Featured in Health Business Daily, Nov. 7, 2017

DOJ Intervenes in MA ‘Upcoding’ Suit Against UnitedHealth Group

Reprinted from MEDICARE ADVANTAGE NEWS, biweekly news and business strategies about Medicare Advantage plans, product design, marketing, enrollment, market expansions, CMS audits, and countless federal initiatives in MA and Medicaid managed care. Subscribe today!

By Lauren Flynn Kelly, Managing Editor
March 2, 2017Volume 23Issue 4

The Dept. of Justice (DOJ) has joined a five-year-old qui tam lawsuit alleging that UnitedHealth Group and various subsidiaries and affiliates knowingly submitted overblown risk adjustment claims in order to receive higher payment under Medicare Parts C and D. While other insurers have been the target of similar “upcoding” complaints, this is the first lawsuit the federal government has intervened in and, as one analyst suggested, could lead to greater scrutiny of risk adjustment claims, possibly pushing CMS to widen its scope of risk adjustment data validation (RADV) audits.

The original suit names 12 other Medicare Advantage plan sponsors and health care technology firm MedAssurant, Inc. (now Inovalon). Centene Corp. in its most recent annual report filed with the Securities and Exchange Commission disclosed that its Health Net, Inc. subsidiary — which was named in the whistleblower complaint — in December 2016 received a Civil Investigative Demand from the Justice Dept. that may be related to the lawsuit. But the DOJ is intervening only in the claims against UnitedHealth and WellMed, a Texas-based physician-owned practice management company that was acquired by the insurer in 2011 “in spite of evidence WellMed was fraudulently inflating its risk scores,” according to a Feb. 16 press release from Constantine Cannon LLP, the firm representing the whistleblower along with Phillips and Cohen LLP.

The first amended complaint (United States of America, ex. rel. v. UnitedHealth Group, Inc. et al., Civil Action No. 11-cv-0258-A, U.S. District Court for the Western District of New York), which was filed by former UnitedHealth employee Benjamin Poehling on Oct. 27, 2011, and sealed until last month, alleges that the defendants had submitted exaggerated risk adjustment claims “since at least 2006.” These firms allegedly provided “upcoded” claims to Medicare indicating that a patient had been treated in the relevant time period for: (a) diagnoses that the beneficiary did not have; (b) more severe diagnoses than the one the patient had; and/or (c) diagnoses for which the beneficiary had previously been treated but not during the relevant year. Poehling was director of finance in the company’s Medicare & Retirement segment.

The complaint also alleges that UnitedHealth and others failed to fix previously submitted Medicare risk adjustment claims even when they knew, or should have known, that such claims were false, and that UnitedHealth incentivized the elevation of risk scores. For example, the whistleblower claims that he and other staff members were given specific performance goals for increasing scores and that he received a $15,000 bonus in 2010 for his work in meeting certain internal operating income targets from risk adjustment payments.

Meanwhile, no such incentives were provided for ensuring the overall accuracy of risk adjustment submissions. “United has steadfastly refused to take anything more than token steps to ‘look both ways’” for “both helpful and harmful errors,” added the complaint.

“There is some legal ambiguity, however, on the obligation to ‘look both ways,’” pointed out securities analyst Michael Newshel in Feb. 17 research note from Evercore ISI. “Notably CMS made an explicit proposal in 2014 that medical record reviews should be designed to find errors whether positive or negative for payment, but retracted that provision in the final version of the rule while still reiterating a general requirement that plans certify the accuracy of their risk adjustment data.” He added that while the DOJ joining the case does “heighten the risk” for UnitedHealth, the suit doesn’t present any “particularly damning new evidence.”

Medicare Advantage News

DOJ Involvement Is First for Upcoding Cases

Several lawsuits have emerged in recent years accusing MA insurers of submitting false claims to inflate risk scores, including one filed by a former SCAN Health Plan employee that resurfaced in an appeals court last fall (MAN 9/1/16, p. 8). But the Justice Dept.’s decision to join this particular suit may have some significance, suggests Denise Bloch, counsel at Sandberg Phoenix & von Gontard P.C. “Whenever the Justice Dept. intervenes, it’s generally an indication that they’ve done a lot of research going in and [based on] what they’ve been able to obtain through discovery, they may believe they have a smoking gun; otherwise they would in all likelihood not intervene,” she observes. “It doesn’t mean that they do, but it just is an indication that there is a chance that they have found something supporting that whistleblower’s case. But it’s too early to be able to say whether that’s true.”

She continues, “And even with things like ‘upcoding,’ it’s so subjective because you can have two different professionals review those medical records and find different opinions as far as whether or not something was medically necessary and reasonable and appropriately coded. It really depends on how the documentation was provided.”

Suit Could Push CMS to Widen RADV

In a Feb. 17 research note, Cowen & Co. securities analyst Christine Arnold suggested the suit could “spell trouble for other industry participants” in that it will likely create “additional scrutiny on Medicare Advantage risk adjustment claims.”

CMS in 2008 began conducting RADV audits to recover improper payments by determining whether the diagnosis codes submitted by an MA organization are supported by a beneficiary’s medical record documentation. But its early attempts to collect overpayments based on extrapolated audit findings were unsuccessful, and while the agency continues to conduct RADV audits on a limited basis, pulling claims samples from 30 or so contracts a year, questions remain about its extrapolation methodology.

In a report published last year, the Government Accountability Office criticized CMS for underdelivering on its RADV audits and estimated that the contract-level audits of 2011 payments would recover only about 3% of MA improper payments for that year after extrapolation (MAN 5/19/16, p. 1). Arnold suggested that the lawsuit could put added pressure on CMS to increase the scope of RADV audits and/or alter the risk adjustment model. At press time, CMS was reportedly in the process of contracting with a Recovery Audit Contractor to perform additional audits.

“The [Justice Dept.’s] decision to jump into the case certainly sends a message — and could have some sentinel effect across the industry,” weighs in Michael Adelberg, a former top CMS MA official who is now principal with FaegreBD Consulting. “Of course, the industry and CMS have both invested a lot of time and resources in refining risk adjustment processes since 2010, so circumstances of this particular case might not be operative in 2017.”

UnitedHealth rejects and plans to contest the claims, according to a statement from the company.


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