Florida doctor’s whistleblower case against Medicare Advantage plans Freedom Health, Optimum Healthcare settles for $32.5 million

TAMPA, Florida, May 30, 2017 – A whistleblower lawsuit filed by Phillips & Cohen LLP on behalf of a Florida doctor against Freedom Health, Optimum Healthcare, and their affiliates prompted a government investigation that led to today’s settlement with the federal government and Florida totaling $32.5 million.

The $32.5 million settlement includes: $15 million paid to the federal government; $16.67 million in credits for money paid through a Medicare payment reconciliation process; $78,414 paid to the state of Florida; and $750,000 that Freedom Health’s former chief operating officer, Siddhartha Pagidipati, has agreed to pay to settle claims in the lawsuit.

“This is the largest settlement so far of a false claims case against a Medicare Advantage plan,” said Edward H. Arens, a whistleblower attorney in Phillips & Cohen’s San Francisco office. “It also is one of the first cases involving a Medicare Advantage plan’s obligation to provide its members with adequate access to healthcare services.”

The “qui tam” (whistleblower) lawsuit, filed in federal district court in Tampa, Florida, in 2009, alleged that Freedom and Optimum submitted false information to Medicare about their members’ medical conditions, which boosted the Medicare payments they received under a process known as “risk adjustment.” The lawsuit also said the companies expanded into new markets in Florida, North Carolina and South Carolina by misstating to Medicare the number of doctors and medical facilities that would be available to their members.

“The allegations in this case address ways that Medicare Advantage plans can drive up Medicare payments for their services,” Arens said. “Our whistleblower client, Dr. Darren Sewell, went to extraordinary lengths working on the case. It was important to Dr. Sewell to get patients the healthcare they deserved.”

The government adjusts its payment rates to Medicare Advantage plans based on risk adjustment data the plans submit, including data on members’ medical conditions. Medicare pays higher rates for patients with acute or chronic conditions, because they are likely to need more treatment than healthy patients, making them a greater “risk” to plans. The lawsuit alleges that Freedom and Optimum increased their Medicare payment rates by sending risk adjustment data to Medicare that made many of their members seem sicker than they truly were.

In addition, the lawsuit alleges Freedom and Optimum overstated the number of healthcare providers available to their members to win approval to expand their service areas in 2009. To protect patients, Medicare Advantage plans cannot operate in a new region without showing that their members will have access to an adequate number of healthcare providers.

The lawsuit says the overstatement left many patients without access to critical health care services, including oncology treatments and radiology services.

Dr. Sewell worked for Freedom and Optimum for five years, most recently as a vice president. He came to Phillips & Cohen after witnessing practices that he believed needed to be addressed. The qui tam case was filed “under seal” as required by the False Claims Act and was not publicly known until today, when the court unsealed the case and approved the settlement agreement.

After his qui tam case was filed, Dr. Sewell devoted himself to helping the government investigate his allegations, logging hundreds of hours assisting federal agents in their investigation and reviewing documents. Dr. Sewell died in 2014, five years after his lawsuit was filed.

Whistleblower attorney Stephen Hasegawa of Phillips & Cohen commended the government attorneys and investigators who worked on the case, including Assistant US Attorneys Randy Harwell and Katherine Ho, Department of Justice Trial Attorneys Jennifer Koh and Charles Biro, FBI Special Agent Eduardo Ortega, Investigator Kevin Codol, and Special Agent Raquel Garrido of the Department of Health and Human Services Office of the Inspector General.

“The work of Randy Harwell, Katherine Ho, Jennifer Koh, Charles Biro, Ed Ortega, and the other dedicated agents and investigators who worked on the investigation, were key to the settlement of this case and the recovery of funds for taxpayers,” Hasegawa said.

Dr. Sewell’s qui tam case was brought under the False Claims Act, which encourages private citizens to sue entities that are defrauding the government. If the government joins the case, the whistleblower receives 15 percent to 25 percent of the amount the government recovers as a result of the case. The whistleblower award in this case hasn’t been determined yet. Phillips & Cohen was co-counsel on the case with Constantine Cannon. James Hoyer served as local counsel. Whistleblower attorneys Taeva Shefler and George Collins were part of the Phillips & Cohen team that worked on the case.

Dr. Sewell’s whistleblower complaint: US and State of Florida ex rel. Sewell v. Freedom Health, Inc., et al., Case No. 8:09-cv-1625-T-35TGW (M.D. Fla.)

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