DOJ Secures $56.6M False Claims Act Settlement Concerning Alleged Medicare Advantage Fraud

By the Constantine Cannon Whistleblower Team

Last week (on June 3), Nashville-based Matrix Medical Network, HealthFair, and HealthFair’s founder Shahriah Ekbatani agreed to pay $56.5 million to settle allegations they violated the False Claims Act by causing the submission of false or invalid diagnosis codes to the Medicare Advantage program.[1]  It is just the latest in an ongoing string of False Claims Act settlements involving alleged fraud on the Medicare Advantage program (also known as risk adjustment fraud).

What is Medicare Advantage?

Under Medicare Advantage (Medicare Part C), Medicare patients opt out of traditional Medicare and receive insurance coverage from private health plans known as Medicare Advantage Organizations (MAOs).  More than half the country’s Medicare patients are enrolled in the program.

The Centers for Medicare & Medicaid Services (CMS) pays MAOs a capitated per-patient monthly amount based on various “risk” factors affecting the patient’s expected healthcare costs.  CMS generally pays MAOs more for sicker patients with higher expected costs and less for healthier patients.  CMS makes these “risk adjustments” based on the medical diagnosis codes the MAOs provide, which must be supported by the patient’s underlying medical record.

What Was Matrix/HealthFair’s Alleged Medicare Fraud?

Matrix contracts with MAOs to provide in-home assessments for their Medicare Advantage members.  Until 2020, HealthFair also contracted with MAOs to provide health assessments for their Medicare Advantage members but did so on mobile healthcare buses staffed by nurse practitioners and medical technicians.  Matrix acquired HealthFair in 2018 and shut down its operations by 2020.

According to the Government, during the 2014 to 2019 period, Matrix caused MAOs to submit false and invalid diagnoses to CMS for several chronic medical conditions.  The Government claimed Matrix reported the invalid diagnoses to MAOs based on its in-home assessments but without sufficient information to support the diagnoses.  The Government further claimed the diagnoses Matrix provided did not conform with CMS-required guidelines for coding and reporting diagnoses.  And for many of the medical conditions Matrix reported, they were not diagnosed by any other healthcare provider who saw the patient.

HealthFair allegedly engaged in similar misbehavior in reporting unsupported and/or invalid diagnosis codes to MAOs.  Specifically, the Government claimed that from 2015-2017, HealthFair made certain diagnoses: (i) without documentation establishing or confirming the existence of the condition; (ii) based solely on patient attestation, claims history, past medical history, or medication; (iii) relating to congestive heart failure and heart arrhythmia that were contradicted by electrocardiogram and echocardiogram results; and (iv) diagnosed thrombophilia solely based on separate diagnoses of atrial fibrillation.

The end result of the invalid diagnoses codes Matrix/HealthFair report to MAOs was the MAOs submitting improper codes to CMS and based on them, received inflated risk adjustment payments to which they were not entitled.

Is Medicare Advantage Fraud a DOJ Enforcement Priority?

This is just the latest False Claims Act settlement involving Medicare Advantage fraud.  In fact, it was only a few months ago (in January) that DOJ secured the largest False Claims Act settlement ever in this area.  In that case, several affiliates of Oakland-based Kaiser Permanente agreed to pay $556 million to settle allegations they inflated risk adjustment scores by pressuring its physicians to alter patient records to add diagnoses the physicians had not considered or addressed during patient visits.  Constantine Cannon represented one of the whistleblowers in this matter.

Other recent False Claims Act settlements involving Medicare Advantage Fraud include the December 2024 settlement under which Buffalo-based Independent Health agreed to pay up to $98 million, the August 2021 settlement under which San Francisco-based Sutter Health agreed to pay $90 million, and the May 2017 settlement under which Tampa-based Freedom Health and Optimum Healthcare agreed to pay $32.5 million.  Notably, Constantine Cannon represented the whistleblowers in each of these actions too.

This continuous string of settlements shows that going after Medicare Advantage fraud remains a top DOJ enforcement priority.  So do the statements by multiple Government officials in the press release announcing the Matrix/HealthFair settlement that strongly reinforce this commitment to combat Medicare Advantage fraud.  DOJ Civil Chief Brett Shumate, for example, underscored how healthcare companies reporting invalid diagnosis codes “siphon money from the Medicare Advantage program,” and how DOJ “remains vigilant in pursuing MAOs, downstream entities, and responsible individuals who do not play by the rules.”

Shumate was echoed by several other high-up enforcement officials who made it equally clear the Government is taking a zero-tolerance approach to fraud on the Medicare Advantage program:

“It is a breach of trust when providers look to make more money by making their patients appear sicker than they are. . . .   This case emphasizes our District’s commitment to justice by pursuing anyone who attempts to steal through misrepresentations.”  [US Attorney Jay Combs, Eastern District of Texas]

“New Yorkers hate fraud that drains public funds.  Why?  Because New Yorkers are smart and they know fraud involving taxpayer-funded programs costs all New Yorkers.  This Office is proud to join with the rest . . . to hold perpetrators of fraud accountable in Medicare and other contexts.”  [US Attorney Jay Clayton, Southern District of New York]

“The allegations in these matters describe conduct that puts profit ahead of patients and undermines the integrity of the Medicare Advantage program. . . .  We will continue to pursue every available enforcement avenue with our law enforcement partners to ensure that anyone who endangers federal program integrity is met with swift and robust accountability.”  [Acting Deputy Inspector General for Investigations Scott J. Lampert, Health and Human Services Office of Inspector General]

What is the Role of Whistleblowers in Reporting Medicare Advantage Fraud?

Whistleblowers — with a firsthand window into the misconduct — play a critical role in reporting Medicare Advantage fraud.  The False Claims Act provides a powerful tool for whistleblowers to report this fraud.  Under the qui tam provisions of the statute, whistleblowers are authorized to sue on behalf of the Government those that commit fraud against the Government.  Successful whistleblowers can receive up to 30% of the Government’s recovery.

Whistleblowers have originated most False Claims Act cases involving Medicare Advantage fraud, including the most recent matter (along with the Kaiser, Independent Health, Sutter Health, and Freedom Health matters referenced above).  Former Matrix employee Nancy Cahill originated the False Claims Act case against Matrix.  And former HealthFair chief medical officer Robert Oristaglio, Jr. originated the case against HealthFair and Ekbatani.  Cahill and Oristaglio will respectively receive whistleblower awards of $7.3 million and $3.6 million from the proceeds of the Government’s recovery.

Constantine Cannon whistleblower partner Marlene Koury expects DOJ’s enforcement in this area to continue, with whistleblowers leading the way.  Koury says, “The Government needs whistleblowers to come forward in these matters given the difficulty of detecting these schemes from the outside.  That is why whistleblowers originate the majority of Medicare Advantage fraud matters.”

Koury points to her firm’s own experience representing whistleblowers reporting risk adjustment fraud.  “The schemes are typically complex, and couched with medical justifications to support their supposed legitimacy, issues that would be very difficult for the Government to unravel without the help of someone on the inside.”  She expects DOJ to continue its vigorous enforcement of this type of healthcare fraud given the increasing slice of Medicare beneficiaries enrolling in Medicare Advantage plans and the billions of dollars the Government pays out under the program.

Constantine Cannon Has Substantial Experience Representing Medicare Advantage Fraud Whistleblowers

If you would like to learn more about Constantine Cannon’s work representing whistleblowers in reporting Medicare Advantage (risk adjustment) fraud, the firm’s multiple False Claims Act successes in this area, or what it means to be a False Claims Act whistleblower more broadly, please do not hesitate to contact us.  We will connect you with an experienced member of the Constantine Cannon whistleblower team for a free and confidential consultation.

[1]  See https://www.justice.gov/opa/pr/matrix-healthfair-and-healthfair-founder-agree-pay-565m-resolve-false-claims-act-allegations.

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