DOJ sues Anthem for millions in overpayments related to MA plan members

Dive Brief:

  • The U.S. Department of Justice filed a lawsuit against the nation’s second-largest private insurer, Anthem, for allegedly failing to correct inaccurate diagnosis codes related to its Medicare Advantage business and receiving millions in improper payments from CMS.
  • DOJ claims Anthem put its profits ahead of compliance and knowingly failed to update the accurate diagnosis codes between 2014 and 2018. This generated at least $100 million in additional revenue each year, according to the lawsuit.
  • Anthem said it plans to vigorously defend its practices. “We think the agency should update regulations if it would like to change how it reimburses plans for services delivered,” the company said in a statement.

Dive Insight:

Other insurers have caught themselves in the crosshairs of the DOJ for failing to provide accurate information regarding the health status of MA beneficiaries.

Just last year, Sutter Health, a dominant provider in northern California, agreed to pay $30 million to settle allegations that it inflated the risk scores of some MA beneficiaries to receive higher capitated payments.

Essentially, the sicker the enrollee, the higher the capitated (or per member, per month) payment an MA plan receives, creating somewhat of an incentive to inflate the risk scores of MA enrollees.

It’s not uncommon for diagnosis codes to be wrong due to the “high frequency of provider coding errors,” the lawsuit states, so it’s incumbent on insurers to fix those errors.

CMS maintains it has been clear and has held numerous training sessions on how MA plans can correct or delete diagnoses after they have been submitted for risk adjustment, according to the lawsuit.

In these trainings, CMS emphasized that the plans have an obligation to delete inaccurate diagnosis codes submitted to the agency.

In fact, Anthem was aware of coding issues and created a “red flag” system for diagnosis codes that were known to be frequently inaccurate, which included diabetes and cancer diagnosis codes, according to the lawsuit.

An inflated risk can be quite lucrative for a plan. For example, a patient’s risk score would jump significantly for someone with metastatic cancer and leukemia. In a hypothetical scenario DOJ laid out in the lawsuit, CMS would have paid out an additional $20,700 in risk adjusted payments in 2014.

Also, Anthem shared in its risk adjustment payments with some providers, further creating an incentive for providers to inflate risk scores and diagnosis codes, the lawsuit alleges.

“Anthem understood that its ‘capitated’ or ‘profit-sharing’ relationships with providers created a strong financial incentive for those providers to over-report diagnosis codes both in terms of the number and the severity of reported medical conditions for Part C beneficiaries,” according to the filing.

Posted in Law