Justice Department Investigating Large Insurers for Medicare Fraud

Question: How is the Justice Department alleging that large insurers defrauded Medicare?

Answer: According to a Reuters report, the Justice Department is looking into claims that four health insurers – Health Net, Aetna, Cigna, and Humana – defrauded Medicare Advantage (“MA”) by claiming that patients were treated for illnesses they either never had or were never treated for.  A former United Health executive brought a False Claims Act whistleblower case against the insurers, which was filed under seal in 2011.

The lawsuit accuses the insurers of defrauding the United States of hundreds of millions – and likely billions – of dollars through claims for payments from the Medicare healthcare program for the elderly. The lawsuit centered on “risk adjustment” payments that Medicare makes to managed-care plans to offset the increased costs associated with treating patients with multiple or serious health conditions. The lawsuit claimed that, in seeking those payments, the insurers falsely claimed that patients were treated for diagnoses they did not have or were not treated for.

Under the False Claims Act, whistleblowers can sue companies on the government’s behalf to recover taxpayer money paid out based on fraudulent claims. If successful, whistleblowers receive a percentage of the recovery. A government decision to intervene is typically a major boost to such cases. When it initially intervened in the case in February, the Justice Department said it was declining to pursue claims against other insurers named in the lawsuit besides UnitedHealth. But on Tuesday, the Justice Department filed a “corrected notice” of intervention, saying that, due to ongoing investigations of Health Net, Aetna, Bravo and Humana, it could not make a decision whether or not to proceed against them at this time.

Weekly Charting Tip: In order to comply with three different federal laws, it is very important that you document the fair market value (FMV) and commercial reasonableness of the “arrangement” at issue. Fair Market Value is “the value in arm’s length transactions, consistent with the general market value”. In other words, if I were a stranger, and I wanted a similarly situated arrangement, what would it be worth? There are professional people who actually will prepare a FMV report for you. This is the safest way of doing it. What do rents go for in the same area for a similar amount of space? You can factor in closeness to public transportation, parking lots and the like. Commercial reasonableness encompasses both the series and payment for them. Is it reasonable to pay a neurologist say $300,000 for the 40 hours a week you are offering? That depends on the location and what is expected of the neurologist. Areas with many neurologists tend to offer less. Rural areas may offer more. Think supply and demand. If a deal is too good to be true, it probably is!

Until next week.   –Larry Kobak, Esq., LKobak@DrLaw.com

If you have any questions, please contact Kern Augustine, P.C. at 1-800-445-0954 or via email at info@DrLaw.com.


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