DOJ intervenes in False Claims Act suit against Medicare Advantage insurer


The federal government is suing a New York Medicare Advantage insurer under the False Claims Act, accusing it of bilking the government for millions of dollars by making its members appear sicker than they were.

The Justice Department is intervening in a whistleblower lawsuit against Buffalo-based Independent Health, its now-defunct risk adjustment subsidiary, DxID, and DxID’s former CEO. The government won a $6.4 million settlement against Seattle-based Group Health Cooperative, another defendant in the original case, last year. Kaiser Permanente acquired the company in 2017, five years after prosecutors began their case against Group Health Cooperative.

The Justice Department has made Medicare Advantage fraud a major area of focus as enrollment continues to grow, said Dayna LaPlante, a member of the law firm Polsinelli’s healthcare litigation group, who is not involved in the case. More than 26 million people are enrolled in Medicare Advantage plans this year, or about 42% of the Medicare population, according to the Kaiser Family Foundation.

“As we’re seeing increasing enforcement in this space, Medicare Advantage plans and contracting health providers certainly are not immune to scrutiny anymore,” LaPlante said. “That’s not a low-risk space anymore in the healthcare world.”

The government alleges the defendants ran a scheme from 2010 until at least 2017 to artificially inflate Centers for Medicare and Medicaid Services payments to Independent Health, which offers two Medicare Advantage plans in New York. DxID, which shuttered in June, provided risk adjustment and chart review services for Medicare Advantage plans, including Independent Health and Group Health Cooperative. The defendants made tens of million dollars as a result, and a precise number will be revealed when the Justice Department collects more evidence, said Max Voldman, the whistleblower’s attorney.

Prosecutors say the scheme relied on two programs: retrospective medical records reviews and addenda. DxID would allegedly analyze patients’ medical records and “capture” conditions purportedly missed, which Independent Health and Group Health would submit to CMS to increase their monthly per-member, per-month payments. CMS reimburses more for sicker patients with costly conditions, and diagnosis codes directly affect how much Medicare Advantage plans get paid to manage their care.

DxID “recklessly” disregarded the requirement that a condition must be relevant to patient care and treatment during a specific visit that year, not merely mentioned in records from prior years, suggested by a computer algorithm or inferred from the medical record, the complaint alleges. As examples, prosecutors cite an ophthalmology visit resulting in a pancreatitis diagnosis and a dermatology visit leading to a diabetes diagnosis.

Further, the addenda process allegedly nudged providers to retroactively add diagnoses to medical records they purportedly missed during visits. For instance, the complaint says DxID’s CEO and founder, Betsy Gaffney, advocated for adding chronic kidney disease to most requests for addenda to providers regardless of whether there was any indication because “pretty much everyone over age 70 has some level of CKD.”

This case is unique in that the CEO of the vendor company is being sued in her personal capacity, said Voldman, an associate attorney with Constantine Cannon. That’s because the government has a collection of emails that show Gaffney’s role in orchestrating the alleged fraud, he said. “It’s not super common to have one person really encapsulate all of that,” Voldman said.

Gaffney’s attorney, Timothy Hoover, wrote in an email that his client has done nothing wrong.

“She is the unfortunate victim of an ancient lawsuit premised on inaccurate allegations leveled by a disgruntled ex-employee of an entirely different company,” Hoover said. “Courts routinely dismiss lawsuits like this and we expect the same result here.”

Independent Health and DxID denied all allegations of wrongdoing in a joint statement. The entities will defend themselves vigorously as they believe the coding policies being challenged were lawful and proper, they said.

“Independent Health and DxID diligently navigate complex and vague coding criteria to ensure that all diagnosis and billing codes properly reflect our members’ medical conditions and are supported with documentation in the members’ medical records,” the statement said.

Retrospective chart reviews by Medicare Advantage plans aren’t inherently illegal, Voldman said. “This case isn’t even necessarily attacking chart review as a concept. It’s just that when you do chart review, you have to stay in bounds of the program rules,” he said, “The government’s allegation is that DxID didn’t.”

Medicare Advantage insurers have a responsibility to audit their providers to ensure the information they pass along to CMS is accurate, LaPlante said. In this case, the auditors were adding extra steps that typically would not be taken, she said.

Independent Health had ample warning about the “impropriety” of the coding and knew the approach would cause the submission of unsupported diagnosis codes, the Justice Department says. The addenda process allegedly resulted in more than 125,000 diagnosis codes being added and CMS paying tens of millions of dollars more to Independent Health than it otherwise would have. Group Health Cooperative refused to participate in that part of the scheme, according to the Justice Department.

In exchange for its work, DxID received up to 20% of the additional revenue.

Teresa Ross, a Group Health employee for more than 14 years, filed the original whistleblower case in April 2012. At the end of her employment there, she was director of risk adjustment services. Ross is entitled to $1.5 million of the Group Health settlement reached in late 2020, and stands to collect up to 25% of the settlement against the remaining defendants.



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