How Medicare Advantage fraud & risk adjustment fraud can occur – upcoding, chart review, chart mining and more
Medicare Advantage plans commit fraud when they knowingly submit — or have a contractor submit on their behalf — risk-adjustment data to the Centers for Medicare & Medicaid Services (CMS) that are inaccurate or ineligible for payment under CMS rules.
In many cases, Medicare Advantage fraud occurs by claiming risk-adjustment payments for medical conditions that their members were not treated for and may not even have. Program of All-Inclusive Care for the Elderly (PACE) plans also can cheat Medicare in that same way.
Whistleblowers can play an important role in stopping Medicare Advantage fraud so that funds are being used properly to care for the roughly one-third of Medicare beneficiaries who receive their benefits through the Medicare Advantage program, or Medicare Part C.
Risk-adjustment fraud violates the False Claims Act and could be investigated and stopped if a whistleblower files a “qui tam” (whistleblower) lawsuit. If the government recovers any funds as a result of the qui tam lawsuit, the whistleblower will receive a reward.
Risk scores and risk adjustment
When a doctor diagnoses a plan member with a medical condition, the plan reports that diagnosis to CMS. CMS uses the diagnoses to assign a “risk score” to each Medicare beneficiary participating in a Medicare Advantage plan.
Under CMS’s formula, sicker members – those diagnosed with serious or multiple conditions – receive a higher score than healthier members. The higher a member’s risk score, the more CMS pays the Medicare Advantage plan. The process to determine a member’s risk score is known as “risk adjustment.”
Risk adjustment is worth a great deal of money to Medicare Advantage plans. On average, each diagnosis a Medicare Advantage plan reports to CMS will increase its revenue by thousands of dollars a year. (CMS pays Medicare Advantage plans an upfront amount for each beneficiary they enroll, based in part on the beneficiary’s health status.)
Given the money involved, Medicare Advantage plans dedicate substantial resources to reporting diagnoses to CMS. Medicare Advantage plans conduct chart reviews in which they “collect” diagnoses by reviewing medical records and gathering information from patients. Plans have outsourced some of this work to physician groups and outside contractors, including specialized risk-adjustment and medical-record review companies.
Risk adjustment fraud
Risk-adjustment fraud occurs when Medicare Advantage plans report to CMS that their members are sicker than they truly are, causing CMS to overpay the Medicare Advantage plans for the members.The Medicare Advantage plan – or a physician, contractor, or consultant hired by the plan – knows that the diagnosis submitted to CMS is unsupported.
It could be that a Medicare Advantage plan may not know that a diagnosis is unsupported when it submits the information to CMS, but the plan discovers that fact later on. This often happens when plans conduct retrospective “chart reviews” or “chart audits.”
However, once the Medicare Advantage plan discovers a diagnosis code is unsupported, it must “delete” that code. Failure to do so is a violation of the False Claims Act.
[If you know of fraud involving a Medicare Advantage plan, contact Phillips & Cohen for a free, confidential consultation about your case.]
How Medicare Advantage fraud occurs – examples
The US Department of Justice has made Medicare Advantage fraud enforcement a top priority. Risk adjustment fraud can take many different forms, including:
- Upcoding members’ diagnoses to exaggerate the severity of the members’ condition (claiming that they are sicker than they really are) in order to submit to CMS a diagnosis code that risk adjusts for a more serious diagnosis code at a higher rate (i.e., has a higher risk score or larger risk multiplier). This allows the Medicare Advantage plan to improperly increase the amount of the per member per month (pm/pm) capitation rate it receives for such members.
- Conducting or hiring an outside vendor to conduct chart audits, chart reviews, or chart mining in which the chart reviewers upcode diagnoses and/or only look for new risk adjustment claims and fail to correct invalid, inaccurate or unsupported diagnoses that were improperly submitted to CMS, a practice known as “looking one way.”
- Doctors, independent practice associations (IPAs), hospitals or other healthcare providers diagnosing Medicare Advantage plan members with diseases that risk adjust but which the member does not have or for which the member was not treated that year (such as diagnoses that only appear on the member’s problem list). These doctors often have “at risk” or “capitated” reimbursement arrangements with Medicare Advantage plans and share in the proceeds from the upcoded diagnoses.
- Asking coders to look beyond the physician-documented diagnoses and attempt to identify diagnoses based on other evidence in medical charts (e.g., medications, laboratory test results, radiology reports, rule-out diagnoses or problem lists).
- Failing to properly filter the diagnosis codes and other data the Medicare Advantage plan submits to CMS to generate risk adjustment claims, including failing to remove diagnoses that were not made during a face-to-face visit with a qualifying healthcare provider, such as a doctor or hospital.
- Performing an internal audit of the validity of risk adjustment diagnoses the Medicare Advantage plan submitted to CMS – e.g., a mock risk adjustment data validation (RADV) audit – and failing to submit to CMS deleted codes for the erroneous diagnoses identified in the audit or to investigate and correct any coding or data submission problems the audit may have uncovered.
- Submitting to CMS a diagnosis code for major depressive disorder (major depression) or cachexia (malnutrition) — two diagnoses that qualify for risk adjustment — when there is no support in the medical records for the existence or treatment of such conditions in the relevant year.
- Submitting diagnosis codes for conditions that physicians have considered and ruled out.
- Claiming current treatment of a condition like stroke or cancer when it is more properly characterized as a past “history of” treatment. For instance, coding acute stroke when stroke occurred years ago, coding cancer when it is in complete remission and not being treated in the relevant year, or coding old myocardial infarction – “old MI” – when it only appears on a problem list and was not treated in the relevant year.
- Submitting to CMS diagnosis codes based on laboratory or radiology claims, in which providers typically do not document confirmed diagnoses.
- Improperly linking complications and conditions to increase risk score, such as claiming a member has diabetes with renal or vascular manifestations without any support that the member’s diabetes caused a renal or vascular manifestation. Diabetes without complications has a lower risk adjustment score than diabetes with renal or vascular manifestations.
- Medical loss ratio fraud can occur in many ways, including reporting false information about profits or medical costs to the government to increase the Medicare Advantage plans’ MLR.
Medicare Advantage fraud by doctors, contractors and consultants
Risk-adjustment fraud can be led by the Medicare Advantage plan itself or by physicians, contractors or consultants that the Medicare Advantage or PACE plan hires to find diagnosis codes and improve the plan’s revenue.
There are a host of companies that offer to provide Medicare Advantage plans with retrospective chart review services, risk-adjustment data submission services (including claims filtering), and prospective risk-adjustment services, including home visits. Many contractors market their services by their high return on investment, not accuracy.
Furthermore, instead of being paid hourly, some contractors have contingency fee arrangements with the Medicare Advantage plans. This type of arrangement gives the contractors a perverse incentive to focus on finding and adding to the Medicare Advantage plan’s submission to CMS as many diagnosis codes as possible, whether or not the codes are valid, as opposed to ensuring the accuracy of the codes submitted.
Many physician groups have contracts with Medicare Advantage plans that pay them a share of the money the Medicare Advantage plans receive from risk adjustment. Such physician groups can “upcode” their patients with diagnoses for medical conditions so that CMS will overpay the Medicare Advantage plans for risk adjustment.
Ultimately, each Medicare Advantage plan is responsible for the diagnosis codes it submits, whether or not it hires a third party to do the work and submit the risk-adjustment processing (RAPS) files to CMS on its behalf. Under the False Claims Act, both the Medicare Advantage plan and the physician, contractor or consultant it hired can be held liable for risk-adjustment fraud.
Part C risk-adjustment fraud (Medicare Advantage fraud) cases under the False Claims Act
- Phillips & Cohen filed a qui tam case on behalf of a Florida doctor, Darren Sewell, which resulted in the largest settlement of a false claims case against a Medicare Advantage plan at the time. Freedom Health, Optimum Healthcare and their affiliates paid the federal government and the state of Florida $32.5 million to settle the case. The whistleblower’s lawsuit alleged that Freedom Health, Optimum Healthcare and their affiliates submitted false risk-adjustment data and misstated to Medicare the number of doctors and medical facilities that would be available to their members.
- Another qui tam lawsuit filed by Phillips & Cohen alleged that Group Health Cooperative (now known as Kaiser Foundation Health Plan of Washington) submitted false risk-adjustment data for Medicare Advantage beneficiaries and received inflated payments from Medicare as a result. Kaiser Foundation Health Plan paid the government $6.37 million to settle the case.
- DOJ has intervened in a whistleblower lawsuit filed by Phillips & Cohen against UnitedHealth Group that alleges risk-adjustment fraud. The qui tam complaint says that UHG developed a company-wide program to review the medical charts of its Medicare Advantage members to find additional diagnoses that would boost payments from Medicare to UnitedHealth. However, the lawsuit says, UnitedHealth avoided meaningfully investigating or correcting errors and high error rates that it found during those reviews because corrections would have decreased its Medicare payments.
- DOJ filed a False Claims Act lawsuit against Anthem, one of the largest Medicare Advantage organizations, for allegedly submitting “inaccurate, and inflated, diagnosis information” that caused CMS to overpay Anthem.
- Sutter Health, a California-based hospital system, paid $30 million to the Justice Department to settle allegations that it had submitted unsupported diagnosis codes to CMS, inflating its members’ risk scores and causing CMS to overpay Medicare Advantage plans. It was the first time that a healthcare provider was held accountable for its risk-adjustment practices.
- The owners of a Medicare Advantage plan in Florida – Dr. Walter Janke and his wife, Lalita Janke – paid the federal government $22.6 million in 2010 to resolve allegations they caused Medicare to pay inflated capitation payments by submitting false diagnosis codes in connection with risk adjustment claims.
The government alleged the Jankes’ Medicare Advantage plan had hired “chart auditors” to look through medical records for additional or upcoded diagnoses that it could submit to CMS for increased payment — whether or not those diagnoses were actually eligible for risk adjustment under CMS rules.
The government also alleged the Jankes’ Medicare Advantage plan used a software program to submit diagnosis codes to CMS that was incapable of submitting delete codes to delete false data from CMS’s database and thereby correct mistakes, i.e., diagnosis codes the Medicare Advantage plan knew had been submitted improperly.
How to report Medicare Advantage fraud
Before reporting fraud involving a Medicare Advantage plan, it is important to consult a whistleblower attorney experienced with Medicare Advantage fraud cases who can evaluate the strength of your case. The whistleblower attorney also can explain how to best protect yourself when reporting fraud and what the risks and rewards of filing a whistleblower case are. Contact Phillips & Cohen for a free, confidential consultation.