Kaiser Foundation Health Plan Will Pay $6.3 Million to Settle Medicare Advantage Fraud Allegations, Whistleblower Will Receive $1.5 Million

Kaiser Foundation Health Plan’s Washington subsidiary (formerly Group Health Cooperative) has agreed to pay $6,375,000 to resolve allegations that it claimed patients were sicker than they were and billed a government health program for nonexistent conditions.

Kaiser Foundation Health Plan Will Pay $6.3 Million to Settle Medicare Advantage Fraud Allegations, Whistleblower Will Receive $1.5 Million

Based in Seattle, Group Health Cooperative (GHC) was founded in 1947 and has been often characterized as a respected nonprofit health insurance plan. Kaiser Permanente acquired the company in 2015.

GHC allegedly defrauded Medicare Advantage (MA) in an attempt to reverse financial losses endured between 2008 and 2010 due to “poor business decisions by company management.”

The MA program allows private insurers, known as Medicare Advantage Organizations (MAOs), to receive a fixed monthly amount from the government for providing coverage to enrolled Medicare beneficiaries. These monthly payments are adjusted based on each patient’s health status. When MAOs submit inappropriate diagnosis codes, claiming patients are sicker than they are, they receive higher payments from Medicare. Over the last few years, prosecutors have investigated numerous cases of Medicare Advantage fraud, exposing several schemes by MAOs that unlawfully appropriated hundreds of millions of taxpayer dollars.

Teresa Ross filed the whistleblower lawsuit against Group Health Cooperative in 2012. Ross spent fourteen years of her life at GHC, first as Director of Insurance and Health Data Analysis and later as Director of Risk Adjustment Services. In both of these roles, she was directly involved in implementing/verifying procedures to ensure the company submitted accurate diagnosis codes and risk adjustment claims to Medicare.

The whistleblower was well equipped to detect misconduct as she had “extensive knowledge of the Medicare risk adjustment system developed both during her time running the GHC risk adjustment department and during her participation in the 2002 administrative process whereby [the Centers for Medicare & Medicaid Services] developed and implemented the risk adjustment system,” the lawsuit stated.

Besides GHC, the defendants named in the lawsuit include NY-headquartered medical coding consultants DxID, Independent Health Association (IHA), Independent Health Corporation (an IHA subsidiary), and two DxID executives named John Haughton and Betsy Gaffney.

According to the complaint, “GHC estimated that CMS would pay it more than $12 million for the risk adjustment claims DxID submitted on GHC’s behalf for the 2010 service year. If 74% of those claims were erroneous (consistent with the error rate Relator has found during her review), GHC and DxID have submitted and conspired to submit more than $8 million in false claims to the United States.” The whistleblower estimated that defendant DxID submitted over $23.3 million in risk adjustment claims on GHC’s behalf for the following service year.

The defendants’ fraudulent behavior allegedly included:

  • Upcoding “risk adjustment claims by submitting claims for diagnoses that the member does not have or for which the member was not treated in the relevant year, or by claiming that a member was treated for a more serious condition than the member actually has;” and
  • Refusing to correct (and to reimburse Medicare for) “previously submitted risk adjustment claims when defendants discover, or in the exercise of reasonable care should discover, that those previously submitted claims were false.”

An example of misconduct cited in the FCA complaint deals with an individual identified as ‘Patient A.’ When a doctor saw this patient in September 2010, he removed “Major Depressive Disorder” from the patient's problem list and wrote in a note, “[the patient] does not have much in the way of depression, in fact, has an amazingly sunny disposition.” However, “Despite this clear notation by the treating physician that the patient was not suffering from major depression,” the lawsuit stated, DxID still coded Patient A for Major Depressive Disorder. Thus, the risk adjustment submitted by DxID on behalf of GHC “was false and fraudulent within the meaning of the False Claims Act.”

The complaint also mentions a diabetic patient who was included in the lucrative HCC 16 category even though a doctor observed he had no serious complications from diabetes. The treating physician specifically wrote, “She does not have significant diabetic neuropathy.” The patient, whistleblower Teresa Ross claimed, should have been included in the HCC 19 category instead, which is reserved for diabetes without relevant complications.

According to the whistleblower, defendants Haughton and Gaffney were “the driving force” behind GHC and DxID's fraudulent scheme.

Dr. John Haughton was DxID’s Consulting Risk Adjustment Advisor. A Maryland resident, he was responsible “for the development of DxID’s risk adjustment claims review and submission methodology.” Despite his extensive knowledge of Medicare rules, the whistleblower claimed, Dr. Haughton “developed the DxID risk adjustment system that systematically violates those well-established rules and causes the submission of thousands of false risk adjustment claims.”

As DxID’s Co-Chief Executive Officer, Betsy Gaffney was also directly involved in risk adjustment claim review and submission. While pitching her company’s services to GHC, she allegedly said, “[r]isk adjustment is a game, and you need to learn how to play it.” She is a resident of Rochester, NY.

Upon the announcement of the settlement, Jeffrey Bossert Clark, Assistant Attorney General of the DOJ’s Civil Division, commented, “The United States relies on Medicare Advantage Organizations to submit accurate diagnosis data to Medicare to ensure that the compensation they receive is appropriate...We will continue to pursue those who undermine the integrity of the Medicare program and the data it relies upon.”

According to U.S. Attorney James Kennedy, Jr. (Western District of New York), “When insurance providers take advantage of Medicare and falsely claim that they are entitled to repayment for unsupported diagnoses, American taxpayers suffer in the form of higher costs.” Kennedy also vowed to continue to ensure Medicare Advantage is not defrauded and “that monies are not paid for unwarranted claims.”

In a press release, the DOJ said that Teresa Ross will receive a whistleblower award amounting to approximately $1,500,000. Tipsters like Ross can file a lawsuit under the False Claims Act. Insiders who provide original information about fraud in an FCA lawsuit leading to monetary recoveries can be eligible for cash awards.

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