Whistleblower Lawsuits Against Medicare Advantage Organizations

In addition to the big qui tam case against UnitedHealth Group that has received so much press recently, there is a similar whistleblower case pending in federal court in Texas alleging False Claims Act (“FCA”) claims against a medical coding company, Censeo Health, L.L.C., and several Medicare Advantage organizations (“MAOs”).   Similar to the allegations in UnitedHealth Group, Censeo is alleged to have provided unsupported diagnostic codes and inaccurate risk adjustment data for the purpose of improperly inflating capitated payments to the coding company’s clients, Medicare Advantage organizations. U.S. ex rel. Ramsey-Ledesma v. Censeo Health, L.L.C., 3:14-CV-00118-M (N.D. Tx).

Medicare Advantage Organizations and Capitation Payments

The Censeo case follows a recognized theory of FCA liability for false claims presented to MAOs, where false claims result in MAOs receiving increased capitation payments from the government. Since capitation payments are largely driven by the diagnosis of chronic medical conditions, an MAO that claims it has a beneficiary with diabetes and relays this information to CMS will almost certainly lead to a substantially increased capitation payment to account for the anticipated increased costs of treating that beneficiary.

Falsely stating risk conditions or diagnosis codes leads to increased payments by the government because the capitated payments per member are adjusted based on what is called “risk adjustment data.”  The capitated payments are prospective, meaning CMS uses risk adjustment data from the prior year to establish payment amount for the following year. 42 C.F.R. §§ 422.308(c), (e), 422.310(g).  CMS’s model assumes that MAOs with higher-risk insureds will be required to pay more for their insureds’ medical care. Thus, MAOs with more high-risk insureds are compensated at a higher level than MAOs whose insureds are comparatively healthier.

Diagnosis Code Guidelines for Medicare Advantage Organizations

CMS guidelines require that MAOs use accurate diagnosis codes, following ICD-9-CM Guidelines for Coding and Reporting. See Medicare Managed Care Manual Ch. 7. The diagnosis codes must be supported by properly documented medical records, see 42 C.F.R. § 422.310(e), and the MAOs must certify that the risk adjustment data provided to CMS, including diagnosis codes, is accurate, complete, and truthful, based on an MAO’s “best knowledge, information, and belief.” See 42 C.F.R. § 422.504(l).

MAOs are permitted to subcontract with third-party vendors, such as medical coding companies, to ascertain and report their patients’ risk adjustment data.  As the New York Times recently reported, “[t]he realization that medical records could be mined for extra money appears to have given rise to a cottage industry of consulting firms offering to screen patient histories and look for indications of long-term health problems that could be used to increase Medicare reimbursements.” Walsh, M.W., Scheme Tied to UnitedHealth Overbilled Medicare for Years, Suit Says, New York Times, Feb. 16, 2017.

Censeo Whistleblower Allegations

As part of the scheme that the whistleblower in Censeo alleges, Censeo allegedly hired unqualified physicians to perform in-home assessments of members of Censeo’s MAO clients and diagnose high-risk conditions. The problems arise, according to this former coding employee, because Censeo pushed the doctors to identify high-risk conditions based on little more than historical data provided by the patients themselves.  U.S. ex rel. Ramsey-Ledesma v. Censeo Health, L.L.C., 3:14-CV-00118-M, 2016 WL 5661644, at *2 (N.D. Tex. Sept. 30, 2016).

The company was also alleged to have provided these inexperienced medical coders and physicians with assessment forms that had been prepopulated with patient information, including medical and prescription medication histories. Id. at *4.  Relator alleges that Censeo instructed those physicians to diagnose high-risk conditions based on information provided in the prepopulated assessment forms and during cursory physical examinations they conducted of members, which lasted only 45 minutes to an hour. Id. Some of these reported conditions were not true diagnoses, but instead simply showed the self-reported conditions or information that the coder gleaned from the medical history, which also included unconfirmed self-reported conditions and severity judgments generally not supported by laboratory results or diagnostic testing.  Id. at *5.

As one example, the whistleblower alleged that Censeo instructed physicians to diagnose chronic obstructive pulmonary disease (“COPD”) based on nothing more than the doctor’s observations that the MAO member used oxygen or had a chronic cough.  Physicians were allegedly pressured to code high-risk conditions through incentive payments and other employment conditions. Id. at *5.

Employees or patients who observe these types of fraudulent practices, which overburden government healthcare programs and potentially make those programs unsustainable, are in the best position to report these violations and allow the government to address that costly fraud and corruption in the industry.