Medicare Insurer, CEO Settle Fraud Case for $100M

Medicare Insurer, CEO Settle Fraud Case for $100M

Introduction

A Western New York health insurance provider and the CEO of its medical analytics arm have agreed to pay up to $100 million to settle Justice Department allegations of fraudulent Medicare billing.

The settlement resolves claims that Independent Health Association of Buffalo and its former subsidiary, DxID, exaggerated or fabricated health conditions to increase Medicare reimbursements.

Settlement Terms and Payment Structure

Under the settlement, Independent Health will pay up to $98 million, while the CEO of DxID will contribute $2 million. The agreement does not include an admission of wrongdoing. Independent Health is required to make guaranteed payments of $34.5 million in installments through 2028, with additional payments contingent on financial performance.

DOJ’s Stance on Medicare Fraud

A DOJ deputy assistant attorney general emphasized that the settlement serves as a warning to the Medicare Advantage industry against submitting inflated claims. This case marks one of the largest payments ever made by a health plan based solely on a whistleblower's fraud allegations and one of the first cases targeting a data analytics firm for its role in overbilling.

Whistleblower's Role in Exposing Fraud

The lawsuit originated from a whistleblower complaint filed by a former medical coding professional. The whistleblower, who will receive at least $8.2 million from the settlement, accused DxID of improperly adding diagnosis codes to patient records without medical justification. The professional stated that the Centers for Medicare & Medicaid Services (CMS) created an environment where health plans could profit from inflated diagnoses, leading to billions of dollars in wrongful payments.

Medicare Advantage and Fraudulent Billing Practices

Medicare Advantage plans cover over 33 million beneficiaries and are expected to expand further under the incoming Trump administration. However, as the program grows, regulators have struggled to curb fraudulent billing practices. Private insurers are incentivized to document severe health conditions, as CMS reimburses plans based on patient risk scores. The DOJ has pursued numerous cases where insurers allegedly exaggerated patient illnesses to receive higher payments.

DOJ’s Case Against DxID and Independent Health

The DOJ’s civil complaint, filed in September 2021, accused Independent Health and DxID of knowingly submitting false Medicare claims. DxID specialized in data mining patient records to find additional diagnoses, allegedly inflating patients’ risk scores. The company reportedly earned up to 20% of the additional payments generated through its coding efforts. DxID shut down in 2021.

Examples of Alleged Fraudulent Claims

According to the lawsuit, Independent Health and DxID billed Medicare for conditions that were either exaggerated or unsupported by medical records. Examples included:

• Coding an 87-year-old patient with "major depressive disorder" despite medical records describing his mood as “transient.”

• Listing chronic kidney disease and renal failure for patients without documented evidence of those conditions.

• Billing for past conditions, such as heart attacks, that required no ongoing treatment.

The Role of Data Mining in Medicare Billing Fraud

The DOJ complaint highlighted a pitch by the DxID CEO, who promoted the company’s services as "too attractive to pass up." The firm operated on a contingency basis, taking a percentage of the additional Medicare payments generated through its coding process. The DOJ accused the CEO of stating that renal failure diagnoses were particularly lucrative, as "the majority of people over 70 have it at some level."

Group Health’s Previous Settlement

The whistleblower originally filed the case in 2012 against Group Health Cooperative in Seattle, one of the nation’s oldest managed-care groups. The suit alleged that DxID had helped Group Health submit over $30 million in improper claims for 2010 and 2011. One example cited in the complaint involved billing for “major depression” in a patient described by his doctor as having an “amazingly sunny disposition.”

Group Health, now Kaiser Foundation Health Plan of Washington, denied wrongdoing but settled for $6.3 million in 2020. The DOJ filed a second complaint in 2021 against Independent Health, another client of DxID, leading to the current settlement.

Whistleblower Retaliation and Impact on CMS Enforcement

The whistleblower reported losing her job after her case became public in 2019 and has since struggled to find work in the medical coding field. The False Claims Act allows private citizens to expose fraud and receive a portion of the recovered funds. Whistleblower lawsuits have helped the government recoup over $600 million from Medicare Advantage fraud cases.

Despite audits revealing significant overpayments, CMS has been slow to reclaim funds. In early 2023, the agency announced it would settle for a fraction of the overpayments uncovered in audits dating back to 2011. Future financial penalties on health plans will only be enforced after audits for 2018 payments, leaving the total recoupment amount uncertain.

Conclusion

The $100 million settlement against Independent Health and DxID underscores ongoing efforts to combat Medicare fraud in the Medicare Advantage sector. While this case marks a significant victory for whistleblowers and government regulators, concerns remain about CMS’s ability to fully address widespread fraudulent billing practices. The case highlights the role of data mining in upcoding schemes and the importance of enforcing strict oversight to ensure the integrity of taxpayer-funded healthcare programs.