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Paul Zimmerman

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Ninth Circuit: Manipulation of Risk Adjustment Data Subjects Insurers to False Claims Act Liability

The U.S. Court of Appeals for the Ninth Circuit has revived a whistleblower suit against Aetna, UnitedHealthcare and WellPoint for allegedly submitting false data for Medicare Advantage payments. Some of the nation’s largest health insurers must face a False Claims Act (FCA) suit accusing them of turning a blind eye to improper diagnoses. The unanimous Ninth Circuit opinion reversed a lower court decision to dismiss the suit.

The Centers for Medicare and Medicaid Services (CMS) pay private Medicare Advantage plans under a severity-adjusted model designed to offer insurers a financial incentive to accept sicker applicants. Medicare Advantage participants are required to certify their data to CMS because they could financially benefit from submitting erroneous codes generated by the provider. Manipulation of risk adjustment data is a relatively new theory in FCA litigation involving Medicare Advantage.

According to the suit in question, UnitedHealthcare, Aetna, WellPoint and Health Net and the physician group HealthCare Partners all submitted false diagnosis codes starting in 2005 to secure higher Medicare Advantage payments. The Ninth Circuit rejected the insurers’ argument that they innocently passed along diagnosis data from physicians. Plaintiff contends that while insurers regularly conduct retrospective reviews of the risk data submitted to CMS, the audit systems are specifically designed only to report those factors that would increase payments, and not to discover reporting errors likely to decrease reimbursement from CMS.

M&R will keep a close eye on this litigation as, regardless of the outcome, the resolution of this matter will shape the future of FCA cases involving Medicare Advantage risk adjustment data.

This blog post is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.