United States Files A Complaint in Intervention under False Claims Act Against Health Insurers Involved In Nine-Year Medicare Program Fraud

On September 13, 2021, the United States of America has filed a complaint in intervention under the False Claims Act in the U.S. District Court for the Western District of New York against a health insurer and its affiliate companies over millions in inflated Medicare claims. The Justice Department has intervened in a nine-year-old whistleblower civil lawsuit against Amherst-based Independent Health (IH) – comprising of the Independent Health Association (IHA) and Independent Health Corporation (IHC), wherein the lawsuit also involves its affiliate company – DxID LLC, and the former CEO of DxID – Betsy Gaffney.

Nature of the lawsuit

A nine-year-old civil lawsuit now includes a complaint in intervention under the False Claims Act filed by the United States of America on September 13, 2021. The civil complaint was filed against health insurers Independent Health – Independent Health Association (IHA) and Independent Health Organization (IHO), DxID LLC, and its former CEO – Betsy Gaffney. These entities are allegedly involved in a healthcare fraud scheme, wherein unsupported diagnoses codes were used to significantly inflate the risk scores of the beneficiaries of the Medicare Advantage Plans to, ultimately, increase the reimbursement of the said entities. The defendants were said to have conspired to use a retrospective chart review program and an addenda process to accomplish their plan. The civil complaint states that DxID coded conditions into records that were not initially documented in the beneficiary’s medical history during a primary visit and were also said to have asked healthcare providers to sign addenda forms, which was then used as substantiation to their ploy of increasing the risk-adjusting diagnosis that was not documented initially. Through the contribution of DxID, the Independent Health received excessive reimbursement for services that were not provided, from which DxID LLC received a 20-percent in kickback of the additional recovery that the MA Plans received. It was further noted that the Independent Health, headquartered in Buffalo, New York, despite having been made aware of the unsupported diagnosis codes, failed to take corrective actions that rectify the unsupported diagnoses.

Defendants and Allegations in the Civil Complaint

The U.S. Department of Justice alleges in a civil complaint of fraud that the Independent Health Association, the Independent Health Corporation, the DxID LLC, and former CEO Betsy Gaffney violated the False Claims Act while participating in the Medicare Advantage (MA) Program – a Medicare Program administered by the Centers for Medicare & Medicaid Services (CMS). The defendants are accused of knowingly submitting or causing thousands of documents containing false claims, misleading statements, and other falsified records of its health care beneficiaries to the government in connection to the requirements needed for the Medicare Advantage Program. It was noted that the goal of the defendants was to inflate the Independent Health’s reimbursement from the MA Program.

Details of the Allegations

In the civil complaint, it was stated that the Independent Health and the other defendants were responsible for the submission of unsupported diagnosis codes to the Centers for Medicare & Medicaid Services (CMS), along with the use of false records and statements to back the alleged unsupported diagnosis codes and the perpetuation of overpayments that arose from the submission of the aforementioned unsupported diagnosis codes. Moreover, it was particularly noted that the defendants actively conspired with each other in order to fulfill the events that led to the violation of the False Claims Act from no later than January 1, 2021, through at least January 31, 2017. The Justice Department further alleges that to execute the elaborate medical fraud scheme, the Independent Health established the DxID LLC under the leadership of defendant Betsy Gaffney.

Information on the Centers for Medicare & Medicaid Services and the Medicare Advantage Program

Independent Health is a Medicare Advantage Organization (MAO) that agrees with the Centers for Medicare & Medicaid Services to provide managed healthcare insurance plans to beneficiaries enrolled in Medicare Part C in New York State. The CMS is responsible for the Medicare programs and is in charge of the transactions made with Medicare Advantage Organizations. The Independent Health and the Centers for Medicare & Medicaid Services contract generally work under a capitation basis. Per member per month is the method of determining the amount to be provided. In this regard, the CMS calculates and makes upward payment adjustments to MA Plans and health insurers, such as the Independent Health, in direct proportion to a risk adjustment system based on the demographic information and health status of each plan beneficiary. This implies that a beneficiary with more severe diagnoses will obtain a higher risk score, resulting in the MAO receiving a larger risk-adjusted payment for the said beneficiary. As such, the Centers for Medicare & Medicaid Services requires the submission of accurate demographic information and medically documented diagnosis codes. These are fundamental to accurate payments to be made from the government to the MAOs.

Contributions of DxID LLC in the Healthcare Fraud Scheme

The role of DxID in the scheme was to provide management of the Hierarchical Condition Categories (HCC), which are sets of medical codes that are linked to specific clinical diagnoses. The presence of HCCs is required by the CMS as a part of its risk adjustment model, which directly affects the payment made to the Medicare Advantage Organization (MAO). In addition to HCC Management, the DxID also handled Medical Record Document Management Solutions and instituted a retrospective medical records review program, allowing DxID to access the medical records of the Medicare Plan enrollees and use the data as needed in the fraud scheme. It was also alleged in the civil complaint that the DxID received a share of up to 20-percent of the additional revenue taken from the per member per month payments provided by the Centers for Medicare & Medicaid Services.

Accusations Against DxID LLC

DxID LLC is being accused of having services designed to capture and cause the submission of diagnosis codes that are not accurate or adequately documented in medical records, in defiance of the prevailing rules set for MAOs. Moreover, it was stated in the civil complaint that the Independent Health went ahead and conspired with DxID, despite receiving ample warning about the impropriety of the coding policies and aggressive coding approach of DxID LLC. To top it off, the U.S. Department of Justice alleges that another MAO called Group Health Cooperative (GHC) used the services offered by DxID at the recommendation of Independent Health while also submitting unsupported diagnoses codes captured by DxID to the CMS.

The Whistleblower Case and the False Claims Act

Specific to this case, the private parties have been allowed to sue on behalf of the United States government and receive any share of recovery as the comprehensive lawsuit was filed under the qui tam, or whistleblower, provisions of the False Claims Act. Additionally, under the same provisions, the government is given the authority to intervene in such lawsuits, to which the court took advantage of and had the United States intervene for a good cause. Teresa Ross, the whistleblower, is a former employee of Group Health Cooperative (GHC), which was a Medicare Advantage Organization that offered Medicare Advantage Plans in Washington State. It is known that the GHC used the chart review services of the DxID LLC from 2011 to 2012 and eventually entered into a settlement with the United States and Teressa Ross in November of 2020 in order to resolve the claims against it arising out of this matter. This intervention of the United States on this particular matter strongly emphasizes the government’s commitment to combating health care fraud, which is highly improved and strengthened by the existence of the False Claims Act.

Statement by Deputy Assistant Attorney General Michael D. Granston of the Civil Division in the Department of Justice

Deputy Assistant Attorney General Michael D. Granston of the Civil Division in the Department of Justice affirmed that the department would persist in its operation of holding accountable health plans and providers that abuse the Medicare Advantage Program and reports unsupported diagnoses in order to inflate risk adjustment payments. Prior to that, he mentioned that the Medicare Advantage Program is one that relies on accurate information regarding the health status of its beneficiaries, particularly with the services needed by these individuals as it is where the compensation allocated to the MAOs is based on.

“The Medicare Advantage Program relies on accurate information about the health status of enrollees to ensure that they receive appropriate treatment and that participating health plans receive proper compensation for the services they actually provide. The department will continue to hold accountable health plans or providers that report unsupported diagnoses to inflate risk adjustment payments,” said Deputy Assistant Attorney General Michael D. Granston of the Justice Department’s Civil Division.

Statement by United States Attorney James P. Kennedy Jr. for the Western District of New York

Also commenting on the allegations made against the defendants, United States Attorney James P. Kennedy Jr. for the Western District of New York said that the act of submitting unsupported diagnosis codes to inflate reimbursements allowed them to acquire a substantial amount from Medicare, even more significant than they were entitled to. Given this, U.S. Attorney Kennedy put attention to the fact that this was a form of fraud, emphasizing that defrauding taxpayer-funded healthcare programs directly affects the nation’s entire healthcare system.

“The defendants are alleged to have submitted unsupported diagnosis codes to inflate reimbursements, which enabled them to receive payments from Medicare that were greater than they were entitled. Defrauding taxpayer-funded health care programs such as Medicare hurts not only taxpayers but our nation’s entire healthcare system,” said U.S. Attorney James P. Kennedy Jr. for the Western District of New York.

Investigation and Prosecution

This civil lawsuit is being handled by the Commercial Litigation Branch (Fraud Section) of the Civil Division of the Office of the U.S. Attorney for the Western District of New York, with assistance from the U.S. Department of Health and Human Services Office of Inspector General.

Documents of the Case

The case is captioned United States ex rel. Ross v. Independent Health Association et al., No. 12-CV-0299(S) (W.D.N.Y.).

Contact Details for Additional Information

As mentioned earlier in this article and the civil complaint, all of the claims are merely allegations against the defendants. No determination of liability has been made. Additional information and complaints from many sources about potential fraud, waste, abuse, and mismanagement are highly advised to be reported to the Department of Health and Human Services at 800-HHS-TIPS (800-447-8477).