Independent Health to Pay $98M to Resolve Medicare Advantage Fraud Allegations
On December 29, 2024, the government announced that Buffalo, New York’s Independent Health Association and Independent Health Corporation (collectively known as Independent Health) have agreed to pay up to $98 million to settle allegations that they violated the False Claims Act by submitting, or causing the submission of, invalid diagnosis codes to Medicare for Medicare Advantage Plan enrollees. Constantine Cannon represented the brave whistleblower who came forward to uncover this scheme.
Under Medicare Advantage, beneficiaries can enroll in private managed care plans (“MA Plans”), which receive fixed payments from Medicare to provide covered benefits. These payments are adjusted based on the beneficiary’s health status. Beneficiaries with more complex or expensive diagnoses receive higher “risk adjustment” scores which result in increased payments to the MA Plan to cover expected health care costs.
Independent Health manages MA plans for beneficiaries living in western New York. The government alleges that Independent Health developed a wholly owned subsidiary called DxID LLC to dig deep when searching medical records and asking physicians for information to support extra diagnoses that could result in higher risk scores. DxID completed these services for Independent Health and other MA Plans.
In a previous complaint, the United States alleged that Independent Health, with assistance from DxID, and its founder / chief executive, Betsy Gaffney, submitted fraudulent diagnoses to CMS, not supported by the beneficiaries’ medical records, to inflate Medicare’s payments to Independent Health from 2011 to 2017.
The December 2024 settlement amount is based on Independent Health’s ability to pay. As listed in the settlement, Independent Health is guaranteed to pay $34,500,000 and will make contingent payments of up to $63,500,000 for itself and DxID. DxID halted its operations in 2021. Gaffney will independently pay $2,000,000.
Deputy Assistant Attorney General Michael Granston of the Justice Department’s Civil Division stated: “The government expects those who participate in Medicare Advantage to provide accurate information to ensure that proper payments are made for the care received by enrolled beneficiaries…Today’s result sends a clear message to the Medicare Advantage community that the United States will take appropriate action against those who knowingly submit inflated claims for reimbursement.”
This case is captioned United States ex rel. Ross v. Independent Health Association et al., No. 12-CV-0299(S) (WDNY). The civil settlement includes a resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act by Teresa Ross, a former employee of Group Health Cooperative, now Kaiser Foundation Health Plan of Washington (Kaiser). Under the qui tam provisions, a private party can file an action on behalf of the United States and receive a portion of the recovery. The Act allows the government to intervene in such lawsuits, as seen with this case.
Ross will receive at least $8,212,500 from the settlement announced on December 20, 2024. Ross also alleged that Kaiser used DxID to discover additional diagnoses to pad Medicare submissions for risk adjustments. The United States previously settled those claims with Kaiser.
The government counts on whistleblowers like Ross to recover billions of dollars lost to healthcare fraud each year.
If you would like to learn more information on the False Claims Act, what it means to be a whistleblower, or believe you have a case, please contact us. We will connect you with an experienced member of our whistleblower team.
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