Humana Inc. Overcharged Medicare Nearly $200 Million, Federal Audit Finds
April 20, 20211
LINK: https://www.npr.org/sections/health-shots/2021/04/20/988817003/humana-inc-overcharged-medicare-nearly-200-million-federal-audit-finds

A Humana Inc. health plan for seniors in Florida improperly collected nearly $200 million in 2015 by overstating how sick some patients were, according to a new federal audit, which seeks to claw back the money.

The Health and Human Services Office of Inspector General's recommendation to repay, if finalized, would be "by far the largest" audit penalty ever imposed on a Medicare Advantage company, said Christopher Bresette, an HHS assistant regional inspector general.

"This (money) needs to come back to the federal government," he said in an interview.

Humana sharply disputed the findings of the audit, which was set for public release Tuesday. A spokesman for the company said Humana will work with Medicare officials "to resolve this review" and noted that the recommendations "do not represent final determinations, and Humana will have the right to appeal."

Medicare Advantage, a fast-growing private alternative to original Medicare, has enrolled more than 26 million people, according to America's Health Insurance Plans, an industry trade group. Humana, based in Louisville, Ky., has about 4 million members and is one of the largest of these insurers.

While popular with seniors, Medicare Advantage has been the target of multiple government investigations, Department of Justice and whistleblower lawsuits and Medicare audits that concluded that some plans boosted their government payments by exaggerating the severity of illnesses they treated. One 2020 report estimated that improper payments to the plans topped $16 billion the previous year.

But efforts to recover even a tiny fraction of the overpayments in past years have stalled amid intense industry opposition to the government's audit methods.

Now the OIG is rolling out a series of audits that could for the first time put health plans on the hook for refunding tens of millions of dollars or more to Medicare. The OIG is planning to release five to seven similar audits within the next year or two, officials said.

The Humana audit, conducted from February 2017 to August 2020, tied overpayments to medical conditions that pay health plans extra because they are costly to treat, such as some cases of cancer or diabetes that have serious medical complications.

Auditors examined a random sample of 200 patients' medical charts to make sure the patients had the diseases the health plans were paid to treat, or that the conditions were as severe as the health plan claimed.

For instance, Medicare paid $244 a month — or $2,928 for the year — for one patient said to be suffering from serious complications of diabetes. But medical records Humana supplied failed to confirm that diagnosis, meaning the health plan should have received $163 less per month for the patient's care, or $1,956 for the year, according to the audit.

Similarly, Medicare paid $4,380 too much in 2015 for treatment of a patient whose throat cancer had been resolved, according to the audit. In other cases, however, auditors said Medicare underpaid Humana by thousands of dollars because the plan submitted incorrect billing codes.

In the end, auditors said Medicare overpaid Humana by $249,279 for the 200 patients whose medical charts were closely examined in the sample. Based on those 200 cases, auditors used a technique called extrapolation to estimate the prevalence of such billing errors across the health plan.

"As a result, we estimated that Humana received at least $197.7 million in net overpayments for 2015," the audit states, adding that Humana's policies to prevent these errors "were not always effective" and need improvement.

The OIG notified Humana of its findings in September 2020, according to the audit. A final decision on collecting the money rests with the Centers for Medicare & Medicaid Services, or CMS, which runs Medicare Advantage. Under federal law, the OIG is responsible for identifying waste and mismanagement in federal health care programs but can only recommend repayment. CMS had no comment.

Though controversial, extrapolation is commonly used in medical fraud investigations — except for investigations into Medicare Advantage. Since 2007, the industry has criticized the extrapolation method and, as a result, largely avoided accountability for pervasive billing errors.

Industry protests aside, OIG officials say they are confident their enhanced audit tools will withstand scrutiny. "I believe what we have here is solid," OIG official Bresette said.

Michael Geruso, an associate professor of economics at the University of Texas-Austin who has researched Medicare Advantage, said extrapolation "makes perfect sense," so long as it is based on a random sample.

"It seems like this is a healthy step forward by the OIG to protect the U.S. taxpayer," he said.

The OIG used the extrapolation technique for the first time in a February audit of Blue Cross and Blue Shield of Michigan that uncovered $14.5 million in overpayments for 2015 and 2016. In response, Blue Cross said it would take steps to ferret out payment mistakes from other years and refund $14.5 million. Blue Cross spokesperson Helen Stojic said that process "is still pending."

But Humana, with a lot more money on the line, is fighting back. Humana "takes great pride in what the company believes to be its industry-leading approach" to ensure proper billing, Sean O'Reilly, a company vice president, wrote in a December 2019 letter to the OIG that blasted the audit.

O'Reilly wrote that Humana "has never received feedback from CMS that its program is deficient in any respect."

The nine-page letter argues that the audit "reflects misunderstandings related to certain statistical and actuarial principles and legal and regulatory requirements." Requiring Humana to repay the money "would represent a serious departure from the statutory requirements underlying the [Medicare Advantage] payment model," the company said.

Humana did persuade the OIG to shave off about $65 million from its initial estimate of the overpayment. In 2015, Medicare paid the plan about $5.6 billion to treat about 485,000 members, mostly in South Florida.

Humana is not alone in disapproving of the audits.

AHIP, the industry trade group, has long opposed extrapolation of payment errors, and in 2019 called a CMS proposal to start doing it "fatally flawed." The group did not respond to requests for comment.

Health care industry consultant Richard Lieberman said insurers remain "vehemently opposed" and will likely head to court to try to sidestep any multimillion-dollar penalties.

Lieberman noted that CMS has "waffled" in deciding how to protect tax dollars as Medicare Advantage plans have grown rapidly and cost taxpayers more than $200 billion a year. CMS says it has yet to complete its own audits dating to 2011, which are years overdue.

The dispute has been largely invisible to patients, who are not directly affected by overpayments to the plans. Many seniors sign up because Medicare Advantage offers benefits not included in original Medicare and may cost them less out-of-pocket, though it restricts their choice of doctors.

But some critics argue that inaccurate medical files pose a risk of improper treatment. Dr. Mario Baez, a Florida physician and whistleblower, said seniors can be "placed in harm's way due to false information in their medical records."


Kaiser Health News is an editorially independent newsroom and program of the Kaiser Family Foundation and is not affiliated with Kaiser Permanente.

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Medicare Advantage Insurer Settles Whistleblower Suit For $32 Million
May 31, 2017
LINK:https://www.npr.org/sections/health-shots/2017/05/31/530868367/medicare-advantage-insurers-settle-whistleblower-suit-for-32-million

Freedom Health Inc., a Florida Medicare Advantage insurer, has agreed to pay nearly $32 million to settle a whistleblower lawsuit. The suit, settled on Tuesday, alleged that two of the company's insurance plans exaggerated how sick patients were and took other steps to overbill the government health program for the elderly.

The two plans are Freedom Health and Optimum HealthCare, both based in Tampa. The suit was filed in 2009 by Dr. Darren Sewell, a physician and former medical director of both plans, who worked for them from 2007 to 2012. He died in 2014, but his family took over the case.

Sewell alleged that Medicare overpaid the health plans after the companies made patients appear sicker than they were or claimed patients had been treated for medical conditions they either did not have or for which they had not been treated.

The Florida settlement comes amid growing government scrutiny of Medicare Advantage plans, which receive higher payments for sicker patients than for those in good health. The payment formula, known as a risk score, has been in use since 2004.

"Medicare Advantage plans play an increasingly important role in our nation's health care market," acting U.S. Attorney Stephen Muldrow said in a statement. "This settlement underscores our Office's commitment to civil health care fraud enforcement."

Overspending tied to inflated risk scores has repeatedly been cited by government auditors, including the Government Accountability Office. At least a half-dozen whistleblowers have sued health plans alleging they tampered with the billing formula to improperly boost profits. The Sewell case is among the first to settle.

"This is the largest whistleblower settlement involving health insurers' manipulation of their members' risk scores," said Mary Inman, a San Francisco attorney who represented Sewell. She said the settlement "sends an important signal to health insurers that the government is serious about risk adjustment fraud."

In a statement, Freedom and Optimum corporate counsel Bijal Patel denied any wrongdoing.

"Although Medicare managed care is a complex and constantly changing industry in which it is common to have differing interpretations of regulations, with this settlement, we have agreed to resolve disputed claims without any admission of liability in order to avoid delay and the expense of litigation, so that we can focus on providing quality care, member service and maintaining the highest Medicare Star Ratings," Patel said.

Earlier this month, the Justice Department accused giant insurer UnitedHealth Group of overcharging the federal government by more than $1 billion by improperly jacking up risk scores over the course of a decade.

Medicare Advantage plans are privately run alternatives to standard Medicare. The plans have been growing rapidly and now serve about 1 in 3 people on Medicare, or about 20 million people.

The Sewell case also alleged that the Florida health plans falsely represented that they had enough doctors, hospitals and other medical services in order to justify an expansion of their membership, a violation of government regulations.

Under the settlement, Freedom Health and Optimum HealthCare will pay the government $16.7 million to resolve the allegations of risk adjustment fraud and $15 million for the allegedly improper expansion of their territories.

A group of Tampa-area doctors founded the Optimum plan in 2004, which initially had only about 3,000 members but later expanded. Freedom also began as a small plan of about 5,000 members in 2005, growing to more than 12,000 just two years later.

In order to boost revenues, officials at the health plan allegedly directed auditors to scour patient medical records in search of new billing codes that could be added and submitted to Medicare. Yet Freedom and Optimum knew that as many as 80 percent of the added codes they submitted in some years were unsubstantiated, according to the suit.

The suit also alleged that the health plans directed their doctors to call patients in for unnecessary office visits in order to find ways to raise their risk scores.

These actions resulted in more than $40 million in Medicare overpayments during 2009 and 2010, according to the suit.

Kaiser Health News is an editorially independent news service that is part of the nonpartisan Henry J. Kaiser Family Foundation.

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GAO Audit: Feds Failed To Rein In Medicare Advantage Overbilling
May 9, 2016
LINK:https://www.npr.org/sections/health-shots/2016/05/09/477388989/gao-audit-feds-failed-to-rein-in-medicare-advantage-overbilling