A decade ago, federal officials drafted a plan to stop Medicare Advantage health insurers from overbilling the government by billions of dollars, but then abruptly rescinded it after an “uproar” from the industry, newly unsealed court documents show.
The Centers for Medicare and Medicaid Services issued proposed rules in January 2014 that would require health insurance plans to identify overpayments by CMS when reviewing patients' medical records and reimburse the government.
But in May 2014, CMS abandoned the idea without any public explanation. In newly unsealed court testimony, CMS officials repeatedly cited concerns about industry pressure.
CMS's 2014 decision and related events are at the center of the Department of Justice's multibillion-dollar civil fraud lawsuit against UnitedHealth Group, which is pending in federal court in Los Angeles.
The Justice Department alleges that the health insurer defrauded Medicare of more than $2 billion by combing through patient records for additional diagnoses, boosting revenue while ignoring overcharges that could have reduced claims. The company “did nothing but close its eyes to reality and embezzle funds,” the Justice Department said in court filings.
Medicare pays health insurers higher premiums for more severely ill patients, but requires health insurers to only bill for conditions that are properly documented in a patient's medical record.
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In court filings, UnitedHealth Group denies any wrongdoing and argues it should not be punished for “failure to comply with regulations that CMS considered but rejected a decade ago.”
This month, the parties in the litigation released thousands of pages of depositions and other records that offer a rare glimpse into the Medicare agency's years-long fight to stop private health plans from extracting billions of dollars from taxpayers.
“It would be easy to abandon Medicare Advantage plans, but CMS has completely wasted money on this,” said Richard Lieberman, a health data analytics expert from Colorado.
Spokespeople for the Justice Department and CMS declined to comment for this article. Heather Soule, a spokeswoman for UnitedHealth Group, said in an email that the company's “business practices have always been transparent, lawful and in compliance with CMS regulations.”
Missed diagnosis
Medicare Advantage insurance plans have grown explosively in recent years, now covering about 33 million people, more than half of all Medicare-eligible recipients. Along the way, the industry has been the target of dozens of whistleblower lawsuits, government audits and other investigations that have allegations that insurers exaggerate patients' medical conditions to scrape together unfair Medicare benefits, including by conducting so-called medical record reviews to find allegedly overlooked diagnosis codes.
By 2013, CMS officials knew that some Medicare plans were hiring medical coding and analytics consultants to aggressively harvest patient files but questioned the agency's authority to require plans to seek out and remove unsupported diagnoses.
Regulations proposed in January 2014 require that chart reviews “must not be designed solely for the purpose of identifying diagnoses that would trigger additional payments to health plans.”
CMS officials backed away in May 2014, citing “stakeholder concerns and resistance,” Sheri Rice, then head of CMS' Medicare Plan Payment Group, testified in a 2022 deposition made public this month. A second CMS official, Ann Hornsby, described the industry response as “uproar.”
It has not been made clear from court documents so far who made the decision to withdraw the proposal to review the medical records.
“The instruction we received was that the final rule should only include provisions that had broad stakeholder support,” Rice testified.
“That's why we didn't move forward at the time,” she said, “not because we didn't think it was the right thing to do or the right policy, but because we got mixed reactions from stakeholders.”
A CMS spokesman declined to make Rice available for an interview, and Hornsby, who has since left the agency, declined to comment.
But Erin Fuse Brown, a professor at Brown University's School of Public Health, said the decision reflects a pattern of careful oversight by CMS of popular health insurance for seniors.
“The fact that CMS is saving taxpayer money is no reason for it to face the wrath of very powerful health insurance organizations,” Fews-Brown said.
“That is very worrying.”
Invalid Code
The fraud lawsuit against UnitedHealth Group, the nation's largest operator of Medicare Advantage plans, was filed by a former employee of the company in 2011. The Department of Justice took over the whistleblower lawsuit in 2017.
The Justice Department alleges that Medicare paid out more than $7.2 billion to insurers based solely on chart reviews between 2009 and 2016. Insurers would have received $2.1 billion less if they had removed unsupported billing codes, the government argues.
The government alleges that UnitedHealth Group knew that many of the conditions it billed for were not supported by medical records, but chose to pocket the overpayments. For example, in 2011, the insurer billed Medicare for roughly $28,000 in treatment for cancer, congestive heart failure, and other serious health problems that weren't documented in patients' medical records, the Justice Department alleged in a 2017 complaint.
Overall, the Justice Department alleges that UnitedHealth Group should have removed more than 2 million invalid codes.
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Instead, the company's executives signed annual reports attesting that the claims data submitted to CMS was “accurate, complete, and true.”The Justice Department alleges that these actions violate the False Claims Act, a federal law that makes it illegal to submit false claims to the government.
The complex case has featured years of legal battles and even conflicting recollections of key CMS staff (including several who have since left government for jobs in the health care industry) and UnitedHealthcare executives.
Red Herring
Court documents describe a 45-minute video conference arranged by then-CMS Administrator Marilyn Tavenner on April 29, 2014. Tavenner testified that, at the request of Larry Renfro, a senior executive at UnitedHealth Group, she arranged a meeting between UnitedHealth and CMS staff to discuss the impact of the proposed rule. Neither Tavenner nor Renfro attended.
Two UnitedHealth Group executives who took part in the call said CMS officials told them the company had no obligation to spot the erroneous codes at the time. One of the executives, Steve Nelson, called that answer “a very clear answer.” Mr. Nelson has since left the company.
Meanwhile, four of the five CMS staffers who took part in the call said in their testimony that they didn't remember what was said, and unlike the company's team, none of the government officials took detailed notes.
“All I can say is I remember having a very uncomfortable experience at that meeting,” Rice said in the 2022 affidavit.
But Rice and another CMS official said they remembered reminding executives that even without chart-review rules, companies had a duty to make good-faith efforts to bill only for verified codes or risk penalties under the False Claims Act. And CMS officials reinforced that view in follow-up emails, according to court documents.
In court filings, the Justice Department called the furor over the ill-fated rule “misleading” and argued that UnitedHealth knew the medical records review had been under investigation for two years when it requested the meeting in April 2014. Moreover, the company was “struggling to address a projected $500 million budget deficit,” according to the DOJ.
Data Miner
Medicare Advantage plans have defended chart reviews against criticism that they serve little purpose other than artificially inflating government costs.
“Chart reviews are one of many tools Medicare Advantage plans use to support patients, identify chronic conditions and prevent those conditions from becoming more serious,” said Chris Bond, a spokesman for AHIP, a health insurance trade group.
Whistleblowers allege that the small industry of analytics firms and programmers hastily formed to conduct these investigations pitched their services as a way to make billions of yen for health insurance companies, and little else.
“It was never legal,” said William Hanagami, a California lawyer who represented whistleblower James Swoben in a 2009 lawsuit alleging that medical record reviews had unfairly inflated Medicare payments. In a 2016 decision, the 9th Circuit Court of Appeals wrote that health plans must exercise “due diligence” to submit accurate data.
Since then, other insurers have settled Department of Justice allegations that they billed Medicare for unconfirmed diagnoses that arose from medical chart reviews. In July 2023, Martin's Point Health Plan, a Portland, Maine, insurer, paid $22,485,000 to settle whistleblower allegations that it improperly billed for a range of medical conditions, from diabetes with complications to morbid obesity. The plan denied any liability.
A December 2019 report by the Department of Health and Human Services' Inspector General found that 99 percent of chart reviews resulted in new diagnoses being added, costing Medicare an estimated $6.7 billion in 2017 alone.
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