September 21, 2021. The United States Department of Justice intervened and filed a complaint under the False Claims Act against an upstate New York-based Medicare Advantage Organization (MAO) and its chart review company subsidiary. According to the allegations, the MAO, Independent Health, and its subsidiary DxID LLC, falsely submitted inflated diagnosis codes to Medicare in order to obtain higher reimbursements for Medicare beneficiaries. A whistleblower brought this rampant upcoding to the government’s attention; they were a former employee of a different MAO which used the chart review subsidiary.

As a Medicare Advantage Organization, Independent Health offered two Medicare Advantage (MA) plans to Medicare beneficiaries in New York state.  DxID is a wholly owned subsidiary of Independent Health and it “provided retrospective chart review and addenda services to Independent Health and other MA Plans.”  In order to be an MA plan vendor, Independent Health had to be approved by Medicare (U.S. Centers for Medicare and Medicaid Services) and follow the government’s rules for what these plans cover.  As the Medicare.gov site states, “These plans set a limit on what you’ll have to pay out-of-pocket each year for covered services, to help protect you from unexpected costs.”  Medicare Part C’s taxpayer cost containment strategy entails capitation, wherein “MA plans are paid a fixed amount per enrollee to provide benefits covered by traditional Medicare to beneficiaries who enroll in their MA Plan.”  “Risk scores” or adjustments to capitated payments based upon diagnosis severity are where plans can receive more funds from Medicare for covering sicker patients.  Risk-adjustment payments are also prime targets for fraudsters.

Allegations against DxID include that the retrospective chart review company added unsupported diagnosis codes to Medicare beneficiaries’ charts after a doctor visit, and the company “asked health care providers to sign addenda forms up to a year after a visit or encounter” to legitimize the unsupported diagnoses. The more risk adjusted payments DxID garnered for Independent Health (and other MAOs), the more money it made: “DxID operated on a contingency fee of up to 20% of the additional recovery that the MA Plans received based on diagnoses captured by DxID.”

As the United States Attorney for the Western District of New York said, “Defrauding taxpayer funded health care programs such as Medicare hurts not only taxpayers but our nation’s entire healthcare system.”  Making systematic exaggeration of sickness a company’s profit center is itself sick, as false diagnoses skew distribution of funds away from the neediest patients.  A DOJ Deputy Assistant Attorney General warned, “The department will continue to hold accountable health plans or providers that report unsupported diagnoses to inflate risk adjustment payments.”  In his December 2020 remarks, the DOJ Official described the exact situation of MAOs hiring auditors to “identify additional codes that would increase their Medicare reimbursement.”  The DOJ has publicly stated that health care fraud will remain a top focus of the Department’s False Claims Act enforcement efforts, particularly fraud schemes involving Medicare Part C.