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Justice Department Demonstrates its Focus on Part C Fraud with Martin’s Point $22.5 M Settlement

Yesterday, the Department of Justice announced a settlement with Martin’s Point Health Care Inc. (“Martin’s Point”) where Martin’s Point agreed to pay $22,485,000 to resolve allegations that it violated the False Claims Act by submitting inaccurate diagnosis codes for its Medicare Advantage Plan enrollees in order to increase reimbursements from Medicare.

Medicare Advantage, also known as Medicare Part C, allows Medicare beneficiaries to obtain health care coverage through private insurance plans (“MA Plans”) that are owned and operated by private insurers. These insurers are called Medicare Advantage Organizations (“MAOs”), and are similar to the health care plans employees receive from their employers. To incentivize private insurers to participate as an MAO, CMS provides MAOs with capitated, monthly risk-adjusted payments. The MAOs are responsible for paying hospitals, physicians and other medical providers for health care services provided to the beneficiaries of the plan. And the capitated payments are meant to help with this responsibility. The risk-adjusted payments are adjusted to reflect the health status of the beneficiary, which is determined by the beneficiary’s demographic information and clinical diagnoses from the prior year. As a result, MAOs receive larger payments for sicker beneficiaries. 

Ultimately, the risk adjustment process relies on the information submitted by the MAOs. In an effort to decrease the fraud and abuse in the Part C program, the Government has prioritized prosecuting fraud schemes that have resulted in MAOs receiving larger risk adjusted payments. For example, in United States ex rel. Teresa Ross v. Group Health Cooperative, et al., the Government alleged that a vendor hired by a MAO submitted diagnosis data, with the MAO’s approval, stating that the patient had diabetic neuropathy even though the treating physician expressly stated otherwise. While MAOs are allowed to conduct retroactive reviews, the diagnosis data must follow strict requirements set by CMS. Yet, often times the CMS diagnosis data requirements are not followed, resulting in MAOs and third-party reviewers to submit unsupported diagnosis codes and, thus, higher risk-adjusted payments.

In the context of this settlement, Martin’s Point operates MA Plans for beneficiaries living in Maine and New Hampshire. The United States alleges that, from 2016 to 2019, Martin’s Point engaged in chart reviews of their Medicare Advantage beneficiaries to identify additional diagnosis codes that had not been submitted to Medicare. The Government further alleges that many of the additional codes submitted, were not supported by the patients’ medical records, yet Martin’s Point nevertheless submitted those diagnosis codes, resulting in higher payments from CMS. 

There are a few important takeaways. First, to the extent that such chart reviews are conducted, there must be sufficient support for billing and payment under the additional diagnosis codes. Second, in some instances, the Government has argued these reviews should not be one-sided: if the MAO identifies patients for which monies should be returned, then such monies should also be returned. Objective chart reviews should not simply result in the Government paying higher risk-adjusted payments. Third, in September 2021, HHS OIG published a report noting that certain MAO companies have a disproportionate share of risk-adjusted payments from chart reviews and recommending that CMS enhance its monitoring of those outliers. Such MAOs likely face exposure and should consider whether the risk adjusted payments from chart reviews are actually substantiated by the patients’ medical record. 

Please find link to the press release to the Martin’s Point settlement here.

  • Denise M. Barnes

    Denise Barnes is a former U.S. Department of Justice (“DOJ”) Trial Attorney who focuses her practice on compliance, white collar and regulatory investigations, and complex commercial litigation.  She represents clients in ...

  • Morgan L. Esters

    Morgan Esters is a litigation attorney who focuses her practice on complex commercial litigation. She has represented a broad range of corporate clients in all phases of litigation. Her experience includes conducting legal ...

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