DOJ’s Medicare Advantage lawsuits, investigations likely to change insurance culture

The Department of Justice’s increased focus on investigating alleged fraud in the Medicare Advantage program is likely to change the way insurers do business, according to lawyers who specialize in False Claims Act suits.

The Justice Department in recent weeks has filed complaints in two Medicare Advantage fraud suits against UnitedHealth Group. The federal government and whistle-blowers allege the insurer presented false claims to the Medicare program and received at least $1 billion in unjustified payments steeming from inflated patient risk scores.

The agency is also investigating Aetna, Health Net, Humana and Cigna’s Bravo Health to determine if they have been engaging in medical upcoding.

Risk scores stem from records submitted by providers that contain diagnosis codes, indicating a patient has metastatic cancer, angina, cystic fibrosis, stroke, COPD or other conditions. The more serious the disease, the more Medicare pays the company for each patient.

Under the fee-for-service model, some doctors weren’t dedicated to documenting every condition because that didn’t affect how they were paid, especially in outpatient settings.

“In the traditional fee-for-service world, doctors were getting paid on what procedures they did,” said Michael Kolber, a partner at Menatt Phelps & Phillips who specializes in False Claims Act cases. “The plans had an incentive to be vigilant on upcoding and fraud and abuse from providers.”

But under a capitated managed care approach, both insurers and providers get more money if the patients are sicker.

“In that way, the interest of the provider and the plan is aligned,” Kolber said.

With the insurers no longer a check on providers in this way, it’s more difficult for CMS to keep an eye on payments, according to Amy Garrigues, managing partner at the Raleigh office of Hall Render Killian Heath & Lyman.

“I think it’s hard, because of the capitated payment model, it’s hard —without restructuring the whole system — it’s hard to come up with a way to monitor that,” she said.

It’s unlikely the UnitedHealth lawsuits will go to trial, but any settlement could have an impact on the overall Medicare Advantage culture, and it’s unclear where the lines will be drawn.

“You can’t verify every claim before you submit it,” Kolber said. “How much short of that can you do?”

UnitedHealth spokesman Matt Burns said the company is confident it complied with Medicare Advantage rules. The DOJ argument ignores that the CMS adjusts Medicare Advantage claims during audits to correct for expected overpayments, he said.

Garrigues, who usually represents providers, said that sector is already used to auditing of codes, partly because the inpatient payments are based on diagnoses-related groups.

“But it is something new for the Medicare Advantage insurer,” she said.

According to the complaint filed in federal court in California on Tuesday, some of the physician groups checked by UnitedHealth lacked documentation supporting particular diagnosis codes…

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