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TAFEF Conference 2019

TAFEF Conference 2019. The False Claims Act and Managed Care Fraud Ed Baker, Constantine Cannon LLP Mark Kleiman, Kleiman/Rajaram Nick Paul, California DOJ Mary Inman, Constantine Cannon LLP. Objectives. 1. Quick review of managed care basics – both Medicare and Medicaid.

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TAFEF Conference 2019

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  1. TAFEF Conference 2019 The False Claims Act and Managed Care Fraud • Ed Baker, Constantine Cannon LLP • Mark Kleiman, Kleiman/Rajaram • Nick Paul, California DOJ • Mary Inman, Constantine Cannon LLP

  2. Objectives • 1. Quick review of managed care basics – both Medicare and Medicaid. • 2. Why these cases are so challenging – successful relators have in common. • 3. How the Government (state and federal) is investigating and litigating these cases. • 4. What Defendants are arguing – and how Courts are responding. • 5. Some predictions. • Questions/Answers/Comments throughout.

  3. Medicare Managed Care • 1. How Medicare Advantage (Part C) was designed and intended to work: • Contrast with traditional FFS “pay and chase.” • Overall design – CMS contracts with MAOs/plans; capitated rate per bene per month for minimum level of care. • Risk adjustment payments for certain diagnoses. • Program integrity requirements. • Various players: MAOs/plans and affiliates; owners; MSOs and other vendors; individual providers and provider groups; benes

  4. 2. Follow the money – financial incentives within Medicare Advantage create opportunities for fraud: • More diagnoses of certain types result in higher risk adjustment payments. Therefore, incentive to make patients appear sicker than they really are. Note: Numerous CMS and OIG studies have found RAF inflation so marked that CMS has had to institute an “inflator factor” to correct it. • More benes in network result in more capitated payments. Therefore, incentive to make network appear larger than really is.

  5. Financial Incentives in MA - continued: • Fewer services to members decreases costs. Therefore, incentive to provide fewer services to more benes. • Proper compliance and training reduces submission of unsupported diagnoses. Therefore, incentive to minimize or ignore compliance/training, or have improper compliance/training. • MAOs/plans allowed to share profits with providers. Therefore, incentive for providers (both individuals and groups) to submit unsupported diagnoses, and for MAOs to “look the other way.”

  6. 3. Potential Legal Hooks to Address MA Fraud: • Contracts and Agreements: Look at relationship between the plans and first tier and downstream-related entities. • CMS Call Letters/Announcements • Federal Regulations • Agency Rules and Guidance • Enforcement actions/investigations/studies.

  7. Legal Hooks – Key Federal Regulations • 42 CFR 422: Medicare Advantage Program • RA Data: 422.310 • Part C Compliance: 422.503 • Part C Annual Attestation: 422.504 •  42 CFR 423: Voluntary Medicare Prescription Drug Benefit • Part D Compliance: 423.504 • Part D Annual Attestation: 425.505

  8. Legal Hooks – The Gold Standard: • Diagnosis codes submitted to CMS must meet specific standards, including: • The diagnosis code must result from a face-to-face encounter with a clinician and a patient; • This encounter must be during the relevant year; • The diagnosis code must be appropriately documented in the patient’s medical record at the encounter, and • The diagnosis code must be based on documented conditions that require or affect patient care treatment or management. See, e.g., 42 C.F.R. § 422.504(l)(3); CMS, Medicare Managed Care Manual Chapter 7, § 111.8 (Rev. 57, Aug. 13, 2004)

  9. Legal Hooks: • Diagnoses must be supported by adequate medical record documentation. See 42 CFR 422.504(l)(1). • Plans must expressly certify that info provided is “accurate, complete, and truthful.” 42 CFR 422.504(l)(2). • MAOs are required to “adopt and implement an effective compliance program.” 42 CFR 422.503(b)(4)(vi).

  10. 4. Medicare Advantage Program Trends: • More individuals enrolling in MA (now > 1/3). • Increased spending. • Increased CMS oversight and audits (e.g., RADV).

  11. 5. Medicare Advantage Case Trends: • Types of cases – some examples: • Member enrollment – “cherry-picking”; “lemon-dropping” • Network fraud – false statements in application; too little care; auto-denials of coverage. • Risk adjustment fraud – “one-way” chart reviews; home visits; failure to delete and correct; direct upcoding of risk scores; pressure providers.

  12. Some Recent Settlements: • Nov. 2010: U.S. v. Janke, No. 2:09-cv-14044 (S.D. Fla.) (non-QT) - $22.6M • Aug. 2012: U.S. ex rel. Swoben v. Scan Health Plan,No. 09-5013 (CDCA) – $320M ($3.8M for RA claims) • May 2017: U.S. ex rel. Sewell v. Freedom Health, Inc., No. 8:09-cv-1625 (M.D. Fla.) - $32.5M • Oct. 2017: U.S. ex rel. Graves v. Plaza Medical Centers Corp., 1:10-cv-23382 (SDFL) - $3M • Jan. 2018: U.S. ex rel Ramsey-Ledesman v. Censeo Health, LLC, No. 3:14-cv-118 (N.D. Tex. 2014) - undisclosed • Feb. 2019: Sutter Health (non-FCA) (NDCA) - $30M • June 2019: U.S. ex rel. David Nutter MD v. Beaver Medical Group LP et al, 17-02035 (CDCA) - $5M

  13. Some On-Going QT Litigation (Unsealed): • Poehling: U.S. ex rel. Poehling v. UnitedHealth Group Inc., No. 16-08697 (CDCA) (originally filed in WDNY) • Sutter Health: U.S. ex rel. Ormsby v. Sutter Health et al, 15-cv-01062 (NDCA) • Silingo: U.S. ex rel. Silingo v. Mobile Med. Examination Svcs., Inc. et al, No. 8:13-cv-1348 (C.D. Cal.) • Aveta: U.S. ex rel. Valdez v. Aveta, Inc., No. 3:15-cv-1140 (D.P.R. 2011) • Non-QT to watch: UnitedHealthcare Insurance Co. et al. v. Alex Azar II, No. 16-157 (D.C.) ("Azar") – administrative challenge to CMS Overpayment Rule based on “actuarial equivalence.”

  14. Medicaid Managed Care

  15. Medicaid Statistics • 50 DISTINCT, STATE-BASED MEDICAID PROGRAMS • SIZE, GROWTH, & DIVERSITY CREATES CHALLENGES • MEDICAID JOINTLY FUNDED BY FEDERAL & STATE GOVERNMENTS* • $576.6 B TOTAL U.S. MEDICAID SPENDING FY 2017 • FFS $141.6 B ACUTE CARE • MC $281.7 B MANAGED CARE • FMAP 61.5% FEDERAL; 38.5% STATE * 2019 Kaiser Family Foundation-Urban Institute estimates based on data from CMS (form 64), as of August 2018.

  16. 281 MCOs

  17. Managed Care spending by state

  18. MAY 6, 2016 • Modernized managed Medicaid regulations; first overhaul since 2002 Medicaid Managed Care Regulations • Aligns Medicaid rules with those of other plans, such as Medicare Advantage (MA)& Qualified Health Plans (QHPs) • Directs procedures & regulations on recovery of overpayments • Strengthened regulations regarding fraud referrals from managed care plans to state Medicaid Fraud Control Units (MFCUs) • Increases data reporting requirements • Design of capitation rates • Medical loss ratio (MLR) • Risk adjustment • Encounter data • Network adequacy requirements • Provider directories • Standardized requirements across states

  19. MCO Required Attestations • Claims & payment data – 42 CFR sec. 457.1201(n); 42 cfr sec. 438.604 (a)(1); 438.606 • Data used to determine actuarial soundness - 42 cfr sec. 438.604 (a)(2); 438.606 • Medical loss ratio - 42 CFR sec. 438.8(n); 42 cfr sec. 438.604 (a)(3); 438.606 • Information showing MCO solvency - 42 cfr sec. 438.604 (a)(4); 438.606 • Adequacy of services and providers - 42 cfr sec. 438.604 (a)(5); 438.606 • MCO ownership & control - 42 cfr sec. 438.604 (a)(6); 438.606 • Report of overpayment recoveries - 42 cfr sec. 438.604 (a)(7); 438.606

  20. Regulations on Encounter data – May 6, 2016 • ACA gave CMS authority to withhold Federal matching funds • 42 CFR 438.604- Contract Requirements • For contracts starting on or after July 1, 2017, States must require that MCOs: • Collect and submit encounter data sufficient to identify the provider rendering the service • Submit all encounter data necessary for the State to meet its reporting obligation to CMS • Submit encounter data in appropriate industry standard formats • Industry standard formats: submit encounter data to CMS through Transformed Medicaid Statistical Information System (t-MSIS) using x-12 fields

  21. Regulations on MCO program integrity requirements May 6, 2016 • 42 CFR 438.608 - Detect & Prevent Fraud, Waste & Abuse • Prompt referral of fraud, waste or abuse directly to state & MFCU • Designate a compliance officer who reports to the CEO • Establish a regulatory compliance committee • Train employees on federal & state standard & requirements • Establish Effective lines of communication from compliance officer & employees • Publish disciplinary guidelines • Dedicate staff for routine monitoring & auditing of compliance risks

  22. Questions for the Panel – and Audience

  23. What Makes These Cases Challenging – Partial List: • Number and types of defendants • Complexity and evolving nature of healthcare system • Patient harm indirect – hard to build a compelling narrative • Government being very cautious and selective how and when they intervene, investigate, and litigate • Defendants have gone on offense by filing administrative complaints (e.g. UHG v Azar) • Defendants generally do some compliance activities/training • Note: Risk of public disclosure in response to Kaiser FOIA complaint

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