The Ninth Circuit Revives a False Claims Act Lawsuit Which Pleaded Collective Allegations

On July 9, 2018, the Ninth Circuit in United States ex rel. Silingo v. Wellpoint, Inc., reversed in part, affirmed in part, and remanded the dismissal of a False Claims Act lawsuit against several Medicare Advantage Organizations. The Court held Wellpoint was mistakenly dismissed on the pleadings.

Under Medicare Advantage, private health insurance organizations provide Medicare benefits in exchange for a “capitated” fee – a fee paid per person regardless of actual care provided. Capitation rates are based largely on one’s “risk adjustment data,” and patients who have more medical issues are subjected to a higher capitation rate based on their related “risk adjustment data.” As a result, if these organizations “fall prey to greed,” they may fraudulently increase capitation rates to receive increased Medicare payments. United States ex rel. Silingo v. Wellpoint, Inc., No. 16-56400, 2018 U.S. App. LEXIS 18560 at *5 (9th Cir. July 9, 2018)

Medicare regulations require risk adjustment data be based on face-to-face visits validated through physician signatures that meet special signature requirements. Silingo claims MedXM used inappropriate software to alter the health records; the medical diagnoses were made by nurse practitioners and physician assistants who were not authorized to do so; and the diagnoses were not done face-to-face. Accordingly, Silingo advanced six theories of liability under the False Claims Act.

In this case, the plaintiff, Anita Silingo, alleged the defendant Medicare Advantage organizations retained Mobile Medical Examination Services, Inc., MedXM, to “fraudulently increase their capitation payments whose risk scores were set to expire and revert to the unadjusted Medicare beneficiary average.” Id. at 2. The panel held that the district court erred in dismissing charges of factually false claims, express false claims, and false records based on the plaintiff’s use of group allegations.

The Court held the relator in this case, Anita Silingo, successfully pleaded a “WHEEL conspiracy,” which involves a “single member or group (‘the HUB’) separately agreeing with two or more other members or groups (‘the SPOKES’)” as opposed to a “chain conspiracy” where “each person is responsible for a distinct act within the overall plan.” Id. *19. The Court explained that, MedXM, was the ‘HUB,’ and the Medicare Advantage organizations were the ‘SPOKES.’

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