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Medicare Part C/Medicare Advantage

The Department of Justice has also pursued fraud involving the Medicare Part C program, which is Medicare’s managed care program, Medicare Advantage.

Enforcing violations of the False Claims Act involving the Medicare Advantage program has been a priority for the Justice Department. “Federal healthcare programs rely on the accuracy of information submitted by healthcare providers to ensure that managed care plans receive the appropriate compensation,” said the Assistant Attorney General. “We will pursue those who undermine the integrity of the Medicare program and the data it relies upon.”

Roughly 60 million Americans who are age 65 and over or disabled receive healthcare benefits through the Medicare program.  Around 20 million Medicare beneficiaries participate in this program.

Total expenditures for Medicare in 2018 were over $740 BILLION, including over $233 BILLION for Part C. 

Medicare Part A helps patients pay for inpatient and outpatient care and skilled nursing.  Medicare Part B covers medical insurance for patients from doctors and other health care providers, outpatient care, home health care, durable medical equipment, and some preventive services.

Unlike Medicare Parts A and B, where Medicare pays for each patient admission or service, Medicare Part C pays a capitated amount for each patient, which is risk-adjusted based on a patient’s demographic information and health status.

In 2019, a third of all Medicare beneficiaries – approximately 22 million beneficiaries – were covered by Medicare Part C.

Under Part C, a Medicare Advantage plan is a private health insurance plan approved by Medicare and administered by a health care insurer called a Medicare Advantage Organization.  A Medicare patient may opt to get all of their health care benefits through a single Medicare Advantage plan instead of traditional Medicare.  These private insurance Medicare plans usually have an HMO or PPO network of doctors.

An intermediary (also called a “first tier entity”) plays a specific role in the Medicare Advantage program.  A first tier entity assesses the health needs of patients and makes diagnoses of patient illnesses.  These health assessments and diagnoses are provided to the patient’s insurer, and health care providers.  In turn, health care providers rely upon the intermediary’s diagnoses to provide courses of treatment and care to patients.  The insurers rely upon them to determine Medicare payments owed to the insurers, which then reimburse the first tier entity for its services.

The Medicare Advantage program was projected to pay $250 BILLION to its participants for services in 2019, accounting for 33 percent of total Medicare spending.

Getting the right diagnosis is a key aspect of health care, as it provides an explanation of a patient’s health problem and informs health care decisions.  The National Academies of Sciences, Engineering, and Medicine, “Improving Diagnosis in Health Care,” (Dec. 29, 2015),

Diagnostic errors—whether deliberate or inadvertent—can lead to negative health outcomes, psychological distress, and financial costs.  If misdiagnosis occurs, inappropriate or unnecessary treatment may be given to a patient or appropriate and potentially lifesaving treatment may be withheld or delayed.  The National Academies of Sciences, Engineering, and Medicine, “Improving Diagnosis in Health Care,”

The data bears this out.  Each year an estimated 1 in 20 adults experiences missed, delayed, or incorrect diagnoses.  Of the estimated 12 million Americans impacted, 4 million are believed to suffer serious harm.  Diagnostic errors contribute to about 10 percent of patient deaths.  Among a clinician’s list of responsibilities, perhaps none is more consequential than the act of diagnosis.  The initial determination of a patient’s condition sets in motion a series of steps that may include life-altering tests, referrals, and treatments.  A correct diagnosis starts a patient on the path toward all that modern medicine has to offer.

The health and safety of hundreds of thousands of patients are significantly dependent upon the intermediary’s health assessments and diagnoses being comprehensive, accurate and truthful.

Under the Medicare Advantage program, the intermediary is responsible to perform a comprehensive patient assessment that involved meeting in-person with the patient, reviewing the patient’s medical records and medical history, performing diagnostic tests such as echocardiograms and diabetes tests, if necessary, determining the patient’s diagnosis and which Medicare-approved diagnoses codes (also known as ICD codes) are appropriate for the patient, and completing a written assessment to be used by the patient’s health care provider.

ICD codes inform the provider of the health status of the patient and inform other participants in the Medicare program of how to bill Medicare.  Medicare also relies upon ICD codes for reimbursement.

Each disease, injury, infection, and symptom have their own ICD code.  ICD codes are very specific to the patient’s illness, and the assignment of an ICD code by a health care provider requires carefulness.  For a flavor, “Type 1 diabetes mellitus without complications” is ICD code “E10.9.”  “Unspecified systolic (congestive) heart failure” is ICD code “I50.20.”

It is critically important to patient care and treatment and for Medicare reimbursement that health care providers report accurate ICD codes for patients.  “Clear and accurate diagnosis and procedure code reporting provide valuable information about patient care.  It provides important information for accurate reimbursements such as key Medicare payment and medical necessity determination.  Clinical codes must be capable of accurately describing diagnoses, illnesses, and medical procedures—especially to improve the quality of health care and design a more equitable reimbursement model.”

Many first-tier entities employ health care professionals to perform their health assessments and diagnostic tests such as physicians, nurse practitioners, physician assistants, nurses, and other clinical staff.

The Medicare Advantage Organization (MAO) relies upon the diagnostic codes provided by the intermediary to figure out the amount of the claim to submit to the MAO.  The Medicare reimbursement amount is calculated using a complex formula that is risk-adjusted based upon these intermediary-assigned diagnostic codes.  The “sicker” the patient, the higher “risk” they are to the insurer, and the higher the reimbursement paid by the Medicare program to the insurer.

Further, due to the financial trickle-down structure of the Medicare Advantage program, the more money Medicare pays to the insurers, the more money the insurers pay to the first tier entity for its diagnostic and health assessment services.

Individuals have reported to the Department of Justice that some intermediaries have perversely viewed this arrangement as an incentive to use diagnostic codes to make patients appear sicker than they actually are.  In this way, the first-tier entity fraudulently exploits the Medicare program at the risk to patient health and safety.

Unfortunately, it is anticipated that there is rampant fraud in the Medicare Part C program.  In 2020 alone, the Centers for Medicare and Medicaid Services (CMS) reported that over $16 BILLION in Medicare Advantage payments were improperly made.

The Department of Justice has focused its investigative efforts on Medicare Part C cases that involve Medicare Advantage Organizations (MAOs), participating plans, first tier entities or intermediaries, and health care organizations and providers who manipulate the risk adjustment process by submitting unsupported diagnosis ICD codes to make their patients appear sicker than they actually were.

One Medicare Advantage provider paid a $270 MILLION False Claims Act settlement for allegedly causing an MAO to submit incorrect diagnosis codes to the Medicare program and obtaining inflated payments.

The Department of Justice filed a lawsuit against health care providers alleging that they violated the False Claims Act by knowingly submitting unsupported diagnosis codes.  United States ex rel. Ormsby v. Sutter Health, et al., Case No. 15-CV-01062-JD (N.D. Cal.).  This fraud was brought to the attention of the Department of Justice by an individual who will be entitled to a reward of any recovery the Department of Justice receives after the litigation ends.

Another Medicare Advantage health care provider and its affiliates paid a $30 MILLION False Claims Act settlement for allegedly submitting unsupported diagnosis codes, which inflated the risk scores of the Medicare patients and led to the MAOs receiving more Medicare money than they were entitled to receive.

A Medicare Advantage provider and physician paid $5 MILLION to settle False Claims Act allegations that they reported invalid diagnoses codes to Medicare Advantage plans and thereby caused those plans to receive inflated payments from Medicare.

Another MAO paid over $6 MILLION to resolve allegations that it submitted invalid diagnoses that resulted in inflated Part C payments.

In each case where a financial settlement was obtained, an individual or group of individuals reported the fraud to the Department of Justice, and they were entitled to receive a financial reward.

According to the Department of Justice, one common scheme that has been investigated is manipulation by MAOs and health care providers of the risk-adjustment process whereby they audit – or hire others to audit – patient medical records to identify additional ICD codes that would increase their Medicare reimbursement.  In the process of conducting these audits, MAOs have uncovered unsupported diagnosis ICD codes that were improperly submitted to Medicare.  Rather than deleting these ICD codes at the same time they submitted them to Medicare, they simply ignored the unsupported diagnosis codes.

If you are aware of old, new, or evolving fraud schemes involving the Medicare Part C or Medicare Advantage program, the Department of Justice may be very interested in learning more about the information you have.  You may also be entitled to a financial reward.  Tell us about the information you have at https://www.fraudfighters.net/.  We will provide you a free consultation.

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