Medicare Advantage insurance firms accused of data-mining patient records and submitting false bills


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Kathy Ormsby’s work auditing medical case files uncovered an alleged scheme to defraud the federal government: The California health system that employed her was scouring health histories of hundreds of elderly Medicare patients, then pressuring doctors so as to add false diagnoses it found to their current medical records.

The purpose of larding the medical records with outdated and irrelevant diagnoses resembling cancer and stroke — often without the knowledge of the patients themselves — was not providing higher care, in line with a lawsuit from the Justice Department, which investigated a whistleblower criticism Ormsby filed. It was to make patients appear sicker than they were.

The maneuver translated into thousands and thousands of dollars in inflated bills to the federal Medicare Advantage insurance program, the federal government alleged in its false-claims lawsuit filed in U.S. District Court in California.

The case was a part of a broader government crackdown on abusive billing practices in Medicare Advantage, the privatized insurance option that by next 12 months is predicted to cover greater than half of all Medicare beneficiaries. The Justice Department is pursuing civil lawsuits against multiple firms that take part in the privatized system, from huge insurers to prestigious nonprofit hospital systems, alleging they’ve cheated the system for unfair profit.

Ormsby’s former employer, the Palo Alto Medical Foundation, which has 1,600 doctors, and its parent affiliate, Sutter Health, which runs 24 hospitals in Northern California, settled the case with the federal government in August 2021 for $90 million. It admitted no wrongdoing or liability.

The federal government said its investigation confirmed that Palo Alto Medical and Sutter systematically added false diagnoses to patient records. In a sample of a whole lot of cases Ormsby audited, the federal government’s lawsuit said, she discovered 90 percent of diagnoses for cancer were invalid, as were 96 percent for stroke and 66 percent for fractures.

“As we continued to audit, I began to see more things,” Ormsby said in an interview with The Washington Post, the one time she has spoken publicly since reporting the alleged misconduct in 2015. “I couldn’t imagine how bad it was.”

In response to questions from The Post, Sutter indicated it was able to move on. “The agreement brought closure to a long-running dispute and enabled Sutter to avoid the uncertainty and expense of protracted litigation,” it said in an email statement.

Medicare Advantage, which is run by outside firms under contract with the federal government, was added to traditional Medicare in 2003 with the support of Republicans in an effort to enhance care and lower costs through privatization. However it is costing taxpayers increasingly extra money to run than traditional fee-for-service Medicare, in line with MedPAC, a government watchdog panel. The upper cost, what MedPAC labels “excess payments,” reached $12 billion in 2020 out of total program costs of $350 billion and are projected to top $16 billion next 12 months, MedPAC said in March.

The aggressive billing tactics stem from incentives built into Medicare Advantage. Under this system, firms are paid a flat fee monthly to offer whatever care is required for a patient based on age, gender, geography and health risk aspects. To compensate plans and providers for potential costs of look after individual patients with conditions resembling diabetes, heart disease or cancer, Medicare boosts the monthly payment to Medicare Advantage plans under a “risk adjustment” for every additional condition. The system differs from the standard “fee for service” payment, during which Medicare pays hospitals and doctors directly every time they supply a service.

If firms add more risk adjustment codes to a Medicare Advantage beneficiary’s medical record to receive higher payment — but don’t spend money on the extra care — they earn more money.

Industry officials broadly rebut the charge that firms game diagnostic risk codes for financial gain. They are saying Medicare Advantage firms adhere to Medicare’s rules and follow the system’s guidance on regulations that are usually not all the time clear. Furthermore, the industry says that listing all health issues on medical records is a vital a part of Medicare Advantage’s promise to anticipate health problems, proactively manage disease and reduce hospitalizations.

But the federal government considers it improper — potentially even fraudulent — for providers so as to add codes for medical conditions which have been resolved or haven’t any bearing on a patient’s current health.

For-profit insurance firms have typically been the first goal of those probes. More recently, unsealed whistleblower cases resembling Ormsby’s against Sutter Health, and a pending case against Kaiser Permanente, reveal how such investigations have spread to prestigious, nonprofit physician and hospital groups.

Doctors, or sometimes even non-physician medical coders, updated patients’ current records without providing treatment and infrequently unbeknown to the patients themselves, the federal government’s investigations have found.

Heart attack, stroke, cancer, vascular disease, depression, obesity and malnutrition were amongst diagnoses most frequently cited by the federal government in its false-claims lawsuits. In an example cited within the Sutter case, thyroid cancer was added as a current condition in a patient record even after the thyroid gland had been removed five years earlier and the patient had been freed from cancer for years. Not one of the allegations has been fully tested in court, because they were settled by the businesses without an admission of liability or, within the case against Kaiser Permanente, remain pending.

Some critics contend that a byproduct of those practices is that patients’ medical records, padded with false diagnoses, are inaccurate. That would unnecessarily stigmatize patients who were improperly deemed obese, or malnourished, or mentally in poor health. It introduces potential phantom influences on treatment decisions, critics say.

Along with her shock over hundreds of alleged false billings, Ormsby “was not comfortable with what she perceived as the entire divorce from the truth of what was in patient records” at Sutter Health, said Sarah “Poppy” Alexander, a whistleblower lawyer at Constantine Cannon, which represented Ormsby.

“The accuracy of patient records is critical for anyone’s health-care treatment,” she said. “Take into consideration all the choices which might be made based on what’s in your health-care record. If that health-care record will not be accurate, it’s extremely dangerous.”

Several doctors interviewed by The Washington Post said it was common practice for insurance firms and medical systems to go looking or data-mine the histories of patients covered by Medicare Advantage. Health systems were known to advise doctors on essentially the most lucrative billing strategies, cajole them to document the utmost variety of illnesses, and grade and rank them amongst their peers based on how they coded patients, they said.

“The emphasis is on easy methods to code for more. It’s not ethical coding, it’s easy methods to code for extra money. That pressure is there,” said David Terry, a recently retired psychiatrist who worked inside large health organizations in Kansas that are usually not a part of any of the lawsuits.

The Justice Department said in February that Medicare Advantage investigations are an “necessary priority.” In federal whistleblower cases, the federal government investigates allegations brought by individuals with knowledge of alleged fraud against the federal government after which decides whether it is going to join the lawsuit, based on its findings. Whistleblowers are rewarded for stepping forward with a portion of any settlement or court awards. Justice Department whistleblower allegations and similar lawsuits are also playing out in federal courts against UnitedHealth Group, Cigna and Anthem. The federal government’s Office of Inspector General has audited Humana and located it overbilled the federal government. United Healthcare, which is under the umbrella of UnitedHealth Group, and Kaiser Permanente denied any improper conduct. Cigna, Anthem and Humana didn’t reply to requests for comment.

The medical health insurance industry’s trade group, AHIP, didn’t comment on allegations of false billings. MedPAC’s estimates of excess payments, compared with traditional Medicare, are exaggerated, AHIP executives said, because its calculations don’t think about all differences between the 2 payment systems.

“The Medicare Advantage system is designed to advertise accurate coding and support integrated care,” said Mark Hamelburg, AHIP senior vice chairman for federal programs. “Plans have to contemplate your complete patient, and know all their conditions, and the way their conditions interact.”

10-year growth in Medicare Advantage Enrollment

Medicare Advantage plans cut costs using the tools of the private insurance industry. They control the usage of MRIs and other costly tests, as an example, cutting down on waste. They restrict care to certain hospital and physician networks. Then they use a share of those savings to maintain monthly premiums lower than traditional Medicare, while offering extra advantages traditional Medicare doesn’t offer, resembling dental and hearing and gym memberships.

“It’s an unlimited, complicated system. It involves all these various components,” Hamelburg said. “Our view is that you simply shouldn’t just have a look at individual components, it is advisable have a look at the totality.”

An industry-backed study found that Medicare Advantage members pay $1,965 less in out-of-pocket costs, including premiums, than traditional Medicare beneficiaries. Beneficiary satisfaction is high. Membership within the plans grew by 10 percent last 12 months; they’re expected to cover greater than 50 percent of all patients next 12 months.

Ormsby, considered one of the Medicare Advantage whistleblowers whose case was investigated by the federal government, quit her job at Palo Alto Medical Foundation in 2015 after two years in her job as a risk adjustment project manager. An out of doors consultant had found 8,000 false codes for the years 2012 and 2013, the federal government alleged within the whistleblower lawsuit she initiated.

The federal government’s investigation of her criticism revealed how physicians received computerized “each day alerts” for his or her patients flagging “suspected” diagnoses unearthed via data-mining. When their risk-adjustment diagnosis numbers fell short, doctors were urged by higher-ranking colleagues to enhance, the federal government lawsuit alleged. In some cases, the federal government said, coders would add diagnoses to patient records without participation of doctors.

Some doctors pushed back on the pressure so as to add diagnostic codes.

“With my patient on hospice, there’s something that seems unseemly about pursuing a recent diagnosis of PVD [pulmonary vascular disease] when she has weeks to live,” one physician, Joann Falkenburg, wrote to colleagues helping lead the pressure tactics. The e-mail was obtained by Justice Department investigators. “I attempt to be pretty legitimate about how I diagnose, document and chart and wish to avoid any possibility that it looks like I’m working someone up only for the financial upside.”

The federal government’s lawsuit doesn’t indicate how Palo Alto Medical responded to her email, and Falkenburg didn’t reply to a phone message requesting comment.

A Palo Alto Medical auditor reported in internal correspondence that one other physician, Thomas Deetz, complained that “pre-populating diagnoses into his visit encounter is possibly fraud. … Does CMS find out about what you all are doing?” Deetz also didn’t reply to a request for comment.

Ormsby maintains that her multiple warnings in regards to the practices were ignored or rebuffed. She said she received a poor performance review in early 2015, but by then she had already sought out private lawyers, a step that led to her whistleblower suit.

“I used to be finding too many errors, they usually didn’t need to send the a refund,” Ormsby said within the interview. Under rules for federal whistleblower lawsuits, Ormsby, 56, will receive 15 to 30 percent of the $90 million Sutter Health settlement.

The practices at Sutter weren’t isolated, in line with the federal government. Kaiser Permanente, a nonprofit health-care organization that treats patients in California, Colorado and elsewhere, including Virginia and Maryland, is accused in a separate Justice Department lawsuit of comparable tactics that allegedly brought in about $1 billion in improper billings from 2009 to 2018. The case, which is pending, was consolidated from six whistleblower complaints against the corporate.

“As annually drew to an in depth, some employees referred to Kaiser’s rush to capture as many diagnoses as possible because the ‘dash for money,’ ” the federal government said in its lawsuit. It alleges that at Kaiser Permanente, doctors were invited to “coding parties,” where physicians can be gathered in a room after hours and be expected so as to add diagnosis codes present in data-mining operations to current patient records.

Kaiser Permanente said in response to the federal government’s allegations that it was following the foundations.

“We’re confident that Kaiser Permanente is compliant with Medicare Advantage program requirements and we intend to strongly defend against the lawsuits alleging otherwise,” the corporate said in an announcement sent to The Washington Post. “Our medical record documentation and risk adjustment diagnosis data submitted to the Centers for Medicare and Medicaid Services comply with applicable laws and Medicare Advantage program requirements. Our policies and practices represent well-reasoned and good-faith interpretations of sometimes vague and incomplete guidance from CMS.”

Internally, some doctors questioned the corporate’s practices, the lawsuit contends. Among the many diagnoses Kaiser Permanente physicians were regularly asked so as to add to patient medical records was aortic atherosclerosis, in line with the federal government’s lawsuit.

The condition, a hardening of the aorta wall, could often be observed incidentally in a chest X-ray or scan for another ailment. Radiologists were instructed to record the presence of the condition in the event that they detected any calcium within the aorta, “no matter significance,” in line with the federal government’s criticism.

Physicians would then be pressured via computerized queries to amend the patient records retroactively to incorporate aortic atherosclerosis, which Kaiser had identified as having a “high rate of reimbursement” within the Medicare Advantage risk adjustment formula, the federal government alleged.

Some Kaiser Permanente doctors objected, saying the disorder was typically not serious of their elderly patients.

In accordance with the federal government’s lawsuit, one physician, Matthew James Sena, observed in internal correspondence that “Aortic atherosclerosis is sort of ubiquitous in patients this age. It will not be a clinically relevant diagnosis and doesn’t require treatment. Isolated [chest X-ray] interpretations are usually not grounds for clinical diagnosis on this case. … [It’s] clinically inconsequential in just about all cases.”

A coding administrator for Kaiser Permanente is quoted within the criticism as saying “[n]o one believes it’s an actual diagnosis,” and since “it’s non-compliant to inform people to code for money, we want to actually sort out a strategy to package this.”

Medicare Advantage programs are touted by industry as a way of ensuring that chronic conditions are fastidiously monitored through disease-management programs. But Kaiser Permanente’s increased diagnoses of aortic atherosclerosis threatened to create so many recent patients with the condition that its disease management program for heart problems threatened to buckle.

Kaiser Permanente managers in 2011 got here upon an answer, the federal government said: stop robotically enrolling aortic atherosclerosis patients within the heart problems management program.

After the change, the lawsuit alleges, medical leaders continued to pressure doctors aggressively to code for the disorder, identifying it as value a further $40 billion in annual billing opportunity at one physician practice.

“How will we rally the herd?” a physician executive director wrote to colleagues at Kaiser’s Northern California Medical Group, in an email quoted within the lawsuit. “Everybody take part the discussion. $40m isn’t any chump change.”

‘Where’s follow-up care?’

Minnesota-based United Healthcare, the most important health-insurance company within the country, quotes a founding father on the homepage of HouseCalls, its program that dispatches clinicians to Medicare Advantage beneficiaries’ homes: “Benjamin Franklin said it best, ‘An oz. of prevention is value a pound of cure.’ We agree.”

Under such initiatives, firms routinely send clinicians, often nurse practitioners, into patients’ homes to conduct “health risk assessments.” Corporations say the assessments are intended to discover any risks to beneficiary health that their physicians could have ignored or which have developed since their last doctor visit.

But government reports have questioned whether the practice is meant to enhance or capture more lucrative diagnosis codes. The visits often end in recent codes added to patient bills with none evidence of doctors’ having considered or treated the newfound diagnoses, the Office of Inspector General of the Department of Health and Human Services present in a report last 12 months.

A Connecticut primary-care physician, Kenneth Dardick (whose spouse is the manager director of the Center for Medicare Advocacy, a nonprofit that advocates for patients), said he routinely receives copies of United Healthcare’s in-home risk assessments and never learns anything about his patients that he didn’t already know.

He does notice that recent patient codes are added to the reports, documenting conditions he already knew about or were irrelevant, he said.

He shared a replica of 1 assessment, with identifying information of the patient removed, that was sent to him by HouseCalls in April. He was already treating the patient, a person in his 70s, for diabetes. However the health risk assessment, in a piece called “recent diagnosis,” had added a distinct code, diabetes with complications. The brand new diagnosis section also listed a private history of a kind of skin cancer. Dardick said a precancerous growth was faraway from the patient’s skin nine years ago and isn’t any longer being treated.

“My sense is that they are doing that simply to game the system,” Dardick said, citing the “recent” diagnosis codes as “irrelevant.”

United Healthcare stood out amongst Medicare Advantage firms for its aggressive use of risk assessments without evidence recent risk codes were related to ongoing medical care, in line with the Office of Inspector General report last 12 months. (OIG didn’t discover the corporate in its report, however it did confirm its identity after a records request from the Minneapolis Star-Tribune.)

United Healthcare has the most important share of Medicare Advantage patients within the country, with 7.2 million beneficiaries, or 27 percent of the overall.

United Healthcare didn’t respond on to the OIG report’s findings. In response to questions from The Post, spokesman Matt Wiggin emailed a transient statement. “Simply stated, in comparison with fee-for-service Medicare, Medicare Advantage costs less (for beneficiaries), is more equitable, has higher quality, access, and outcomes with greater coverage and advantages and nearly 100% consumer satisfaction,” he said.

Jacqualine Reid, a government research analyst who led the review, said the findings about United Healthcare raised red flags. Of the $9.2 billion in risk adjustment payments in 2016 based on health risk assessments with no other records to support the diagnosis, United received $1.38 billion, Reid and her team present in their review.

The three top diagnoses generating those payments were peripheral vascular disease, major recurrent depressive disorder and Type 2 diabetes with peripheral angiopathy.

“These are serious medical conditions. In the event that they are getting payments for in-home visits, but we don’t see some other evidence of services being provided to them, it raises concern,” Reid said. “In the event that they are appropriate, where’s the follow-up care that normally you’d expect to see?”


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