Rare DOJ Criminal Indictment Related to Medicare Advantage Risk Adjustment

In an indictment announced on October 26, 2023 in Miami, the U.S. Department of Justice, Criminal Division’s Fraud Section, working with the FBI and HHS-OIG, brought what may be only the second federal criminal charges directly related to the Medicare Advantage (Medicare Part C) risk adjustment payment methodology.  DOJ enforcement in the Medicare Advantage risk adjustment space overwhelmingly has proceeded civilly under the False Claims Act. Although the allegations suggest conduct far more troubling than prior civil cases under risk adjustment, these criminal charges should serve as a reminder that criminal enforcement can attach to risk adjustment.

The Indictment (and the Corporate Declination)

In the indictment, HealthSun Health Plans Inc.’s former director of Medicare risk adjustment analytics, Kenia Valle Boza, was charged with six federal felonies in connection with an alleged scheme to submit to CMS false risk-adjustment data relating to beneficiary diagnoses for chronic ailments. The indictment alleges that enrollees in HealthSun’s Medicare Advantage Plan did not actually have such chronic ailments and that Ms. Valle Boza and the coders she supervised (a.k.a. other unindicted co-conspirators) used physicians’ login credentials to alter tens of thousands of patient electronic medical records to add fraudulent diagnoses.  Ms. Valle Boza and the coders allegedly falsified the beneficiaries’ medical records days or weeks after the patients had been seen by their physicians. DOJ alleged that as a result of the scheme, CMS made approximately $53 million in overpayments to HealthSun, increasing the plan’s profits and the individuals’ compensation.

DOJ alleged that this was a long-running scheme, spanning from 2015 to 2020. Ms. Valle Boza was charged with one count of conspiracy to commit health care fraud, two counts of wire fraud, and three counts of major fraud against the U.S.

The day after the charges were filed, the Fraud Section sent a declination letter to HealthSun, stating that pursuant to the Criminal Division’s Corporate Enforcement and Voluntary Self-Disclosure Policy, the Fraud Section had declined to bring criminal charges against the company.  The Fraud Section stated it granted this declination due to the company’s self-disclosure of the misconduct, proactive cooperation, remediation (including terminating employees, reporting and correcting the allegedly false information submitted to CMS, and substantially improving their compliance program) and the immediate repayment of the $53 million overpayment. In providing such declination, DOJ reinforced its view that the conduct was driven by a small group of individuals, not by corporate edict.

A Rare Criminal Indictment Related to Medicare Advantage Risk Adjustment

This recent indictment is believed to be only the second time that DOJ has charged a defendant criminally for an alleged Medicare Advantage risk adjustment payment fraud. In 2016, Dr. Isaac Thompson, a South Florida primary care physician, pled guilty and was sentenced to 46 months in prison for falsely diagnosing 387 Medicare Advantage beneficiaries with a spinal disease that they did not have in order to obtain excess capitation fees from the MA plan.  Dr. Thompson was paid 80% of the capitated fee for each Medicare Advantage patient on his panel. Accordingly, Dr. Thompson had potential upside to risk adjustment score increases. As seen from the recent 2023 indictment discussed above, it has taken DOJ more than six years to criminally charge similar conduct again.  

What is Medicare Advantage (Part C)?

Under “original” or “traditional” Medicare, Medicare pays providers for beneficiaries’ care on a fee-for service model. Beneficiaries can receive care from any provider or hospital that accepts Medicare. Under this model, there is little financial incentive for coordination of care by providers.  By contrast, Medicare Part C, or Medicare Advantage, is a managed care alternative to traditional Medicare that provides Parts A and B Medicare benefits and, often, additional supplemental benefits not covered by traditional Medicare. Medicare Advantage plans can also have more predictable and advantageous costs sharing. Under Medicare Advantage, private insurers contract with Medicare to provide Medicare Advantage plans (“MA Plans”) to beneficiaries. These MA Plans function largely like commercial insurance. Medicare pays MA Plans a fixed fee (known as a capitated payment or rate) per beneficiary to pay for all Medicare-covered care. The capitated payment is risk-adjusted based on the expected medical spend for patients who have health conditions on CMS’s Hierarchical Condition Category Coding Model (“HCC”). With some exceptions, generally HCCs are chronic diseases or disorders or more severe acute conditions.  Beneficiaries with these diagnoses are anticipated to be more expensive to treat and accordingly, CMS has allocated a coefficient value that modifies the payment to the plan to account for anticipated additional costs. These patients will have a higher risk score, and thus CMS submits a larger payment to the MA Plan for that beneficiary.  Under this model, the MA Plan gathers and submits encounter and claim information for their enrollees to CMS to report such diagnoses.

2023 Marked the First Time That More Than Half of All Medicare Beneficiaries Are in a MA Plan

Medicare Advantage enrollment has been increasing for the past 20 years. As of 2023, 51% of the eligible Medicare population (30.8 million people) are believed to be enrolled in a Medicare Advantage plan. This accounts for 54% of total federal Medicare spending ($454 billion).  The federal outlay of dollars for the Medicare program is significant, and Medicare is the nation’s largest health insurer by expenditures.

MA participation has increased year over year.  For example, in 2007, only 19% of Medicare beneficiaries were enrolled in Medicare Advantage.  Ten years later, in 2017, that figure had almost doubled at 35%.  As of this year, the average Medicare beneficiary can choose from Medicare Advantage plans offered by nine companies. The Congressional Budget Office (“CBO”) projects that by 2033, 62% of all Medicare beneficiaries will be enrolled in Medicare Advantage plans.

Although MA Plans operate in all 50 states, high MA adoption is centered around relatively large, urban areas. For example, 58% of all Medicare beneficiaries in Florida are enrolled in MA, ranging from 79% in Miami-Dade County as compared to 20% in less-densely populated Monroe County (Key West).

As MA Advantage Enrollment Has Increased, So Has Federal Law Enforcement Scrutiny

With 54% of Medicare dollars currently allocated to Medicare Advantage, it is no surprise that HHS-OIG has designated oversight of managed care as a priority area.  While HHS-OIG estimates that the improper payment rate (an analog for fraud) in Medicare Part B (fee for service) has decreased from 8.1% in FY 2018 to 7.3% in FY 2019, OIG remains concerned about the improper payment rate in MA, which was 7.9% in FY 2019.  Per HHS-OIG, improper payments to MA plans pose a significant vulnerability for CMS and cost taxpayers billions of dollars and are largely driven by improper risk adjusted payments.

DOJ has taken notice as well. On January 23, 2023, DOJ’s Deputy Assistant Attorney General Michael Granston, who leads the Civil Division’s Commercial Litigation Branch, stated in remarks at the ACI False Claims Act conference that MA remains one of DOJ’s top enforcement priorities.  DAAG Granston made similar remarks at an ABA conference in 2020. Over the years, DOJ’s Civil Division, Commercial Litigation Branch, Fraud Section, which is the Main Justice component with a nationwide leadership role in False Claims Act investigations and prosecutions, and other DOJ components, are believed to have publicly opened at least two dozen qui tam FCA investigations of MA plans relating to risk adjustment. Approximately nine cases have been settled, most with multi-million dollar settlement amounts. Some settlements were accompanied by Corporate Integrity Agreements (“CIA”) with HHS-OIG. Many of these cases originated with whistleblowers / qui tam relators. Settled cases have almost exclusively focused on allegations that MA providers submitted inaccurate, invalid or “upcoded” diagnosis codes for their MA Plan enrollees in order to increase reimbursements from Medicare.

Criminal Charges Are Infrequent, But That Can Change

The recent indictment of Ms. Valle Boza brought in October 2023 in the U.S. District Court for the Southern District of Florida is a rare criminal case in the MA risk adjustment space.  While certainly not a trend, federal prosecutors around the U.S. now have a recent “go-by” prosecution to follow as they seek to investigate similar charges, where warranted. As noted above, MA Plans operate nationwide, potentially opening up this avenue of investigation to the various U.S. Attorneys’ Offices.

Conclusion

With an aging U.S. population, the increasing popularity of Medicare Advantage and the corresponding massive federal spend going to MA Plans, federal law enforcement activity in the MA space is considered by many practitioners to be the next wave of complex health care fraud activity.  Plans, downstream providers, and vendors who provide risk adjustment services should look at their controls now and ensure sufficient and proper allocation of oversight and monitoring resources.