Feds targeting fraud in Medicare managed care

Top Department of Justice official outlines the DOJ’s blueprint for uncovering fraud

Chicago-based United Healthcare of Illinois recently became the country’s second major HMO to fall victim to the government’s war on Medicare managed care organizations. But federal investigators predict it won’t be the last.

Late last month, United agreed to pay the government $2.9 million to settle allegations that it defrauded Medicare for improperly categorizing some of its beneficiaries living in several Illinois counties as being institutionalized and reaping enhanced per capita advance payments it was not entitled to. That follows a $15 million agreement the government reached with Miami-based Humana earlier this year to settle similar charges.

According to Dan Anderson, an attorney in the civil division at the U.S. Department of Justice (DOJ), the government now is working to uncover schemes by managed care companies that are sometimes buried in the complex web of managed care Medicare agreements.

Exactly how many more companies will fall prey to these investigations is an open question, however. "When you look at the universe of providers in areas such as physicians and hospitals, there are not nearly as many HMOs," explains Assistant U.S. Attorney Linda Wawzenski, who represented the government against United. "It is a much smaller number, relatively speaking."

Anderson reports that he recently surveyed offices investigating managed care companies and uncovered several broad themes. "They are not necessarily the simple schemes that we used to see where doctors were not rendering the services that we paid for," he asserts. Instead, federal investigators are zeroing in on so-called "enhanced payments."

While Medicare typically pays managed care plans a set fee per patient per month, plans are paid more money if patients are in end-stage dialysis or if they are "dual-eligible" patients enrolled in a Medicaid program as well as Medicare.

Plans also receive more money for patients institutionalized in a nursing home or hospital. The basic theory is that all these patients are sicker and require more care.

In the case of Humana, Anderson says the plan was submitting claims to Medicare for dual-eligible patients who were never enrolled in Medicaid. "This went on for a couple of years, and the bottom line is that we paid about $15 million more than we should have paid for the patient population," he asserts.

According to Anderson, another problem area involves patients who are no longer institutionalized. He says plans are doing a dismal job in this area, and in at least one investigation underway investigators believe it was deliberate. "Like an ostrich, they stuck their heads in the sand knowing that they got more money if they didn’t report to us that the patient was no longer institutionalized," asserts Anderson. He says he expects a resolution in that case to be announced shortly.

Also causing great alarm among federal investigators are so-called "forced disenrollments," Anderson reports. He says it has always been the government’s theory that once a Medicare managed care patient got sick, the plan would bend over backwards to disenroll him or her and get the patient back into a fee-for-service plan.

He claims the Office of Inspector General’s database has uncovered more than $224 million in fee-for-service fees that were paid to six plans within three months of discharging certain patients enrolled in Medicare managed care.

Had the patients remained in the plan, Medicare would only have paid $20 million through capitated payments, he says.

DOJ’s investigation in that area is ongoing, Anderson reports. But he adds that it is a "surprisingly complex" area. In some cases, patients opted out of the plan on their own after learning about an illness.

But in other instances, it was the physicians working for the plan, either as subcontractors or as employees, who initiated or encouraged the disenrollment. "Just giving advice is not necessarily a fraudulent or criminal act," he asserts. But any illegal remuneration connected to it would be another matter. "We are investigating that to see what, if any, legal action can be taken against those doctors," he says.

According to Anderson, whistle-blower suits so far have had little impact in the area of Medicare. In part, he says that is because it is difficult to quantify the damages for a plan that may be rendering only 25% of all the care provided.

Health care attorney Lynn Snyder says hospital compliance officers should note that the primary area of vulnerability in managed care has been at the state level where numerous enforcement activities have targeted the prompt payment of claims.

Snyder, of the Washington, DC-based Epstein, Becker & Green, says that hospitals struggling to receive prompt payment would benefit by staying abreast of these activities.