Medicare Part C Fraud and the False Claims Act

Medicare Part C, also known as Medicare Advantage, is a valuable program that provides private insurance options to Medicare beneficiaries. While most Medicare Advantage plans are legitimate and provide essential healthcare services, instances of fraud can and do occur.

In fact, taxpayers are losing more than $100 billion a year to Medicare and Medicaid fraud, according to estimates from the National Health Care Anti-Fraud Association.

This comprehensive guide aims to shed light on Medicare Part C fraud, its common examples, and how the False Claims Act and its qui tam provision empower whistleblowers to combat such fraud.

Medicare Part C fraud refers to deceptive activities involving Medicare Advantage plans, where individuals or entities engage in fraudulent practices to obtain payments or benefits from Medicare Advantage programs illegally. The most common types of frauds are:

• Upcoding – providers inflate the severity of a patient’s medical condition on claims to receive higher reimbursements, causing financial harm to Medicare Advantage programs.
• Kickbacks – Healthcare professionals or organizations may offer incentives for referrals or enrollment in specific Medicare Advantage plans.
• Billing for Services Not Rendered – providers submit claims for medical services that were never provided to beneficiaries, leading to improper payments.
• Inappropriate Enrollment – Beneficiaries are enrolled in Medicare Advantage plans without their consent or through deceptive practices.
• Misrepresentation – Agents or brokers may mislead beneficiaries about the benefits, coverage, or costs of Medicare Advantage plans.

In many cases, Medicare Part C fraud occurs by healthcare providers claiming risk-adjustment payments for conditions that members were not even treated for.

Essentially, risk-adjustment fraud occurs when Medicare Advantage plans provide CMS with inaccurate information, suggesting that their members are in poorer health than they actually are.

This leads CMS to make excessive payments to the Medicare Advantage plans for these members. The Medicare Advantage plan, or a healthcare provider, contractor, or consultant working on their behalf, is aware that the submitted diagnosis lacks proper support.

In some cases, a Medicare Advantage plan may initially be unaware that a diagnosis lacks support when shared with CMS, but they later discover this during retrospective “chart reviews” or “chart audits.”

Nevertheless, once a Medicare Advantage plan identifies an unsupported diagnosis code, it is obligated to remove that code. Failure to do so constitutes a violation of the False Claims Act.

Recognizing common red flags of Medicare Part C fraud is important for beneficiaries, healthcare providers, and whistleblowers to help identify possible fraudulent activities. While the presence of these red flags does not guarantee fraud, they are a warning sign that may suggest further investigation. Here are some common red flags of Medicare Part C fraud:

• Excessive Billing or High Utilization Rates – providers or healthcare facilities that consistently bill Medicare Advantage plans for significantly higher services or procedures than their peers may raise suspicion. Unusually high utilization rates can indicate potential fraud.
• Unsubstantiated or Inconsistent Medical Records – inconsistent medical records, including concerns in patient diagnoses, treatment plans, or medical history, may suggest that healthcare providers are manipulating records to justify higher reimbursement rates.
• Rapid Patient Enrollment Growth– a sudden and significant increase in the number of patients enrolled in a Medicare Advantage plan may indicate fraudulent enrollment practices, such as offering incentives or enrolling patients without their consent.
• Lack of Follow-Up Care – providers who fail to provide necessary follow-up care after initial treatments or diagnoses may be engaged in fraudulent billing practices, such as billing for services not rendered.
• Repetitive or Unusual Procedures – frequent billing for the same or similar procedures, especially if they are not medically necessary, can be a red flag. Providers should always base their services on a patient’s actual healthcare needs.
• Frequent Changes in Diagnosis Codes – frequent changes in diagnosis codes submitted on claims can indicate upcoding, where providers exaggerate the severity of a patient’s condition to receive higher payments.
• Patient Complaints or Concerns – multiple patient complaints about unnecessary tests, procedures, or unexplained charges may suggest fraudulent practices within a healthcare facility or provider network.
• Referral or Kickback Schemes – if healthcare professionals or providers receive payments, gifts, or other incentives in exchange for referring patients to specific Medicare Advantage plans or services, it may indicate an illegal kickback or referral scheme.
• Provider’s Reputation or History – investigating the reputation and history of a healthcare provider or organization is essential. Past legal actions, sanctions, or investigations related to Medicare fraud should raise concerns.
• Inadequate Staffing or Resources – a healthcare provider’s inability to staff or equip their facility in relation to the volume of patients may indicate fraudulent practices or an inability to provide necessary care.
• Inadequate Documentation – poorly maintained or incomplete medical records can slow proper billing verification and lead to fraudulent claims.
• Unusual Billing Patterns – billing patterns that deviate significantly from industry norms or standards can raise suspicion. Providers should be transparent in their billing practices.

Recognizing these red flags requires oversight and a commitment to ensuring that Medicare Advantage funds are used appropriately to provide quality care to beneficiaries.

The Cigna Group
Connecticut-based company, The Cigna Group, consented to a settlement of $172,294,350 to address allegations of False Claims Act violations. These allegations involved the submission and retention of inaccurate and false diagnosis codes for their Medicare Advantage Plan members, with the aim of inflating Medicare payments.

Health Management Associates (HMA)
In 2014, HMA, a hospital chain, agreed to pay $31 million to settle allegations of Medicare Part C fraud. The lawsuit alleged that HMA pressured emergency department physicians to admit patients who could have been treated as outpatients, resulting in higher Medicare payments. This case exposed the practice of “inpatient admission inflation.”

Freedom Health and Optimum Healthcare
In 2017, two Florida-based Medicare Advantage insurers, Freedom Health and Optimum Healthcare, settled a whistleblower lawsuit for $32.5 million. The lawsuit alleged that these insurers engaged in various fraudulent activities, including inflating risk adjustment scores by submitting diagnosis codes that were not supported by medical records.

Dr. Farid Fata
In a high-profile case, Dr. Farid Fata, an oncologist in Michigan, was convicted in 2014 for intentionally misdiagnosing patients with cancer and administering unnecessary treatments, including chemotherapy. Part of his fraudulent activities involved overbilling Medicare Advantage plans for these unnecessary treatments.

The False Claims Act, enacted during the Civil War era, is a powerful tool designed to combat fraud against the government. It allows individuals with knowledge of fraudulent activities, including Medicare Part C fraud, to take legal action on behalf of the government.

“How does it cover Medicare Part C fraud?” you may ask…

Under the False Claims Act, whistleblowers, also known as qui tam relators, can file qui tam lawsuits against individuals or entities engaged in fraudulent activities related to Medicare Part C. Qui tam actions empower private citizens to expose and prosecute fraud while protecting the interests of taxpayers and the government.

Whistleblowers who file successful qui tam lawsuits can receive a percentage of the recovered funds, typically between 15% and 30%. This financial incentive encourages individuals to come forward with information about fraud.

The False Claims Act (FCA) provides several legal protections to whistleblowers, also known as relators, who come forward to report fraud against the government. These protections are crucial to encourage individuals to expose fraudulent activities without fear of retaliation. Here are the key legal protections afforded to whistleblowers under the False Claims Act:

One of the primary protections under the FCA is the provision that prohibits employers from retaliating against employees or contractors who report fraud. Retaliation can take various forms, including termination, demotion, harassment, or other adverse actions. Whistleblowers who experience retaliation have legal recourse and can seek remedies, including reinstatement, back pay, and compensation for damages.

The False Claims Act allows whistleblowers to file qui tam lawsuits under seal, meaning that the lawsuit’s details, including the whistleblower’s identity, are kept confidential during the initial stages of the case. This confidentiality protects whistleblowers from potential harm, retaliation, or professional consequences.

The FCA prohibits employers from using employment agreements, policies, or contracts to interfere with an employee’s rights to report fraud or to discourage whistleblowing. This protection ensures that whistleblowers cannot be contractually bound to keep quiet about fraud.

Whistleblowers who file qui tam lawsuits under the False Claims Act have the legal standing to represent the government in pursuing the case. If the government chooses to intervene in the case, the whistleblower remains a party to the litigation and continues to be protected by the FCA’s anti-retaliation provisions.

In the event that a whistleblower prevails in a qui tam lawsuit, they may be entitled to a portion of the government’s recovery as a reward. This financial incentive encourages individuals to come forward with information about fraud. The reward typically ranges from 15% to 30% of the recovered funds.

The False Claims Act also provides for the recovery of reasonable attorney’s fees and costs incurred by the whistleblower in pursuing a successful qui tam lawsuit. This ensures that whistleblowers are not financially burdened by the legal process.

The FCA includes provisions that extend the statute of limitations for bringing a qui tam lawsuit. This extension allows whistleblowers more time to gather evidence and file a lawsuit if they have reason to believe that fraud has occurred.

These legal protections are essential in fostering a supportive environment for individuals who have knowledge of fraudulent activities to step forward and report them without fear of reprisal. They play a vital role in the successful enforcement of the False Claims Act and the government’s efforts to combat fraud and recover misappropriated funds.

Reporting Medicare Part C fraud under the False Claims Act is a legal process that involves several essential steps:

Collect all relevant evidence and documentation that supports your knowledge of Medicare Part C fraud. This evidence will be crucial in building a strong qui tam case.

Hiring an experienced whistleblower attorney who specializes in the False Claims Ac tis critical. They can help you navigate the complex legal process, assess the strength of your case, and protect your rights throughout the litigation.

Your attorney will help you draft and file a qui tam lawsuit under seal, ensuring confidentiality. The government will investigate the allegations, and if they choose to intervene, they will work alongside you to prosecute the case.

During the investigation and litigation, it’s essential to cooperate fully with the government and provide any necessary assistance.

While pursuing a qui tam case, be prepared for potential challenges, such as the length of the legal process or the emotional toll of being a whistleblower.