San Francisco—Independent Health Association, Independent Health Corp., its subsidiary DxID LLC, and the former CEO of DxID Betsy Gaffney will pay up to $98 million to settle a whistleblower lawsuit filed by a Phillips & Cohen LLP client under the False Claims Act. Independent Health is a Medicare Advantage Organization (“MAO”) that contracted with the Centers for Medicare & Medicaid Services (CMS) to provide health plans to beneficiaries enrolled in Medicare Part C in New York. Phillips & Cohen filed the lawsuit in 2012 and the government joined the lawsuit in 2021.
Under the Medicare Advantage program, the government pays Medicare Advantage plans a fee to cover medical services for plan members. That fee is “risk adjusted” based on each member’s health status, age, and other factors that could affect the need for more or fewer medical services. Medicare Advantage plans receive more money for members with serious health conditions than for healthy members.
The lawsuit alleges that Independent Health, DxID, and Gaffney violated the False Claims Act by submitting or causing the submission of false or fraudulent diagnosis codes of enrollees in Medicare Advantage plans to inflate Independent Health’s risk-adjustment payments from CMS.
The suit alleges that DxID, a fully owned subsidiary of Independent Health, conducted a retrospective chart review program for Independent Health to review patients’ medical records and gather additional diagnosis codes for enrollees that they could submit for risk adjustment even when there was insufficient support in medical records for documenting the codes. These false diagnosis codes resulted in increased payments from the government to the Medicare Advantage plans.
According to the government’s complaint, DxID “nudged” providers to fill out addenda to retroactively add diagnoses to medical records so that Independent Health could submit additional, fraudulent diagnosis codes. As a result of this process, Independent Health submitted more than 125,000 diagnosis codes that caused the government to pay millions of dollars more to the Medicare Advantage plan than it otherwise would have paid.
“Medicare Advantage programs rely on the accuracy of information submitted by healthcare providers to ensure that the plans receive the appropriate compensation,” said Emily Stabile, a partner with Phillips & Cohen. “This risk-adjustment fraud cost the government millions of dollars.”
The settlement requires Independent Health to make a $34.5 million guaranteed payment over the course of five years through 2028. Independent Health and DxID will also make contingent payments of up to $63,500,000 total over the next four years, if certain conditions are met, and Gaffney will pay $2 million. Independent Health will also enter into a corporate integrity agreement as part of the settlement, which is based on Independent Health’s ability to pay.
“When healthcare providers pad their profits with unsupported diagnosis codes, they rob the government and taxpayers alike,” said Stephen Hasegawa, a partner at Phillips & Cohen. “The whistleblower was brave to come forward and expose this fraud against the government.”