“Widespread and Persistent” Problems in Medicare Managed Care Burden Patients and Are Potential Violations of the False Claims Act

The federal government’s internal watchdog for the Medicare and Medicaid healthcare programs, the U.S. Department of Health and Human Services Office of the Inspector General (OIG), has issued a report finding that Medicare Advantage Organizations (MAOs) have engaged in a “widespread and persistent” practice of inappropriately denying coverage for medical services to Medicare patients. In addition, OIG has found that the MAOs failed to adequately inform Medicare patients and providers about why their care was denied. The wrongful activity described in the OIG report affects 20 million elderly Americans currently enrolled in Medicare managed care, and is potentially actionable under the False Claims Act.

Issued just last month, OIG’s report is based on an audit of annual performance data that MAOs reported to the Centers for Medicare & Medicaid Services (CMS) for the 2014 to 2016 contract years. In its audit, OIG focused on the 36 million payment requests, and 1 million pre-authorization requests, that MAOs denied during this three-year period. OIG found that Medicare beneficiaries and providers appealed a tiny fraction of these service denials-only about 1 percent. But when beneficiaries and providers did appeal, they were successful in getting the denial overturned at the initial appeal stage about 75 percent of the time. Indeed, OIG reported that, during the 2016 contract year alone, 76 MAOs overturned more than 90 percent of their own denials upon appeal, including 7 MAOs that overturned more than 98 percent of their denials. At subsequent appeal stages, independent review organizations overturned an additional 10 to 27 percent of the appealed denials. In short, the overwhelming majority of Medicare beneficiaries who appealed an MAO denial of payment for a covered medical procedure got the payment approved on appeal.

Although OIG states in the report that “overturned denials do not necessarily mean that MAO’s inappropriately denied the initial request,” it emphasizes that such denials create administrative obstacles for patients and providers, and “may be especially burdensome for beneficiaries with urgent health conditions.” Moreover, OIG warns that overturned payment denials “may impact future access” to care for Medicare beneficiaries because providers “may be discouraged from ordering services that are frequently denied-even when medically necessary-to avoid the appeals process.” Since 99 percent of payment denials are not appealed, OIG is concerned that beneficiaries may be going without medical services that MAOs are required to cover, or simply paying for these services out of pocket themselves. Providers may also be absorbing some of these costs. In short, the potential for patient and provider harm is enormous.

According to the OIG report, CMS has cited more than half of audited MAOs for inappropriately denying requests for services or payment. CMS has also cited nearly half of audited MAOs for sending denial letters to Medicare beneficiaries or providers that were essentially useless or misleading because the letters did not contain required information about why the claim was denied and how the denial could be appealed. But CMS’s administrative sanctions are clearly insufficient. As the OIG report shows, MAOs are continuing to deny payment for hundreds of thousands of medical procedures that the MAOs themselves ultimately acknowledge are covered services, and are keeping Medicare beneficiaries and providers in the dark about these improper denials.

The False Claims Act may be a more effective enforcement tool to address the worst offenders: MAOs that repeatedly make wrong clinical decisions based on information submitted by providers and beneficiaries, and submit false certifications or statements to CMS. To help ensure that MAOs don’t place profits above patient care, Constantine Cannon attorneys are poised to represent whistleblowers who may have such claims.

Read more:

• Medicare Whistleblowers: The Most Common Questions Answered About Reporting Medicare Fraud
• Fraud in Managed Care Programs
• False Claims Act
• I think I have a whistleblower case
• Constantine Cannon’s Whistleblower Team

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