical Loss Ratio (“MLR”). If an MA plan falls below the MLR, it must refund the difference between its eligible expenses and the MLR to the federal government. Another way to think of the MLR is that it sets something approximating a 15% to 20% profit margin ceiling on MA plans. But the MLR can be manipulated. For example, MAOs may inflate MLR-eligible costs to reduce or eliminate their refund obligations. And the risk of manipulation is now greater than ever as the healthcare industry has gone through a remarkable process of vertical integration. Increasingly insurance companies (which provide MA plans) are part of much larger healthcare conglomerates. Those conglomerates frequently own an array of non-insurance subsidiaries like physician practices, pharmacies, pharmacy benefit managers, and the like. This creates a prime opportunity for fraud. If an MA plan expects to fall below the MLR, it has two choices: (a) face the prospect of having to refund the difference to CMS: or (b) make unnecessary payments to related companies in the corporate family and label those excess payments “patient care’ or “quality of care” payments. The latter option is fraudulent and is no more than a thinly veiled scheme to dodge the MA plan’s obligation to refund money to the government.
How Can I Blow the Whistle on Medicare Advantage Fraud?
The False Claims Act covers schemes to defraud Medicare Advantage. Before pursuing a False Claims Act whistleblower case, it is prudent to consult with experienced counsel. An experienced whistleblower attorney can explain the risks and rewards associated with pursuing a whistleblower case. Contact Pietragallo Gordon Alfano Bosick & Raspanti if you are interested in pursuing a Medicare Advantage whistleblower case. An initial consultation is free and confidential.
If you are aware of any person, corporation or entity that you think may be violating the Federal False Claims Act or a State False Claims Act, contact us today.