16 billion-dollar Medicare Advantage False Claims Act case revived

The Ninth Circuit reversed the dismissal of various claims against several Medicare Advantage Organizations who a whistleblower claims submitted fraudulent health data to the federal government (“CMS”).

Anita Silingo, a former employee of Mobile Medical Examination Services, Inc. (“MedXM”), brought claims under the False Claims Act ("FCA") on behalf of the United States Government against MedXM and several Medicare Advantage Organizations. After MedXM settled the case, the Organizations moved for dismissal of the complaint, which the trial court granted.

Under the Medicare Advantage system, private health Organizations are paid a fixed amount for each person enrolled in their programs. The amounts paid by CMS to the Medicare Advantage Organizations are based on a Medicare enrollee’s “risk adjustment data”. More money is paid per month for enrollees who are likely to have higher healthcare costs. CMS uses medical diagnosis codes to calculate these payment rates, relying primarily on self-reported data. According to the Court’s decision, CMS has vastly overpaid funds for patients with unsupported diagnoses, “an estimated $16.2 billion- nearly ten cents of every dollar paid to Medicare Advantage organizations- in 2016 alone.”

According to the Ninth Circuit, Silingo claimed that MedXM contracted with the Medicare Advantage Organizations to fraudulently increase diagnosis codes, or keep inflated codes, for people enrolled in Medicare Advantage. Silingo claimed that MedXM edited health records to “exaggerate medical diagnosis.” She also claimed that MedXM employees making medical diagnosis were not authorized to do so and that MedXM made diagnoses without properly examining enrollees.

Medicare Advantage Organizations receive the set amount based on a person’s risk adjustment regardless of how much services are provided. Because the insurers pocket the difference, they have an incentive to cut costs in order to retain revenue. Various certification requirements seek to prevent these overpayments, including the requirement that providers certify data as an express condition of payment.

Here, MedXM did not submit the alleged false risk adjustment data, the Medicare Advantage Organizations did. Silingo contends that those Organizations either knew that the data was false when they submitted it, or acted with “reckless disregard” or deliberate ignorance” as to whether the data submitted to CMS was true.

The Ninth Circuit addressed the Medicare Advantage Organizations’ arguments that the claims, pled against them as a whole, did not differentiate between the various defendants, and the trial court’s grant of dismissal on that basis. In reversing the dismissal, the Court found that the complaint plead sufficient “circumstantial evidence that that the defendant organizations submitted MedXM’s risk adjustment data and certified the data’s validity to CMS.” The Court further held that it the claims were not inadequate as pled “simply because a co-defendant was alleged to have committed the same wrongful acts.” Therefore, the Court held that claims against the Medicare Advantage defendants could proceed. Read the decision here.

Bienert Katzman Littrell Williams LLP partners Thomas H. Bienert, Jr., Michael R. Williams, Daniel Z. Goldman, and others on the BKLW team have expertise and experience in handling FCA qui tam litigation, having secured a record $280 million settlement and $78 million relator share for its FCA client Beverly Brown.

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