Federal Appeals Decision Could Signal Change for Medicare Advantage Fraud Cases
An August 2016 decision by the Ninth Circuit Court of Appeals revived a Medicare Advantage Fraud case that had been pronounced dead by a California district court in 2013.
In 2013, a central California district court dismissed a federal whistleblower case brought by data manager James Swoben in which he claimed that major health insurers, including United Health, Aetna, WellPoint, HealthCare Partners, HelthNet, and SCAN Health Plan were defrauding Medicare by inflating Medicare Advantage risk scores to collect larger payments from government payers.
Swoben’s 2009 lawsuit claimed that data coders at major health insurers were instructed to audit Medicare bills and add billing codes that had erroneously been omitted. However, the coders were not permitted to report incorrect diagnosis codes, or to remove codes that were entered in error. According to Swoben, the coders were instructed to only identify errors that would generate additional income for insurers, but were intentionally discouraged from removing codes that resulted in overpayments. These actions created a one-way street designed to net the insurers more money. According to Swoben, the biased retrospective reviews were in violation of the False Claims Act.
Medicare Advantage Risk Scores Determine Insurer Payments
Data coders like Swoben were tasked with reviewing bills submitted to The Centers for Medicare & Medicaid Services (CMS). CMS pays Medicare Advantage plans, like the insurers identified in Swoben's lawsuit, based on patient risk scores that are determined by the level of services each beneficiary receives. A higher risk score means higher payments to the plan. Insurers, Swoben alleged, were fraudulently increasing patient risk scores to generate more revenue.
To put the scope of the insurer's scheme in perspective, Swoben claimed in his lawsuit that auditors discovered coding error rates in excess of 20%. Other reports indicate error rates closer to 40%, resulting in $32 billion in overpayments between 2008 and 2010.
Appeals Court Decision Could Be Bellwether for Medicare Advantage Fraud Cases
Swoben first filed the lawsuit against his employer, California-based SCAN Health, in 2009. Over the next four years, he amended his complaint three times, adding defendants United Health, Aetna, WellPoint, HealthCare Partners, and HealthNet.
In 2013, a California federal district court dismissed Swoben’s case, saying that his claims were too vague and that allowing Swoben to amend his Complaint a fourth time would be “futile.”
However, in August 2016, the Ninth Circuit Federal Court of Appeals disagreed, tearing apart the defense team’s arguments in the process. The appellate court agreed with Swoben’s allegation that the insurers rigged the system and knew exactly what they were doing.
While Swoben's case is far from over, the Ninth Circuit appellate opinion could be a bellwether decision, potentially translating into hundreds of lawsuits against Medicare Advantage plan insurers and resulting in massive penalties and significant settlements in fraud cases brought by whistleblowers.
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