Risk Adjustment Fraud in Healthcare

Risk adjustment fraud occurs when insurers who contract with the government to provide coverage for beneficiaries, and others working with those insurers, seek to game the healthcare system by inflating the risk profile of patients, because inflated risk profiles mean more money for the insurers and others.

Understanding Medicare and Medicaid Managed Care

Under Medicare Advantage and Medicaid managed care programs, the government pays private health insurance companies to provide health insurance benefits to individual beneficiaries. These private insurers operate under a managed care model.

Medicare plans offered under Medicare Part C, called Medicare Advantage (MA), are a comprehensive alternative to original Medicare Part A (hospital services) and Part B (physician services).  Medicaid managed care plans vary by state, but operate under similar principles.

Beneficiaries enrolled in managed care plans receive an array of benefits including primary and specialist care, hospital services, and sometimes additional benefits like dental care or prescription drugs. The underlying goal of managed care is cost reduction through coordinated care.

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The Principles of Risk Adjustment

With managed care such as Part C or Medicaid managed care, the government replaced its traditional fee-for-service reimbursement with capitated payment, a classic cost-saving strategy utilized by managed care plans. Under its capitation model, the Centers for Medicare and Medicaid Services (CMS) pays MA plans a per-member-per-month (PMPM) figure to provide care to enrollees.

However, CMS recognizes that beneficiaries with particular conditions are more expensive to treat than healthy beneficiaries. Accordingly, CMS – and states managing Medicaid managed care plans – make additional “risk adjustment” payments for beneficiaries treated for certain costly diseases, reducing incentives for plans to avoid enrolling sicker beneficiaries.

These risk adjustment payments are calculated based on members’ diagnoses. Plans request increased payment by submitting to diagnosis codes as risk adjustment claims.

These claims must include:

1. That the member has the given diagnosis, appropriately documented in the medical record;
2. The diagnosis was treated by a qualified provider;
3. Treatment occurred during the relevant treatment year; and
4. Treatment was provided in a face-to-face visit.

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Identifying Risk Adjustment Fraud

Medicare and Medicaid are vulnerable to a variety of fraudulent practices aimed at improperly inflating members’ diagnostic data, and thus inappropriately increasing risk adjustment payments.

Many of these practices are actionable under the False Claims Act (FCA), which creates an independent violation for each of the following:

1. each unsupported risk adjustment claim to the government for payment;
2. any false document created to support the submission of an unsupported claim; and
3. each false claim previously submitted that the MA plan fails to correct (delete) if the plan learns, or in the exercise of reasonable diligence should have learned, was unsupported. 31 U.S.C. § 3729(a)(1)(A), (B), (G).

Both MA plans and providers face FCA liability for fraudulent risk adjustment practices. MA plans are responsible for the content of all risk adjustment data they submit to CMS, whether those codes were identified by providers or by the MA plan itself during a retrospective review of patient medical charts.

Providers may be held liable for causing false risk adjustment submissions, particularly where the provider shares in the fraudulently obtained payments.

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Recurring Examples of Fraudulent Risk Adjustment Healthcare Practices

Upcoding as Risk Adjustment Fraud

• Making it up, i.e., submitting claims for payment when the patient does not have, or was not treated for the condition.
• Exaggerating the severity of the patient’s condition to submit codes that risk adjust at a higher rate: for example, substituting major depression for a depressive episode, or malnutrition for weight loss.
• Claiming current treatment of condition rather than past history of treatment—such schemes often involve stroke or cancer diagnoses.
• Submitting claims based on improper provider or service type (e.g., laboratory or radiology) in violation of CMS’s requirement that diagnoses codes must be supported by a record that reflects a face-to-face encounter with an eligible provider type.
• Inferring diagnoses from unacceptable medical record documentation without evidence the condition required or affected the patient’s care, treatment, or management on the visit in question, including coding from problem lists, patient history, or prescription drugs.
• Improperly linking complications or conditions without sufficient evidence the complications or additional conditions stem from the underlying diagnosis where doing so results in a higher reimbursement: for example, coding diabetes with complication where the medical record does not support linked conditions.

Business Practices and Other Systemic Causes of Falsity

Chart Reviews/Audits

Combing through patient charts—either internally or using third party coding vendors—and performing only a “one way look” for additional risk adjusting diagnoses, rather than “looking both ways” by also reviewing for previously submitted codes that are unsupported in the chart and deleting those invalid claims

Home Visits

Sending medical professionals to conduct “in home assessments” or “health and well-being assessments” on targeted patients suspected to yield increased risk adjustment scores, where the visits are not designed to improve patient care or provide treatment, but rather to exclusively capture additional diagnoses

Attestations/Addenda/Queries

Asking providers to complete forms to create a supplementary record to support a diagnosis code that would otherwise not meet CMS requirements. This becomes problematic if the MA plan suggests new diagnoses the provider did not actually consider at the time of treatment, or if a provider signs an attestation without recalling the patient visit

Gain-sharing/Risk-sharing/Contingency Agreements

Incentivizing employees, vendors, or network providers with performance targets or financial rewards tied to increased risk scores

Filtering Logic

Failing to properly filter data used to generate risk adjustment claims, leading to submission of ineligible claims

Error Rates

Ignoring or failing to adequately address unacceptable error rates, such as particular codes that performed poorly in audits or providers known to code conditions at an implausible prevalence

Inadequate Compliance Program

Failing to implement an effective compliance program to ensure adherence to CMS requirements, detect provider upcoding, and identify and delete previously submitted false claims

The potential for risk adjustment fraud goes beyond Medicare. A majority of states contract with managed care organizations to deliver care to Medicaid beneficiaries. Some of those states’ Medicaid programs also utilize risk adjustment principles, exposing Medicaid to similar fraudulent practices.

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Constantine Cannon’s Experience in Risk Adjustment Fraud Cases

No law firm in the country has as much experience or success representing whistleblowers in managed care risk adjustment fraud cases as Constantine Cannon.

This includes:

• Our successful settlement of the first major Medicare Advantage risk adjustment case;
• Our representation of the whistleblower in one of the largest Medicare Advantage risk adjustment cases in history; and,
• Securing the largest Medicare Advantage FCA settlement to date against a hospital system after winning a landmark 100-page court decision validating the legal theory for managed care risk adjustment fraud.
• Our representation of whistleblowers in two other public cases in which the Government has elected to intervene.

Our whistleblower attorneys actively monitor developments in both Medicare Advantage Part C and Medicaid Managed Care relating to fraud in managed care programs by Medicare Advantage Organizations (MAOs), Medicaid Organizations (MCOs), health plans, hospitals, providers, and managed care consultants and vendors.  Like healthcare fraud generally, these managed care fraud schemes are potentially actionable under both state and local False Claims Acts as well as the federal False Claims Act.

Contact a Healthcare Risk Adjustment Fraud Whistleblower Lawyer

Whistleblowers play a critical role in bringing managed care fraud to light and holding wrongdoers accountable when they try to cheat the system.  If you would like more information, or would like to speak to a member of the Constantine Cannon’s whistleblower lawyer team, please Contact us for a Confidential Consultation.

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Additional Resources on Risk Adjustment Fraud

In addition to our work representing whistleblowers in risk adjustment litigation, Constantine Cannon’s whistleblower lawyers regularly publish and speak on risk adjustment topics.  Links to all of our content related to risk adjustment fraud are at the bottom of this page.  In addition, we highlight the following resources on this site:

• Pleadings in risk adjustment cases:
  • U.S. ex rel. Sewell v. Freedom Health Inc., Optimum Heathcare, Inc. et al.:  Relator’s Second Amended Complaint
  • U.S. ex rel. Poehling v. UnitedHealth Group, Inc. et al.: Relator’s Second Amended Complaint; Government Complaint in Intervention
  • U.S. ex rel. Ormsby v. Sutter Health LLC et al.:  Relator’s First Amended Complaint; Government Complaint in Intervention
  • U.S. ex rel Taylor v. Kaiser Permanente et al.: Relator’s First Amended Complaint
  • U.S. ex rel. Ross v. Group Health Cooperative et al.: Relator’s First Amended Complaint
• Constantine Cannon risk adjustment cases in the news:
  • Two Constantine Cannon whistleblower clients were featured in New Yorker magazine for blowing the whistle on risk adjustment fraud.  You can read more about these cases below, and on the Whistleblower Insider blog.
  • Constantine Cannon whistleblower client Teresa Ross was featured in Bloomberg for exposing risk adjustment fraud.
  • The Washington Post featured Constantine Cannon whistleblower client Kathy Ormsby discussing risk adjustment fraud in hospital systems.
• Constantine Cannon publications and presentations about risk adjustment fraud:
  • In the Crosshairs: Medicare Advantage and Risk Adjustment Fraud, RAC Monitor broadcast program featuring Mary Inman’s discussion of Constantine Cannon’s Freedom Health settlement.
  • The Calm Before the Storm – Enforcement Trends in Risk Adjustment: DOJ and the False Claims Act, with Constantine Cannon attorney Mary Inman.
  • Beyond RADV: Does Your Plan’s Risk Adjustment Strategy Run Afoul of the False Claims Act? with Constantine Cannon partner Mary Inman.