Â鶹ԭ´´

US authorities have reached a settlement to resolve a whistleblower case alleging that a New York state health insurer systematically defrauded the federal Medicare program by exaggerating how sick members were in order to boost profits.

The settlement was disclosed in a court filing Monday that didn’t detail the settlement amount. The lawsuit in federal court in the Western District of New York concerns a type of health-care fraud claim that has drawn increasing attention from the Department of Justice.

The agreement resolves a case that began 12 years ago when the whistleblower, Teresa Ross, filed a sealed complaint alleging widespread fraud. A representative for insurer, Independent Health Corporation, didn’t have an immediate comment Monday.

The Justice Department in the lawsuit in 2021, one of a series of cases that put a on allegations that health insurers exploited payment rules in private Medicare Advantage plans to juice profits.

The Medicare Advantage program now covers more than half of people on Medicare, at a cost of in 2023. It’s become a crucial driver of growth at the largest US health insurers, including UnitedHealth Group Inc., CVS Health Corp. and Humana Inc.

Yet congressional Medicare advisors have raised concerns for years about how the program’s payment system can be manipulated. The Medicare Payment Advisory Commission declared an “urgent need for a major overhaul,” according to a this year.

The group estimates that the program pays an estimated 22% more — which translated to $83 billion this year — to cover people through private plans than it would pay for the same beneficiaries in traditional Medicare.

Read more:

Under the Biden administration, the Centers for Medicare and Medicaid Services are policies in Medicare Advantage, with changes phasing in over three years. That, combined with rising medical expenses, have led to a decline in earnings and stock prices of the largest health insurers.

In 2023, Cigna Group agreed to pay to resolve Medicare Advantage fraud claims. Cigna didn’t admit liability. Other cases are pending against insurers including UnitedHealth and Elevance Health Inc. Both companies dispute the allegations and are fighting them in court.

Monthly Payments

In Medicare Advantage, the government makes monthly payments to health plans for each member they enroll. Those payments, intended to cover the members’ medical costs, are adjusted based on the illnesses patients have, with higher payments for sicker patients. That’s meant to discourage insurance plans from cherry-picking healthy people and adequately reimburse insurers for the costs they incur.

Watchdogs have for that the payment system is susceptible to manipulation and fraud. Whistleblower Ross first raised concerns about insurer practices more than a decade ago. At the time, she was working for a Washington state health insurer that later became part of Kaiser Permanente.

In a bid to boost revenue, her company turned to an outside vendor called DxID, owned by Independent Health, to help identify more diagnosis codes to submit to Medicare, which would bring higher payments. The vendor mined patient charts for illnesses to add, and prompted doctors to sign off on the revisions.

But Ross found many claims to be inaccurate, according to court filings. She said in interviews with Bloomberg Â鶹ԭ´´ that her company resisted her attempts to fix the submissions. So she filed a lawsuit under seal in 2012, alleging that her employer and the vendor were defrauding Medicare. Ross is represented by attorneys from the firm Whistleblower Partners LLP.

“Each diagnosis you submit is more money,” Ross said in a recent interview.

The case remained under seal for years while the Justice Department investigated the allegations. The government intervened in the case in 2020, taking up Ross’s claims to recover money on behalf of the public. As the person who brought it to light, Ross gets a cut of whatever money the US recovers. In 2020, her former employer, by then a part of Kaiser Permanente, the claims against it for $6.3 million, without admitting wrongdoing. Ross got about $1.5 million of that.

Kaiser Permanente previously told Bloomberg Â鶹ԭ´´ that it submitted its Medicare Advantage data in good faith and relied on the recommendations of its vendor, DxID.

Unsealed Lawsuit

Ross had moved on to another company by 2019, when the lawsuit was unsealed, seven years after she first filed it. She lost her job and couldn’t find another one — once she was known as a whistleblower, no one in the health insurance industry wanted to hire her, she said.

Ross accused DxID, the vendor that her company had hired, and its parent of fraudulently inflating diagnosis codes for profit. Her lawsuit also personally named DxID’s chief executive officer, Betsy Gaffney. Ross got a view into how the companies operated as DxID proposed new approaches to billing Medicare Advantage at her own company, according to court filings.

DxID marketed its coding services to other health plans and got paid a percentage of the increased revenue it brought in. In 2012, for example, it found thousands of new diagnosis codes to submit on behalf of Ross’s company, boosting revenue by more than $12 million, according to the Justice Department’s complaint in the case. DxID got to keep $2.5 million of that.

It was just a portion of the millions that the Department of Justice alleged Independent Health and DxID generated by submitting fraudulent diagnosis codes. DxID shut down in 2021. Independent Health, in a statement for a previous story in 2022, Bloomberg it believed its coding polices were lawful. Attorneys for Gaffney didn’t respond to emails seeking comment late Monday. They previously told the that she was an “unfortunate victim of an ancient lawsuit premised on inaccurate allegations.”

In the years since Ross’s case came to light, the issues she raised have gained greater attention. But she is still pushing for Medicare to cap the total amount of money available to the Medicare Advantage plans to limit their incentive to manipulate diagnostic codes for profit.

“I don’t know how you’re going to stop the bad actors there from dialing for diagnoses without something like that,” she said.

Top Photo: Teresa Ross Photographer: Jovelle Tamayo/Bloomberg

Topics New York