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DOJ Catch of the Week — Beaver Medical Group

Posted  August 9, 2019

Yesterday, California-based Beaver Medical Group and one of its physicians, Dr. Sherif Khalil, agreed to pay roughly $5 million to resolve allegations they violated the False Claims Act by reporting invalid diagnoses to Medicare Advantage plans causing those plans to receive inflated payments from Medicare.  It is the latest example of what has become a strong government commitment to pursuing fraud in the Medicare Advantage program, also referred to as Medicare Part C.  See DOJ Press Release.

Under the Medicare Advantage program, Medicare patients obtain their health care coverage through private insurance plans (called Medicare Advantage Organizations or MAOs).  Medicare pays MAOs a fixed, monthly amount per patient based largely on the projected health care needs of the patient.  Generally, Medicare pays MAOs more for patients who because of their health status are projected to require more care.  These pre-determined capitated payments are made regardless of what treatment is actually provided to the patient.

MAOs typically contract with hospitals, physician groups and other healthcare providers like Beaver Medical to provide care to the Medicare Advantage patients enrolled in the MAO plans.  These providers report patient diagnoses and other health information to the MAOs which are used to calculate the ultimate “risk score” used by Medicare to calculate the Medicare Advantage payments it will provide for each patient.  The higher the risk score, the higher the Medicare payment.  Thus, there is a financial incentive to provide the highest risk score for each patient to secure the highest Medicare reimbursement possible.

MAOs often compensate the providers that care for their Medicare Advantage patients with a share of the payments Medicare makes to the MAOs.  This creates for healthcare providers the same financial incentive MAOs have to report the highest risk scores possible for their Medicare Advantage patients.  According to the government, that was the case with Beaver Medical with which several MAOs in California contracted to provide care for their Medicare Advantage patients.  The government claimed Beaver Medical and Dr. Khalil submitted diagnoses that were not supported by the patient medical records for the purpose of inflating the payments the MAO, and consequently Beaver Medical, received from Medicare.

In announcing the settlement, the government made it clear that policing fraud in the Medicare Advantage area is a top priority:

The United States relies on healthcare providers to submit accurate diagnosis data to Medicare Advantage plans to ensure those plans receive the appropriate compensation from Medicare.  . . .  As enrollment in Medicare Advantage continues to grow, investigation into accuracy of diagnosis data becomes ever more important.  . . .  Those who inflate bills sent to government health programs can expect to pay a heavy price.

The government’s action against Beaver Medical originated in a whistleblower lawsuit filed by former Beaver Medical physician David Nutter under the qui tam provisions of the False Claims Act.  The statute permits private parties to sue on behalf of the government and to receive a share of any recovery.  Dr. Nutter will receive a whistleblower award of roughly $850,000 from the proceeds of the government’s recovery.

This case is just the latest example of the government joining whistleblower actions alleging Medicare Advantage or “Risk Adjustment” fraud.  As just three recent examples, the government joined whistleblower actions brought against Freedom Health and Optimum Healthcare (for their roles as MAOs), United Healthcare (for its role as an MAO), and Sutter Health (for its role as a healthcare provider), all based on allegations of defrauding the Medicare Advantage program.

The Freedom Health/Optimum case resulted in a $16.7 million settlement, which at the time was the largest whistleblower risk adjustment settlement.  The United Healthcare and Sutter cases are still ongoing, though Sutter recently made a $30 million payment to resolve allegations of submitting inaccurate risk adjustment data, which emanated from the whistleblower’s complaint in that matter.  Constantine Cannon represents the whistleblowers in all three of these actions.

Please contact us if you would like to learn more about Medicare Advantage fraud or if you have any information on any potential fraud in this or any other area of healthcare fraud.  We are happy to connect you with one of Constantine Cannon’s experienced whistleblower lawyers for a free and confidential conversation.

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Tagged in: Catch of the Week, FCA Federal, Healthcare Fraud, Medical Billing Fraud, Medicare, Whistleblower Case, Whistleblower Rewards,