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Freedom Health, Optimum Healthcare and Its Former COO to Pay $32.5 Million to Settle False Claims Act Allegations of Medicare Fraud

Posted  May 31, 2017

By the C|C Whistleblower Lawyer Team

Yesterday, the Department of Justice and Constantine Cannon, LLP announced that they had reached a settlement with Freedom Health and Optimum Healthcare, two large health insurers and operators of Medicare managed healthcare insurance plans controlled by Dr. Kiranbhai “Kiran” C. Patel and based in Tampa, Florida, to resolve allegations of systemic Medicare and Medicaid fraud.  This is the largest whistleblower settlement to date for claims of risk adjustment fraud at $16.7 million of the $32.5 million total settlement amount.  The lawsuit was brought under the False Claims Act by the late Dr. Darren D. Sewell, M.D, who worked at Freedom and Optimum from 2007 to 2012.  As Dr. Sewell rose through the ranks, he became familiar with the companies’ various schemes to bilk money from the government—and felt compelled to do something about it.

Dr. Sewell’s whistleblower complaint, which was unsealed yesterday, alleges that Freedom and Optimum orchestrated two lucrative schemes.  The first scheme allegedly involved the gaming of a feature of the Medicare Advantage program known as risk adjustment, or risk scoring.  Risk adjustment permits Medicare to make additional payments to managed-care plans based on the plan members’ health-risk scores, which are derived from patients’ medical diagnoses.  The higher the patient’s risk score, the higher the payments from Medicare.  According to the complaint, Freedom and Optimum fraudulently inflated patient risk scores and the corresponding risk adjustment payments by claiming that their members were treated for conditions they either did not have or for which they were not treated.

The complaint also alleges that Freedom and Optimum, with the assistance of former Freedom COO Siddhartha “Sidd” Pagidipati, fraudulently induced the Centers for Medicare & Medicaid Services (CMS) to allow them to expand their health insurance offerings into new counties in Florida and the Carolinas.  The defendants allegedly lied about the sufficiency of their network of doctors, clinics, and hospitals available to serve their enrollees in the expanded service areas when, in fact, they had no such networks in place.

According to the terms of the settlement, Freedom Health and Optimum Healthcare will pay the government $16.7 million to resolve the allegations of risk adjustment fraud and $15 million for the allegedly fraudulent expansion of their service areas.  Mr. Pagidipati has agreed to pay $750,000 to resolve his alleged role in the schemes.  This is largest whistleblower settlement involving claims of risk adjustment fraud to date.

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