Medicare Advantage Risk Adjustment Fraud: Does your plan’s strategy violate the False Claims Act?

The following is a transcript of a PowerPoint presentation on risk adjustment fraud in Medicare Advantage plans – “Medicare Advantage Risk Adjustment Fraud: Does your plan’s strategy violate the False Claims Act?” – given by Phillips & Cohen whistleblower lawyers.

If you think you may have a whistleblower case that involves Medicare or Medicaid fraud, contact Phillips & Cohen for a free, confidential review of your case.

Overview of Risk Adjustment Fraud

• Risk adjustment fraud is essentially “upcoding” for diagnosis codes
• Traditional Upcoding: doctors and hospitals, paid by the procedure, claim payment for procedures they did not truly perform, or for a more complex version of the procedure they did perform
• Risk Adjustment Upcoding: Medicare Advantage (“MA”) HMOs, paid in large part by their members’ health status, claim payment for diagnoses they do not have/were not treated for

Principles of Risk Adjustment

• CMS pays Medicare Advantage HMOs on a capitated basis
  • Per-member-per-month
• CMS recognizes, however, the risk HMOs take by agreeing to insure beneficiaries for a flat monthly fee
  • A single hospitalization costs an average of $10,000 and can wipe out the Medicare premiums the HMO received that year
• To help HMOs manage their risk, CMS created a system that increases its premium for beneficiaries who are receiving treatment for diseases that typically correspond to high costs
  • The additional money comes in the form of an increased capitation rate:
    • Member’s Capitation Rate = (The HMO’s Base Capitation Rate) x (The Member’s Risk Adjustment Multiplier)
• Example: 76-year-old female with diabetes and renal failure
• Requirements for Risk Adjustment Claims
  • The patient must have been treated that year
  • Face-to-face
  • By a qualifying provider

• CMS has rigid requirements about how plans qualify for increased risk adjustment payments
  • The diagnosis codes must be documented in the medical record, following standard industry guidelines (ICD-9-CM)
  • The diagnosis codes must stem from a face-to-face encounter between the physician and the patient
• To ensure these goals are met, CMS requires HMOs to follow its guidance as to what diagnosis codes they submit
• For example: HMOs cannot submit diagnosis codes taken from certain types of medical records, such as radiology and lab reports, because the records do not reflect a face-to-face physician encounter

• Risk Adjustment and the False Claims Act
  • The False Claims Act prohibits:
    • knowingly presenting (or causing to be presented) to the federal government a false or fraudulent claim for payment or approval; and
    • knowingly concealing or knowingly and improperly avoiding or decreasing an obligation to pay or transmit money or property to the Government.
    • 31 U.S.C. § 3729(a)(1).
  • Any person who violates the FCA is liable for a civil penalty of up to $11,000 for each violation, plus three times the amount of the damages sustained by the United States. 31 U.S.C. § 3729(a)(1).
  • Each Diagnosis Submitted to CMS is a Claim for Payment
  • With every diagnosis, HMOs submit information to CMS asserting the member has the diagnosed condition and received treatment for it:
  • • The member’s Health Insurance Claim (“HIC”) number
    • The ICD-9-CM diagnosis code
    • The “service from” date and “service through” date
    • The provider type
  • Each risk adjustment claim is itself a false statement, if the diagnosis is unsupported
  • No separate certification is required to establish falsity
  • That being said, Medicare Advantage HMOs must attest to the accuracy of their risk adjustment data on an annual basis.
  • United States v. Janke
    • United States v. Janke, 09-CV-14044-Moore-Lynch (S.D. Fla. Feb. 10, 2009)
      • MA plan used coding reviewers to submit diagnosis codes to CMS that were not documented in the medical record or supported by an actual medical condition
        • Data sweeps to find additional codes
      • MA plan submitted codes via an automated system that could not delete unsupported or false claims
        • Example: reviewers are unable to submit delete codes when they find erroneous data (there is an “add” function, though)
  • Pending Unsealed Cases Involving Medicare Advantage Plans and Risk Adjustment Fraud
    • United States ex rel. Valdez v. Aveta, Inc. et al .,  No. 3:15cv1140 (D. P.R.)
      • The complaint alleges that MA plans submitted inflated Risk Adjustment Factor scores based on diagnosis codes reported by Puerto Rican physicians and hospitals.
      • The complaint alleges that risk scores were unsupported by the patients’ medical records.
  • United States ex rel. ex rel. Graves v. Plaza Medical Centers, et al., No. 8:13cv1348 (C.D. Cal.)
    • In a recent ruling on a motion to dismiss, the district court upheld a magistrate judge’s opinion holding that a doctor systematically “upcoded” patient diagnoses to increase their risk adjustment factors, and a MA plan knowingly failed to correct the issues despite audits of patient files.
  • United States ex rel . Silingo, et al ., v. Mobile Medical Examination Services Inc., et al., No. 1:10cv23382 (S.D. Fla.))
    • The complaint alleges that defendant Mobile Medical Examination Services systematically upcoded patients to increase their risk scores without performing a face-to-face evaluation under the supervision of a physician.
    • Health plans then “turned a blind eye to the truth” and failed to properly certify or validate the claims submitted by Mobile Medical Examination Services.
  • United States ex rel. Ledesma v. Censeo Health LLC, et al. , No. 3:14-CV-0118-M (N.D. Tx.)
    • The Complaint alleges that the defendant developed an algorithm to identify patients who previously suffered from conditions that would increase their risk-adjusted capitation payments and sends “physicians” to conduct “in home assessments” of these patients, then submits the old diagnoses to CMS. These visits usually did not result in any follow-up care, but were rather exclusively to increase risk adjustment scores.
    • These in-home assessments are, according to the whistleblower, not valid assessments but rather “self-reported conditions captured from the medical history and verbally confirmed” by the physician. Such “assessments” cannot form the basis for higher risk scores.
    • The complaint also alleges that many of the physicians were not licensed to practice medicine.
  • United States ex rel. Valdez v. Aveta, Inc. et al .,
    No. 3:15cv1140 (D. P.R.)
    • The complaint alleges that MA plans submitted inflated Risk Adjustment Factor scores based on diagnosis codes reported by Puerto Rican physicians and hospitals.
    • The complaint also alleges that risk scores were unsupported by the patients’ medical records.

Areas of Risk for the Submission of False Risk Adjustment Claims

• Causes of False Claims: Affirmative Upcoding
  • Simple fraud – “making it up”
  • Exaggerating severity of patient’s condition (e.g., depression, malnutrition)
  • Claiming current treatment of condition (e.g., stroke, cancer) instead of past history of treatment
  • Claims based on laboratory, radiology or other improper provider or service type
  • Improperly linking complications and conditions
• Causes of False Claims: Business Practices and Systemic Causes of Falsity
  • Conducting chart reviews or other audits that only look for new risk adjustment claims
  • Failure to properly filter data used to generate risk adjustment claims
  • Compliance risk due to incentives to providers and failure to monitor provider submissions
  • Compliance risk due to vendor business methods and incentives