Federal court records show at least a half dozen whistleblower lawsuits alleging billing abuses in these Medicare Advantage plans have been filed under the False Claims Act since 2010. Shutterstock
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Privately run Medicare plans, fresh off a major lobbying victory that reversed proposed budget cuts, face new scrutiny from government investigators and “whistleblowers” who allege plans have overcharged the government for years.

Federal court records show at least a half dozen whistleblower lawsuits alleging billing abuses in these Medicare Advantage plans have been filed under the False Claims Act since 2010, including two that just recently surfaced. The suits have named insurers from Columbia, S.C., to Salt Lake City, Utah to Seattle and plans which have together enrolled millions of seniors; lawyers predict more whistleblower cases will surface. The Justice Department also is investigating Medicare risk scores.

Though specific allegations vary, the whistleblower suits all take aim at these risk scores. Medicare uses the scores to pay higher rates for sicker patients and less for people in good health. But officials were warned as early as 2009 that some plans claim patients are sicker than they actually are to boost their payments.

Privately run Medicare Advantage plans have signed up more than 17 million members, about a third of people eligible for Medicare, and are poised to get bigger. Their lobbying muscle is keeping pace with that growth. Earlier this month, the industry overturned proposed cuts sought by the Obama administration for a third straight year, instead winning a modest raise in payment rates for the programs.

Medicare Advantage resonates with many seniors for its low out-of-pocket costs. It’s also winning favor with some health policy wonks who argue these managed care plans can offer higher quality care than standard Medicare, which pays doctors and hospitals on a “fee-for-service” basis.

Karen Ignagni, the chief executive officer of America’s Health Insurance Plans, the industry’s trade group called the government’s change of heart “a notable step to provide stable funding.”

She went on to say: “Millions of seniors across the country have made their voices heard in Washington, and more than 340 members of Congress have stood in support of Medicare Advantage.”

But the whistleblower suits argue that it’s far too easy for health plans to gouge the government.

Malcolm Sparrow, a health care fraud expert at Harvard’s John F. Kennedy School of Government, said the number of these cases suggests government oversight is too lax.

“Overall this is quite bad news, because in the majority of instances no whistleblower steps forward—as it’s a difficult, risky and highly stressful thing to do,” said Sparrow. “It shows the incentives provided for whistleblowers are working well, and all the other controls and detection systems are failing miserably,” he wrote in an email.

Ray Thorn, a spokesman for the federal Centers for Medicare and Medicaid Services, disagreed. He said CMS “is taking steps to protect taxpayers, Medicare beneficiaries, and the Medicare program.” Thorn cited an increase in CMS audits and said health plans have identified overpayments and given back about $1.1 billion to the government.

Still, critics want to step up accountability– annual taxpayer costs for Medicare Advantage exceed $150 billion—as the health plans bite off bigger chunks of Medicare business.

“CMS could save billions of dollars by improving the accuracy of its payments to Medicare Advantage programs,” the Government Accountability Office, the watchdog arm of Congress, wrote in its 2015 annual report released earlier this month.

On another front, the Justice Department is widening the scope of an investigation into whether exaggerated risk scores are jacking up costs improperly.

Humana Inc., based in Louisville, Kentucky, which counts more than 3 million seniors in its plans, wrote in a March Securities and Exchange Commission filing that the investigation “includes a number of Medicare Advantage plans, providers and vendors.”

On April 14, DaVita Healthcare Partners Inc., headquartered in Denver disclosed that it had been hit with a Justice Department subpoena. Investigators sought Medicare Advantage billing data and other records from January 2008 through the end of 2013.

DaVita HealthCare Partners, whose medical clinics have treated Humana patients, also disclosed “a potentially improper” billing practice, which it said had been halted. DaVita is cooperating with authorities to “address the issue,” according to the SEC filing.

Medicare Advantage billing errors aren’t easy to spot because CMS – not patients— foots the bill and the agency keeps its audits of risk scores secret. (The Center for Public Integrity is suing CMS in an effort to make these findings public under the Freedom of Information Act).

In the latest lawsuit to surface, a pair of whistleblowers allege that Blue Cross of South Carolina submitted inflated claims between 2006 and 2010, then “acted to cover up and hide the false submissions so that they would be able to retain the wrongly paid reimbursements,” according to an April 3 filing.

The South Carolina suit also names the Deseret Mutual Insurance Company, a Utah plan formed by the Church of the Latter-day Saints, which contracted with Blue Cross to process Medicare Advantage billings.

“We deny the allegations and are vigorously defending the case,” responded Blue Cross of South Carolina spokeswoman Patti Embry-Tautenhan.

Deseret Mutual could not be reached despite repeated calls and emails to the health plan’s Utah office and its South Carolina attorney.

The suit was filed by Catherine Brtva, a former Blue Cross computer billing specialist and Jerald R. Conte, a former contractor. Conte alleges he was fired after objecting to the billing, while Brtva said she was forced to quit. Blue Cross lawyers counter that Brtva “resigned of her own accord” and Conte was let go because of “budget reductions.”

The case targets flaws in computer programs that Blue Cross says were used to submit to Medicare millions of health insurance claims by hundreds of thousands of members.

In court filings, Blue Cross does not deny some overcharges occurred. But it says underpayments also happened and it worked with CMS to correct the problems.

The whistleblowers argue that the plans set out to repay only about $2 million in overpayments – just 10 percent of what they actually owed. CMS officials declined to discuss the matter.

The False Claims Act dates to the Civil War and is a growing platform for unveiling fraud against the federal government. The suits are filed under court seal to give the government time to decide whether to join the case, a process known as “intervention.” (Here’s how it works).

These suits don’t appear on court dockets until a judge lifts the seal, usually after the government completes its investigation. As a result, it’s difficult to discern how many such cases are in the pipeline.

“We are not yet seeing everything out there,” said Patrick Burns, co-director of Taxpayers Against Fraud, a group funded by whistleblowers. “The strongest cases may be hidden for years while the government investigates.”

Several attorneys said in interviews they expect more cases to surface, particularly as Medicare Advantage grows. Risk scoring fraud “has popped up on our radar,” said Joseph E.B. White, a Philadelphia lawyer who specializes in whistleblower cases.

The Center for Public Integrity has previously reported the case of Miami doctor Olivia Graves. She accuses Humana of billing Medicare for diseases that “were not supported by medical records.” Humana denies the allegations and has sought to get the case tossed out of court. But earlier this month, a magistrate judge recommended that it go forward. Humana has appealed that decision, arguing in an April 20 filing that it cannot “guarantee the accuracy” of all medical diagnoses made by doctors.

In another case, a former manager at a southern California health care firm alleges that home visits were abused to inflate risk scores at several Medicare Advantage plans. A third case brought by a former Bush administration health official accuses a Medicare health plan in Puerto Rico of bleeding hundreds of millions of dollars from Medicare by concealing inflated risk scores.

All of the health plans have repeatedly denied the allegations and are seeking to have them dismissed. Lawyers on both sides note that whistleblowers must clear significant legal bars to succeed in court. If so, they can receive from 15 percent to 30 percent of any money the government collects.

Many cases fall by the wayside, either because the government doesn’t intervene or the whistleblowers fail to meet legal tests in the law. In general, whistleblowers have a much greater chance of winning if the government joins the case and throws its resources behind the effort. But lawyers can also point to many cases that settled for millions of dollars, or more, even though whistleblowers went ahead on their own.

Even cases that fail to meet the legal threshold can allege conduct that most businesses would rather not have aired. One case in Seattle that didn’t go forward after the government declined to take it over, makes the point.

The suit, which the Center for Public Integrity only recently discovered, was filed in 2012 by Lisa Parker, a former clinic supervisor at The Polyclinic, who sued the clinic and Essence Healthcare, a Medicare Advantage plan.

Parker cited a 2010 memo that asked doctors’ staff to talk hundreds of elderly people into coming in for a medical visit. The clinic was to receive about $250,000 to $500,000 in 2011from increased risk scores from the visits.

“We have a significant opportunity to enhance our financial results and thus our paychecks, but we must act quickly,” the memo reads.

The staff was given “talking points” to use in persuading the patients to come in. When patients resisted, the staff waived patient co-payments for the visits or in some cases paid for their parking fees. Co-pays were from $10 to $20 at the time, according to the lawsuit.

The lawsuit alleges the visits “were not dictated by patient concern, nor for the treatment or diagnosis of specific illnesses, symptoms, complaints or injuries, but were designed and performed to maximize the opportunity to bill Medicare.”

Joel Andersen, vice-president of marketing for Essence Healthcare, said in an email statement: “the government did not find any wrongdoing or any cause to intervene and thus the case was quickly dismissed. We consider the matter closed and have no additional commentary to add. We strongly advise that this matter not be characterized in any other fashion than a frivolous lawsuit based on unfounded claims.”

Tracy Corgiat, vice-president of marketing and development at The Polyclinic, said that CMS requires that a patient’s “clinical history and medical diagnoses be newly documented each year during an in-person visit.” The Polyclinic has a “rigorous process for validating the diagnoses of our patients and we are fully confident in that process,” she said.

At least one doctor was taken aback and said so.

“Let me see if I’ve got this right. In order to get more $$$ for the Polyclinic, we have to bring patients in for a visit they didn’t need or initiate?” the doctor, Scott Stevens, wrote in an email that’s part of the court file.

Stevens said the visits were “contrived appointments” that “entail inconvenience, a waste of their time and co-pays for no added value (to the patient).”

He went on: “considering the advancing age of these patients, they struggle to find and pay for parking, often having to coax a friend or family to bring them in. For them, it’s a half-day at least.

“They would get more from a movie and popcorn,” Stevens wrote.

This story was co-published with NPR.

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