United States: The Enforcement Risks For Medicare Advantage Plans Continue: A New False Claims Act Settlement In Florida

Recent activities of the Department of Justice ("DOJ") and Qui Tam whistleblowers reveal that Medicare Advantage Plans remain at the forefront of investigations for violations of the federal False Claim Act ("FCA") for allegedly engaging in improper risk adjustment practices and other improper or fraudulent practices. In addition to the pending FCA enforcement cases in the Swoben and Poehling cases, as well as reports of ongoing federal investigations, the recent federal settlement in May in Florida with Freedom Health, Inc., and Optimum HealthCare, Inc. – both Medicare Advantage-participating managed care plans that are subsidiaries of America's 1st Choice Holdings of Florida, LLC – demonstrates that the DOJ, the Office of the Inspector General of the United States Department of Health and Human Services ("OIG") and Qui Tam whistleblowers are not only interested in large players, such as UnitedHealth Group and others, but also in smaller and regional Medicare Advantage organizations.

In late May 2017, Freedom Health and Optimum entered into a settlement agreement with the DOJ for $32.5 million to settle a lawsuit that alleged they had done the following: submitted incorrect and unsubstantiated risk adjustment data to CMS in order to fraudulently increase their capitated payments; failed to make refunds when appropriate; fraudulently induced CMS to authorize them to expand their service area; and used discriminatory enrollment practices to minimize their risk and increase profitability among other alleged violations. Additionally, Freedom Health and Optimum entered into a five-year Corporate Integrity Agreement with the OIG, which Agreement requires the retention of an Independent Review Organization that conducts annual audits and reports to the OIG, the submission of annual reports by the Plan to the OIG, oversight by an OIG monitor, and the implementation of robust compliance program protocols.

In addition – and of noteworthy interest – the Florida settlement resulted in personal liability for the former COO of Freedom Health, who had to pay $750,000 to resolve his alleged role in the scheme. This settlement with the COO is consistent with the DOJ's announcement a number years ago in the so-called Yates memorandum that DOJ would, going forward, look more seriously at executives' and other individuals' potential personal liability for misconduct, in addition to imposing liability on corporate entities. It is thus clear that CEOs, CFOs, COOs and other major officers or employees can be held liable for the misconduct of their organizations which they oversee.

Indeed, Medicare Advantage regulations require certifications from high level executives as to the accuracy of data relating to claims submissions, applications for expansion of service areas, enrollment and other matters. It is thus imperative that Plans, and their executives, take steps to ensure the adequacy and robustness of their internal risk adjustment and claims submission processes, in order to protect both the organization and its leaders.

It is also important to remember that, under the FCA, wrongful and intentional misconduct is not required for a finding of liability. Rather, it is sufficient if the organization or individuals simply acted with "deliberate ignorance" or "reckless disregard." It is thus simply not a defense to assert that "I did not know what was going on nor did I intend to do anything improper or fraudulent." To the contrary, such a statement could be construed as evidence of deliberate ignorance, if uttered by a high level execute who was signing certifications to CMS or who otherwise had the responsibility of overseeing key aspects of the organization's operations.

Given the ever-increasing enforcement activities, it is now, more than ever, essential that Medicare Advantage Plans take pro-active steps to ensure that their risk adjustment processes are in compliance with all federal and state requirements and, in light of the Florida settlement, that all certifications and submissions to CMS are accurate and truthful. Moreover, Plans must be careful that their operations avoid even the appearance of impropriety in the face of potential allegations that they have acted recklessly or in deliberate ignorance of the truth or falsity of their submission to CMS.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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