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Motion to Dismiss Denied in False Claims Act Case Against Medicare Advantage Organization: Anthem’s Alleged “Revenue Enhancement” Scheme

Date Published
Oct 06, 2022
Opinion & Order

October 6, 2022. A federal judge denied insurer and Medicare Advantage Organization Anthem Inc.’s motion to dismiss the U.S. government’s lawsuit against the insurer regarding false claims submitted to Medicare. The United States Attorney’s Office for the Southern District of New York filed a civil fraud lawsuit against health insurer Anthem in 2020, alleging misconduct related to the Medicare Advantage (Medicare Part C) plans it administers. Specifically, the government alleges that as a Medicare Advantage Organization (MAO), Anthem knowingly failed in its duty to accurately report its members’ diagnosis codes to the Centers for Medicare and Medicaid Services (CMS), instead leaving inaccurate and often inflated diagnosis codes in data it submitted to CMS, resulting in overpayments and false claims against Medicare.

Anthem, like other health insurance providers who transact Medicare Part C business as MAOs, administers benefits such as doctor and hospital coverage for Medicare Advantage beneficiaries. The MAO covers the cost of these healthcare services for beneficiaries, submits claims to CMS, and is paid on a capitated basis for each member (i.e., “per head” or per person). The capitated payments are adjusted based on patient demographics and diagnosis codes, and the sicker a beneficiary is, the more money CMS pays to the MAO (risk adjustment payments).

According to the complaint filed in 2020, from 2014-2018, Anthem took advantage of the capitated payments system by allegedly submitting inflated diagnosis codes to receive more payments than they were entitled to, based on a patient’s actual conditions and diagnoses. Moreover, Anthem repeatedly made attestations that the risk adjustment data it sent to CMS was “accurate, complete, and truthful,” when the complaint alleges that the data was anything but. The MAO additionally hired a vendor to perform “retrospective chart review,” or analysis of beneficiary diagnosis data after the insurer submitted that data to CMS. This review was explained to providers as a means to ensure the diagnosis codes were accurate, but, as stated in the complaint, the MAO failed to delete any inaccurate or unsupported diagnosis codes. According to evidence included in the complaint, the insurer characterized this one-sided chart review as one of its “revenue enhancement programs” and directed its Medicare R&R group to “constantly look[…] for ways to increase the return on investment (“ROI”) rate for chart review,” the outcome of which the MAO “closely tracked.”

In the Court’s decision to deny Anthem’s motion to dismiss and motion to transfer venue, this statement sums up the case: “The facts point to a fraud scheme in which key decision makers, namely Anthem’s executives, pushed a policy of revenue maximization in lieu of legal compliance.” Anthem attempted to argue that the MAO’s certifications that the risk adjustment data they sent to CMS was true and accurate (when it was not) was not a “material” misrepresentation, meaning it did not influence payments from the government. The court disagreed, rejecting Anthem’s argument that materiality is established only if CMS would have refused payment if it had known of the misrepresentations. Further, the Court found the overpayments to Anthem were not merely administrative.

Medicare fraud harms beneficiaries and patients, healthcare providers, insurers, and taxpayers. Healthcare providers should be able to diagnose their patients appropriately and know that the MAOs to which they submit patient data are not exaggerating patients’ conditions to get an additional payment from the government. Excessive Medicare Advantage billing leads to higher premiums for beneficiaries, as actuaries and underwriters must spread the financial risk of very ill patients across the carrier’s entire book of business. This cost is in turn passed onto taxpayers, whose taxes subsidize Medicare. While there was no whistleblower in this case, an Anthem employee with knowledge of this scheme, or an employee of the medical coding review company, could have come forward and reported this scheme. Under the False Claims Act, they would have been entitled to 15-25% of the government’s recovery, had they stepped forward.

If you would like to report Medicare Advantage fraud, you can contact attorneys at Tycko & Zavareei LLP.  Eva Gunasekera and Renée Brooker are former officials of the United States Department of Justice and prosecuted whistleblower cases under the False Claims Act. Eva was the Senior Counsel for Health Care Fraud. Renée served as Assistant Director at the United States Department of Justice, the office that supervises False Claims Act cases in all 94 United States District Courts. Eva and Renée now represent whistleblowers. For a free consultation, you can contact Eva Gunasekera at [email protected] or contact Renée at [email protected] (tel.: 202-417-3664). Visit Tycko & Zavareei LLP’s website for whistleblowers to learn more.

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