Medicare Advantage Plan Audit Finds Medicare Paid Too Much for Nearly Half of Patients


A 2012 audit of a Medicare Advantage plan provided by UnitedHealth Group through PacifiCare of Washington State of 201 patients found 153 erroneous diagnoses out of 786 diagnoses. In total, the Government paid too much for nearly half of the patients on the insurance plan.

Medicare should have paid less in 49 percent of bills, with higher payments 15 percent in the audit. As a result, the government asked the health insurer to pay the difference, a total penalty for UnitedHealth of only $381,000 since the audit only involved a small number of cases and the government did not seek to predict the adjustment in the other patient populations.

And yet it formed the basis of a three year legal battle that remains ongoing. UnitedHealth objected to having to collect the medical records to support the erroneous diagnoses. 64 percent of the improper payments involved insufficient documentation. For example, 38% of the objectionable records lacked a physician’s signature.

The internal estimates of CMS officials concerning Medicare Advantage fraud totaled $13.5 billion in billing errors in 2010 alone. The Center for Public Integrity had previously estimated that improper payments to Medicare Advantage plans could top $12 billion in 2014.

A recent study by the National Bureau of Economic Research suggested that $2 billion of those improper payments are the result of upcoding. The working paper estimates that patients on Medicare Advantage plans have 6% to 16% higher risk scores than they would under traditional Medicare. The paper, which stops short of calling all issues the result of intentional manipulation, also suggests that CMS hasn’t gone far enough with its 2010 decrease in risk scores.

The Department of Justice has been investigating the use of risk adjustment scores in MA plans at healthcare plans, providers and vendors. Humana, one of the largest U.S. providers, has previously disclosed a government inquiry into its practices, for example. Several health care whistleblowers have already filed lawsuits under the False Claims Act to challenge fraud in insurance plans in this area as well.

Audits like the one performed on UnitedHealth are called Risk Adjustment Data Validation. If risk scores are inaccurate, it can cause Medicare to pay higher rates for people who are not as sick as the health care provider or insurer represents. In the audit, auditors typically review medical records to confirm that patient conditions are properly documented and the facility was entitled to payment.

The Center for Public Integrity obtained the documents concerning UnitedHealth through a FOIA request.

Medicare Advantage has been a hot topic since it now treats 17 million Americans at a cost of more than $150 billion a year. It is the subject of a few different bills in Congress at the moment. A recent bill to extend the period of time for comment on rates and policy changes by 15 days just passed the House. And another to extend poorly rated drug plans set to be eliminated in 2015 to be extended until 2018 to give seniors using the Medicare plans a chance to find a different insurance plan.

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Ten Breakthrough Drugs to Cost US $50 Billion in Ten Years

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The Government Healthcare Programs, including Medicare and Medicaid, will have to pay more than $50 billion over the next ten years on ten “breakthrough” medications developed by the pharmaceutical industry.

We’ve already highlighted the enormous amount that the United States has been spending on hepatitis C drugs over the past year. This analysis goes farther to include future projections for Keytruda, a cancer treatment developed by Merck; Eylea, an eye drug from Regeneron and Bayer; Kalydeco, a Vertex Pharmaceuticals cystic fibrosis treatment, and other drugs.

Over the next ten years, these ten drugs are estimated to cost Medicare more than $30 billion and Medicaid (state and federal portions) more than $15 billion. Spending by the Veterans Administration and the Department of Defense weren’t included in the analysis.

The FDA was authorized by Congress in the Food and Drug Administration Safety and Innovation Act of 2012 to use the breakthrough therapy status to speed the development and review of drugs to allow them to reach patients with serious conditions sooner. Sovaldi, a hepatitis c treatment which received market approval in eight months, is the most well-known breakthrough therapy to date.

The report, put together by Avalere and funded by the trade group America’s Health Insurance Plans, is troubling. It is research like this that makes it more important than ever that the government’s Medicare Part D program be given the authority to negotiate prices for high-cost drugs with the pharmaceutical industry. Medicaid and the Department of Veteran Affairs can already negotiate their drug prices. Medicare should have that power as well.


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Record Breaking Settlement of Declined False Claims Act Lawsuit


DaVita Healthcare Partners agreed to pay up to $495 million to settle a False Claims Act lawsuit brought by two whistleblowers, a doctor and a nurse, that worked at DaVita. It is the largest settlement ever in a case where the Department of Justice chose to decline intervention. The company has now agreed to pay nearly $1 billion to settle allegations of Medicare and Medicaid fraud since 2012.

DaVita provides dialysis services to patients with chronic kidney failure and end stage renal disease.  The lawsuit concerned allegations that DaVita wasted medicine in vials and billed Medicare for it. The CDC since 2002 has allowed the reuse of single-use vials in the drugs at issue if proper procedures are followed. The company billed Medicare for the unused portions of the drugs which it discarded.

What is a declined case? The government, after conducting an investigation on the merits of the litigation, generally intervenes and takes over prosecution of the civil claims in around 20 percent of cases brought under the False Claims Act. The rest of the whistleblowers receive a declination letter from the Department of Justice which informs the relator (as a whistleblower under the FCA is known) that they may continue the lawsuit on the government’s behalf (this is what is meant by qui tam, which you may often see in this context).

There have only been five years in the history of the False Claims Act where non-intervened cases reached settlements or judgments exceeding $100 million. Looking at the statistics since 1987, none of the annual totals of these cases exceeded $200 million.

In the past, relatively few non-intervened cases reached a successful settlement or judgment. Some whistleblowers evaluate the situation and decide that they are not interested in prosecuting it themselves if the government isn’t interested in vindicating the fraud against them. However, the success ratio may be improving as more law firms have decided to take these cases and run with them against the large corporations that they challenge.

When False Claims Act cases like these settle, the whistleblowers who file them typically get between 15 and 30 percent of the settlement. The law mandates these percentages, but there are few situations where the amount paid could be less than the minimum award. However, the Department of Justice, on behalf of the U.S. Government, investigated the relator’s claims and declined to intervene in it. In a declined case, the mandated percentage by the law is between 25 and 30 percent.

If you have additional questions about how these lawsuits worker, or have evidence of misconduct by a company which you wish to report, contact one of our Philadelphia FCA attorneys.

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Medicare Releases 2013 Part D Drug Spending Data

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Prescription drug spending from Medicare Part D is now available as the U.S. Government released data for claims in 2013. The government spent nearly $104 million on drugs under the program which covers approximately 36 million elderly and disabled individuals.

The data details spending on nearly 3,500 drugs during the year. The government spent $2.53 billion on Nexium, a heartburn treatment, in the top drug expenditure. Advair Diskus was in second place in total cost, with government spending of $2.26 billion.

The data is available on the Medicare website here.

After a brief glimpse at the data, it looks like the government’s release of information could eventually put a damper on Defendant’s use of Rule 9(b) in Rule 12(b)(6) motions to dismiss in False Claims Act litigation. Rule 9(b) requires plaintiffs to plead fraud with particularity. Courts have held that it applies to litigation under the False Claims Act, although the level of specificity required varies in different appellate courts. Following the release of this information, a relator may still not have individual patient level data but they do now have proof of Part D spending on prescriptions written by certain doctors. The question is whether that would be sufficient for the whistleblower to overcome the objection in their particular case.

The prescription drug data released is a substantial improvement over the information previously available, but still limited in some respects. The Part D data released covers about 78% of total costs and 87% of total drug claims in Part D, excluding from the information physicians with 10 or fewer drug claims. The information release also doesn’t give a complete picture of all money spent by Medicare on prescription drugs. It fails to account for medicines received in a hospital or doctor’s office as these are not billed to the Part D program.

This isn’t the only news coverage that the government’s drug spending has received this week. An OIG report recommended Congress and Centers for Medicare & Medicaid Services pursue additional rebates from companies for prescription drugs. The report found that Medicaid received rebates of 47% of their expenditures while Medicare received a rebate of only 15% of their spending. The cost after rebates on 110 brand name drugs for Medicaid was less than half of that paid by Medicare Part D.

Following the report, Senator Bill Nelson introduced the Medicare Drug Savings Act of 2015 into the U.S. Senate. The bill would require pharmaceutical manufacturers to offer the same rebates in Medicare as they do to Medicaid.

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Fear of lawsuits driving unnecessary diagnostic tests

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An overwhelming majority of emergency physicians believe their department runs too many diagnostic tests on patients. Nearly all of the doctors (97%) responding to a national survey published online in Academic Emergency Medicine last month acknowledged ordering advanced imaging that was not medically necessary.

The problem goes well beyond the computed tomography (CT) or magnetic resonance imaging (MRI) that was at the heart of the survey. 85% of the respondents said generally that their department runs too many diagnostic procedures. These procedures can range from blood and urine testing to scans. The survey respondents primarily blamed the extra tests on concerns over malpractice lawsuits and the fear of missing a low probability diagnosis.

Based on these survey results, it wouldn’t surprise me if we start to see some whistleblowers from the emergency room come forward. The False Claims Act is the primary tool for the government to target physicians and hospitals billing for procedures and tests that are not medically necessary. Because Medicare only reimburses health care providers for conduct that is reasonable and necessary, providers that are not intentionally ordering medically unnecessary tests are violating the law and subject to treble damages. A whistleblower that reports Medicare fraud can earn a reward of between 15 and 30 percent of the U.S. Government’s recovery.

In the past, there have been a couple qui tam lawsuits related to practices in the emergency room. The allegations in these lawsuits have involved the unnecessary admission of patients to the hospital and overbilling by the improper coding of the services rendered.

The abstract of the survey is available online.  Emergency room physicians or nurses who wish to discuss filing a qui tam lawsuit should discuss their evidence with one of our False Claims Act lawyers.

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Medicare Spent $4.7 Billion on Hepatitis C Drugs Last Year.

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Medicare paid $3 billion last year for Gilead Sciences’ hepatitis C drug Sovaldi and another $670 million for its new drug, Harvoni, which started on the market in October. Olysio, Johnson & Johnson’s drug which is frequently used at the same time as Sovaldi, resulted in an additional $821 million in Medicare spending.

We spend a lot of time in the office dealing with cases of the fraudulent overbilling of Medicare and Medicaid. It’s central to the False Claims Act. But the amount of money that is being authorized by the government on these drugs is astronomical.

In 2013, Medicare spent $286 million on hep-C drugs. The number is now 15-fold higher. If you add in the amount of money that was spent on older drugs, the total spending reaches $4.7 billion.

The amount of money spent on these drugs now exceeds the amount that is recovered from Medicare fraud under the False Claims Act every year. The Department of Justice publishes an annual report of the money spent due to health care fraud that it recovers. Last fiscal year, it recovered $2.3 billion.

The astronomical cost of these drugs has raised questions among politicians in the United States. Sovaldi is priced at roughly a $1,000 a pill, making the cost of a full course of treatment roughly $84,000.

Competitors are starting to spring up in countries where Gilead does not have patent protection. The cost of a full course of treatment of these drugs is less than the cost of one pill in the United States. Generic manufacturer Incepta launched its version of the drug in Bangladesh and priced it at $900 for a full course of treatment. The price of one pill is 1/100th of the cost of the Gilead drug it copies in the US.

Of course, some doctors have justified the cost by noting that the drugs work and that they prevent other serious and expensive complications in patients. They have a cure rate of 90 percent or higher and fewer harmful side effects are known.

An Annals of Internal Medicine Study analyzed the potential economic benefits of the higher cure rates of these drugs. It concludes that the new drugs would cost an additional $65 billion in the next 5 years with estimated cost offsets of only $16 billion.

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Senate Bill would post every physician’s Medicare billing data on Internet


Aiming to curtail Medicare fraud, Senator Charles Grassley (R, Iowa) introduced a program integrity measure before a Senate Finance Committee hearing on Medicare and Medicaid fraud on March 2nd.

The bill in part would require the Department of Health and Human Services by the end of 2012 start publishing Medicare claims and payment data on the website n prohibited by a court ruling for more than 30 years. But some lawmakers recently stepped up their efforts to lift the ban and bring Medicare billing data to light to prevent fraud.

By increasing transparency, the government hopes to prevent billions Medicare and Medicaid Fraud each year. Senator Grassley said, the “more transparency about billing and payments increases public understanding of where tax dollars go,” Grassley said. “The bad actors might be dissuaded if they knew their actions were subject to the light of day.”

Crankin’up the HEAT


HEAT is the rather odd acronym for the Health Care Fraud Prevention and Enforcement Action Team. It is the brainchild of Attorney General Holder and Health and Human Services Secretary Sebelius, and despite the great stretches of the imagination it takes to make it work as an acronym (HCFPEAT doesn’t exactly roll off the tongue), it seems to be taking a bite out of health care fraud.

HEAT is a coordinated effort between DOJ and HHS, and it has a Medicare Fraud Strike Force that has been going around various cities busting health care fraud perps. It’s operating in various locations, including South Florida, but no, you are not likely to see Attorney General Holder wearing a Miami Vice suit and driving a go-fast boat into a medical center.

In recent testimony given before the House Ways and Means Subcommittee on Health and Oversight, Edward Siskel, the Associate Deputy Attorney General, stated that since May 2009, the Strike Force has been putting fear in the hearts of health care fraudsters. Strike Force prosecutors have filed over 120 cases charging more than 290 defendants and have obtained 16 convictions. The Strike Force also appears to have had a deterrent effect. In the twelve months since the Strike Force was announced, the Miami area has seen an almost $2 billion reduction in durable medical equipment submissions compared to the preceding 12 month period.

Deputy AG Siskel also notes in his testimony statistics all too familiar to qui tamers: the bulk of the DOJ’s civil case load comprises suits against drug and medical device makers. Qui tam suits have proved to be an important weapon in the DOJ’s fraud-fighting arsenal, and have helped the government to recover $24 billion since 1986. This goes to show that the civil justice system is just as important as the swaggering Task Force in the fight against health care fraud.

This article is brought to you by the QTT, the epicenter for whistleblowers and people interested in the False Claims Act, Qui Tam Provisions, and Medicare and Medicaid fraud. To discuss a potential case, please call Eric Young at 1 (800) 590-4116.

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