Under the Medicare Advantage Program (also known as Medicare Part C), private health insurance companies called Medicare Advantage Organizations (“MAO”) are authorized to administer Medicare benefits on behalf of the United States. They offer Medicare Advantage plans to Medicare-eligible beneficiaries who pay monthly premiums and copayments that are often less than the coinsurance and deductibles under traditional fee-for-service models for Medicare Parts A and B. MAOs may then contract with healthcare providers for the care of a plan’s participants.
A critical difference between traditional Medicare and the Medicare Advantage Program is in how the federal government’s Center for Medicare and Medicaid Services (CMS) pays the MAOs and healthcare providers with which they contract. The goal of the Part C program is to use a capitated payment system (monthly payments made based on health of the beneficiary) to improve the quality of care while protecting the government against overpaying for that care. Since not all beneficiaries require the same level of care, however, the Medicare Advantage Program requires payments to the private health insurance companies (and healthcare providers) be risk-adjusted annually based on the documented health status of each beneficiary.
In 2004 the Government implemented the Hierarchical Condition Category (“HCC”) model to calculate risk-adjusted payments for each beneficiary in the Medicare Advantage Program. The HCC model was intended to compensate healthcare providers based on the medical condition and expected needs of the particular enrollee, with higher compensation for less healthy patients (who were predicted to require more care), and lower compensation for more healthy patients (who were predicted to require less care). Healthcare providers submit risk adjustment data, including beneficiary diagnosis data, to the MAOs which, in turn, submit the risk adjustment data to CMS. CMS uses the HCCs, as well as demographic characteristics, to calculate a risk score for each beneficiary based on these various Risk Adjustment Factors (“RAF”). CMS then uses the risk scores to adjust capitated payments up or down for the next payment period. Accurate diagnosis codes reflecting the beneficiary’s actual medical condition are, therefore, squarely at the heart of the Government goal with the Part C program of providing the highest quality of healthcare in the most cost-effective manner.
- As of 2021, more than 26 million Americans — mostly seniors — were covered through Medicare Advantage plans. These 42% of Medicare beneficiaries generate $343 billion, or 46% of total Medicare spending.
- 45.3% of California Medicare beneficiaries are enrolled in Medicare Advantage.
- In 2019 Medicare spent $321 per person more for Medicare Advantage enrollees than for traditional fee-for-service Medicare, even adjusting for differences in health status. This costs Medicare approximately $7 billion per year.
- The cost of Medicare Advantage plans is projected to grow at the rate of 5.3% a year, as opposed to 4.4% for traditional Medicare. The Congressionally established Medicare Payment Advisory Commission (MEDPAC) estimates that more than half of this increase stems from the increased risk adjustment scores.
Since the introduction of the Medicare Advantage program, numerous fraudulent schemes have been identified which undermine CMS’ goals in the Part C program. Here are just some of the RAF fraud schemes, which may give rise to False Claims Act liability:
One-way chart reviews. MAOs and healthcare providers have obligations to make sure the patients’ medical records accurately reflect the patients’ conditions. If an MAO or healthcare provider audits or reviews medical records after the fact, but only reviews the charts to add diagnosis codes that will increase reimbursement, this one-way review may be the basis of a fraud on the government. United States v. United Healthcare Ins. Co. 832 F.3d 1084 (9th Cir. 2017); 42 C.F.R. §422.504(l).
Chart reviews not attached to services. Another kind of chart review manipulation may occur if an MAO or healthcare provider uses individuals other than the patient’s doctor(s) to review a patient’s medical record after a doctor visit to add diagnostic codes that will increase reimbursement from the government. United States ex rel Ormsby v. Sutter Health, 444 F.Supp. 3d 1010, 1084 (N.D. Cal. 2020). In Ms. Ormsby’s case, the government alleged that Sutter designed a “coding party” to increase RAF Scores. The whole purpose of the party was to increase the RAF scores quickly and not wait for doctors to add diagnosis codes during patient visits, which could take years to raise the scores.
Pre-populating Patient Medical Records. Another kind of chart review manipulation may occur if the MAO or healthcare provider pre-populates the patient’s medical records in advance of a face to face visit with a doctor. In Ms. Ormsby’s case, the government took issue with instances where Sutter employees who were not medical professionals were pre-populating diagnosis codes into a patient’s medical record before the doctor saw a patient. If the doctor did not de-select the code the non-medical professional inserted, the code would stay in the medical record and form the basis for an upward adjustment of the payment for that patient. United States ex rel Ormsby v. Sutter Health, 444 F.Supp. 3d 1010, 1032 (N.D. Cal. 2020).
Upcoding. Upcoding schemes have long-been a basis of fraudulent schemes against the government. In the Medicare Advantage program these schemes may occur when a less severe diagnosis (which provides lower reimbursement) is “upcoded” to a more severe diagnosis in order to secure higher reimbursement. Upcoding may take place at the time of a patient encounter, or it may occur in chart reviews long after the patient has left the doctor’s office. The Congressionally established Medicare Payment Advisory Commission (MEDPAC) estimated that in 2016 Medicare Advantage plans claimed higher diagnosis categories that were 8 percent higher than scores for similar traditional fee-for-service Medicare beneficiaries.
Minimum compliance expectations. CMS understands that information in a patient’s medical record will not be 100% correct 100% of the time. However, since accurate patient records are at the heart of the Medicare Advantage program, CMS expects that MAOs and healthcare providers will have minimum basic procedures in place to audit whether the patients’ medical records are accurate and/or include unsupported diagnosis codes. This was a threshold issue in Ms. Ormsby’s case against Sutter. As described in her complaint, when Ms. Ormsby started working at PAMF Sutter had no compliance procedures in place to know if its diagnostic coding was accurate, or if it was being reimbursed based on unsupported diagnosis codes. Ms. Ormsby alleged that this problem existed at all of Sutter’s affiliates even though its Medicare Advantage program included approximately 45,000 covered lives. 42 C.F.R. §422.504(i)
Paying doctors to add diagnostic codes. Diagnostic codes in a patient’s medical records should reflect the medical decision-making of a qualified healthcare professional after a face to face evaluation of the patient. In this RAF fraud scheme, MAOs or healthcare providers pay extra money gives incentives to doctors or others to add lucrative diagnostic codes to patient medical records. CMS is adamant that a healthcare provider’s compensation should never be connected to the care that provider gives to a patient. If a doctor is bonused to add diagnostic codes, or if staffers are given gift cards or other rewards for adding diagnostic codes, those incentives could form the basis of liability under the False Claims Act.