The Department of Justice (DOJ) filed a lawsuit May 2, 2017 against UnitedHealth Group Inc. (UnitedHealth) alleging the insurer intentionally fudged information about patient’s health status to increase reimbursement from the Medicare Advantage Plan. The lawsuit was filed in Los Angeles, California, and comes on the heels of DOJ’s entry into another, separate whistleblower lawsuit filed against UnitedHealth earlier in 2017.
Let’s Get the Parties Started
The 39-page complaint names the United States (on behalf of whistleblower James S. Swoben) vs. Secure Horizons. UnitedHealth is the parent of Secure Horizons. The complaint alleges that UnitedHealth submitted false diagnosis codes to Medicare to boost payments.
The plaintiffs in the lawsuit are the United States Department of Health & Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS). The initial case was a qui tam whistleblower case initiated by “Relator” Swoben on March 24, 2017. In qui tam cases, whistleblowers like Swoben are eligible for a reward if the lawsuit recovers funds for the U.S. government.
UnitedHealth Group (UHG), headquartered in Minnesota, has offered Medicare Advantage plans via Secure Horizons Medicare Insurance since 2005. The DOJ claims that patient medical records didn’t back up diagnosis codes, and UnitedHealth never made any movements to rectify the false information.
In this civil action, the government seeks “recover treble damages and civil penalties” via the False Claims Act (FCA) along with common law damages and restitution.
A Numbers Game
Millions of Americans rely on the Medicare Advantage (MA) program. Private health insurers, liked Secure Horizons via UnitedHealth, are allowed to administer Medicare benefits to qualifying elderly and/or disabled patients. Medicare eligible seniors enroll in these plans which are owned and operated by Medicare Advantage Organizations (known as MA Organizations). UnitedHealth is both the largest health insurer and the largest MA Organization in the country.
Every month, CMS pays a fixed amount to MA Organizations for every Medicare patient enrolled in a plan. Laws and regulations are established by Congress.
Payment adjustments are made for a number of patient “risk factors” that impact healthcare payments. Such adjustments allow MA organizations to get higher payments for enrollees who will likely require higher costs.
CMS uses a health-based risk adjustment model, the Hierarchical Conditions Category (HCC), that considers diagnoses from physician office visits, outpatient encounters, and hospital stays.
MA Organizations use diagnosis codes, which they send to CMS, for everyone enrolled in their plans. Codes are created based on “medical encounters” including hospital stays, physician visits, etc. CMS then creates a risk score for every enrollee, which dictates the monthly payment amounts to each MA Organization per enrollee for the following year. Usually, the more conditions a person has, and the more severe they are, the higher their risk score and the bigger the payment made to the MA Organization.
It’s in an MA Organization’s financial interest to have MA Plan enrollees with numerous and severe health issues.
To discourage MA Organizations from exaggerating, over-reporting or making up visits and diagnoses of MA Plan patients, CMS cross checks diagnoses against validated via medical records. MA Organizations also have to expressly declare that codes are truthful and correct by adopting and implementing “an effective compliance program, which must include measures that prevent, detect, and correct non-compliance with CMS’ program requirements as well as measures that prevent, detect, and correct fraud, waste and abuse.”
Introducing the Sidekick
HealthCare Partners (HCP), a major provider group that includes DaVita Medical Group California, is one of the biggest service providers to UnitedHealth MA Plan enrollees in California. The DOJ is alleging that UnitedHealth gave HCP a cut of the Medicare payments for enrollees receiving HCP services and that these payments were “incentivized.”
The DOJ claims that UnitedHealth paid for medical record reviews (also known as “chart reviews”) specifically for HCP-served enrollees. They allege UnitedHealth paid The Coding Source (a third-party, blind-review vendor) and HCP directly for chart reviews. It’s also alleged that the chart reviews directly led to higher Medicare payouts through extra diagnosis codes which weren’t previously sent to CMS. DOJ claims UnitedHealth was “systematically ignoring information that would have led to decreased payments,” including adding diagnosis codes with no medical record support.
According to the DOJ,
By failing to ‘look both ways,’ UnitedHealth improperly generated and reported skewed data artificially inflating beneficiaries’ risk scores, avoided negative payment adjustments, and retained payments to which it was not entitled. Indeed, in the one year that HCP compared the results of the chart reviews with the provider-reported codes, it confirmed that at least 1,800 diagnosis codes were not supported by medical records.
Specifically, the DOJ claims that UnitedHealth took the chart reviews from The Coding Source and used the data in UnitedHealth’s favor (which led to higher CMS payments) while ignoring the data that would have led to lower payments or adjustments from CMS.
The DOJ hasn’t filed a lawsuit against HCP or its many predecessors and/or affiliates. However, it’s suggested in the lawsuit that UnitedHealth perhaps conspired with HCP by stating UnitedHealth caused and/or conspired with HCP to “fail to look both ways.”
Quite the Inheritance
Insurers are legally required by CMS to delete any unsupported or invalid diagnosis codes. However, the DOJ claims UnitedHealth “turned a blind eye and funded and encouraged one-sided chart reviews of HCP’s patients enrolled in UnitedHealth’s MA Plans.” When UnitedHealth purchased a number of companies in 2005, including PacifiCare, they re-branded and re-named the companies but retained a number of PacifiCare employees—employees who knew the legal requirements for submitting valid diagnosis codes to CMS.
Invalid diagnoses aren’t rare or unusual. In fact, CMS audited PacifiCare (pre-UnitedHealth) data in 2003 and found that about 30% of diagnoses from providers were invalid. That’s how PacifiCare employees learned that providers were mistakenly reporting unsupported codes from “unacceptable sources” like lab results.
The lawsuit names four key PacifiCare-cum-UnitedHealth employees familiar with diagnosis codes: Jeffrey Dumcum, Pam Holt, Pam Leal, and Stephanie Will.
According to the DOJ lawsuit, Holt spoke with CMS during a “data validation call” in 2005, right before UnitedHealth’s acquisition of the company and was told by CMS how MA Plans are expected to correct invalid diagnoses. Holt then passed this information to co-worker Will and recommended they create a spreadsheet of invalid diagnoses so PacifiCare could delete them, resulting in a Medicare payment readjustment.
Per the DOJ lawsuit, Will allegedly resisted the suggestion. And, says the DOJ, Holt and Leal warned higher ups at what was now UnitedHealth, that there needed to be a standardized process to withdraw/delete invalid diagnoses. No standardized process to delete or withdraw invalid diagnoses based on the results of their chart reviews were implemented until 2013—eight years later.
Dumcum says he and others knew “claims did not always match the medical record documentation. So … we were concerned that it should be a place that we try to improve.”
Dumcum further alleges that he had given a number of presentations to UnitedHealth employees to address “provider coding [that] is highly inaccurate and incomplete” where he explained that “more than 30% of coded conditions are not supported by CMS validation findings.”
Former PacifiCare employees actively tried to educate UnitedHealth management about the problems, claims the suit, and senior executives like Jerry Knutson (the company’s Medicare and retirement chief financial officer from 2003 – 2009) attended meetings where Dumcum demonstrated his concerns.
It wasn’t just PacifiCare with red flags. UnitedHealth’s own analyses allegedly showed that there were problems with diagnoses from providers—particularly HCP. Risk scores assigned to Medicare enrollees who were seen by UnitedHealth providers like HCP showcased increases “significantly above the norm” according to the lawsuit. Analytics also highlighted medical conditions reported at an above-average rate.
Holt, Leal, Will and other employees created a provider list in September 2006 which earmarked providers that gave codes 300% above average. HCP was included.
That same year, Dumcum, Holt, Leal, and Will say they discussed the benefits of an internal data validation (IDV) program to ensure the accuracy of diagnoses from providers. It could potentially tell if the records from physicians supported the diagnosis codes that were being reported to UnitedHealth.
By January 2007, Dumcum allegedly told UnitedHealth leaders that they simply had to improve the validation of diagnosis codes coming from providers. By 2008, the IDV program was implemented, and although small, it targeted physicians who reported three times more diagnoses than average. The data confirmed that providers like HCP were indeed reporting invalid diagnoses.
In 2009, the HHS Office of Inspector General (OIG) completed their own risk audit of the UnitedHealth California MA Plan for the 2007 year. The findings were sent to UnitedHealth’s CEO, with the conclusion that “half the beneficiaries in the audit were invalid.” A following, final report was also sent to UnitedHealth. Both reports gave examples of unsupported diagnoses. UnitedHealth employees Patty Brennan and Karen Wagor acknowledged in a call with CMS that payments aren’t legitimate for non-validated diagnoses in 2008.
False Claims Act Basics
The FCA’s goal is to recover government losses from fraud. To violate the FCA, a defendant must do four things
- “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval” when the entity receiving the funds wasn’t entitled to it,”
- “knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim,”
- “knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government,”
- “conspiring to commit a violation of [various FCA] sections.”
The FCA defines “knowing” as either having real knowledge or deliberate ignorance or “reckless disregard” of information. No proof of real intent to defraud the government is required.
From the People, For the People
The Medicare Advantage program is Part C of Medicare. If a person qualifies, due to age or disability, they can opt out of traditional Medicare plans A and B. Enrollees may also choose to add on Part D’s Prescription Drug plan. All Medicare Advantage plans are funded by taxpayers, and “are intended for the health and welfare of beneficiaries,” wrote U.S. attorney Sandra Brown in a statement regarding the pending lawsuit. “This action [filing the lawsuit] sends a warning that our office will continue to scrutinize and hold accountable Medicare Advantage insurers to safeguard the integrity of the Medicare program.”
DOJ is suing for presentation of false or fraudulent claims, making or using false records or statements, conspiracy, reverse false claims, restitution and payment by mistake.
OTW contacted United Healthcare for comment. The company did not reply.
