Featured in Health Business Daily, Nov. 7, 2017

Calif. Ruling, DOJ Dismissal Are Tentative Wins for UnitedHealth in False Claims Fight

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
October 19, 2017Volume 23Issue 20

A recent ruling in an ongoing False Claims Act lawsuit against UnitedHealth Group may be a minor victory for the health insurer as it battles federal allegations of inflating Medicare Advantage risk-adjusted payments and “looking the other way” when medical chart reviews turned up invalid diagnoses. The ruling prompted the Dept. of Justice (DOJ) to drop that suit, although the District Court for the Central District of California in its Oct. 5 order gave the federal government room to amend the complaint.

Insurers should not take comfort from these developments, advisers warn, as the DOJ has not abandoned a parallel whistleblower suit pending in the same district and the government’s interest in MA plan practices is likely to continue.

The federal government on May 1 intervened in allegations against UnitedHealth contained in the Fourth Amended Complaint (FAC) filed by former SCAN Health Plan employee James Swoben (MAN 5/11/17, p. 8). The whistleblower filed his initial suit against SCAN in 2009, adding UnitedHealth and others that same year and additional insurers in future via amended complaints alleging that the carriers conducted retrospective reviews of patient records in order to identify only additional diagnosis codes that would drive higher MA risk scores leading to enhanced risk-adjusted payments. SCAN in 2012 settled with the United States and Swoben, but the plaintiff continued to pursue his case against the remaining defendants. The DOJ earlier this year intervened in the allegations against UnitedHealth and filed a separate complaint-in-intervention (U.S. ex rel. Benjamin Poehling v. UnitedHealth Group, Inc., 16-08697).

Both complaints charged that the insurer for years conducted a chart review program designed to identify additional diagnoses not reported by treating clinicians that would boost payments and alleged that the insurer ignored certain information uncovered through the chart reviews to avoid repaying the government for funds it was not owed.

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UnitedHealth has said it rejects the claims in both suits and in July sought dismissal of U.S. ex rel. Swoben v. Secure Horizons, et al. (09-5013) for the government’s failure to state a claim (MAN 7/27/17, p. 8). In a motion filed July 14, UnitedHealth took issue with various aspects of the DOJ’s adoption of the whistleblower’s FAC, arguing that Swoben’s claims were based on conduct that allegedly took place 10 years prior to the March 2017 filing of the FAC and are thus barred by the statute of repose. UnitedHealth also pointed out that the Ninth Circuit Court of Appeals, which upheld an earlier court decision to dismiss the case, “expressly refused” to address Swoben’s “reverse false claims theory” that he attempted to revive in the FAC.

The district court on Oct. 5 agreed with both points and granted the motion, but dismissed certain other arguments with leave to amend. For one, the district court found that the DOJ’s complaint-in-intervention failed to identify the corporate officers who signed attestations to the allegedly fraudulent risk adjustment or that those individuals “knew or should have known that the attestations were false.” The court also found that the complaint lacked the specificity to satisfy Rule 9(b), which requires that a “party must state with particularity the circumstances constituting fraud or mistake,” according to the Oct. 5 order.

“This is certainly an important decision...and a big win for United to get a dismissal at this early stage in this kind of litigation. That said, DOJ will have an opportunity to refile,” observes Bob Ramsey, a shareholder in Buchanan Ingersoll & Rooney’s health care section, where he represents health care providers in a variety of regulatory, transactional and reimbursement matters. “The [DOJ has] invested a fair amount of time and effort and resource into this so far, so I would anticipate that it’s not going to fold its tent and go away. And I wouldn’t be surprised if the DOJ continues to press forward in the other cases, so I think while it’s certainly a good win for United, it’s a battle and the war has not been won yet.”

The U.S. Attorney’s Office in California on Oct. 12 filed a notice of voluntary dismissal without prejudice. A spokesperson with the department declined to comment for this story.

Court Ruled That Case Lacked Specificity

Additionally, the court cited a two-year-old Supreme Court ruling in *Universal Health Services v. U.S. ex rel. Escobar *to assert that the complaint failed to allege that the “challenged conduct” was material to the government’s decision to pay UnitedHealth’s risk-adjusted claims. “Escobar established a heightened materiality standard, sort of what you have to prove to say, ‘But for your fraudulent behavior, the government would have paid the claim,’’’ explains Ramsey. “The Supreme Court kind of set that standard, but it takes a number of other cases to interpret that standard and really give the health care industry knowledge of what is that standard.”

“The government’s decision to drop the suit, despite being granted leave to amend, highlights the significant obstacles that will need to be overcome in pursuing [False Claims Act] cases involving managed care plans,” weighs in Angela Bergman, an associate in the Nashville office of Bass, Berry & Sims PLC. “While the U.S. Attorney’s Office has indicated that it will turn its sights to a similar case in the same district, it must still address the substantial deficiencies noted in the dismissal.”

According to a statement from UnitedHealth spokesperson Matt Burns, the insurer is “pleased with the government’s decision to dismiss these meritless claims.”

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