AMARILLO, TX – President Lyndon B. Johnson signed the Medicare Act into law in 1965. This set up the Medicare system that is designed to provide health care for the elderly and disabled. It made sense that the DME industry originated in the 1970s. It is the elderly population that primarily needs medical equipment and soft goods (collectively referred to as “DME”) for day-to-day living. And so DME suppliers came into being to serve the DME needs of the elderly.

For decades, the DME industry was a “traditional Medicare fee-for-service” industry. Suppliers took care of their patients and learned how to bill traditional Medicare. Managed care was not part of DME suppliers’ lives. This began to change about 15 years ago…and the change has picked up speed over the past several years. Today, the DME industry can no longer regard itself as a traditional Medicare fee-for-service industry.

• Approximately 50% of Medicare beneficiaries are covered by Medicare Advantage (“MA”) plans. This percentage will continue to increase.
• MA plans receive about $454 billion.
• There are approximately 4000 MA plans available to Medicare beneficiaries.
• United Healthcare has about 29% of the MA market. Humana has about 18% of the MA market. Following these two large insurers are Blue Cross Blue Shield, CVS Health, Kaiser Permanente, Centene, Cigna, and many others.
• In 2023, MA plans received almost $13 billion in “bonus” payments from CMS.
• Marketing to Medicare beneficiaries (to convince them to sign up for MA plans…as opposed to using traditional Medicare) has become distasteful. Is anybody else, besides me, tired of seeing Joe Namath on television pitching Medicare Advantage?

MA is a “middleman model.” That is, CMS pays a certain amount of money each year to a MA plan…the plan pays out a portion of the money to physicians, hospitals, DME suppliers, etc.…and the plan “pockets the spread.” This type of model is easily susceptible to abuse. It is human nature for a MA plan to (i) desire to collect as much money as possible from CMS, (ii) desire to pay out as little money as possible to providers and suppliers, and (iii) desire to increase the spread.

It is also human nature to attempt to “game the system.” MA plans, which are owned by insurance companies, are not immune from engaging in fraudulent acts designed to increase the money (the “spread”) that the plans can pocket. As will be discussed below, MA plans are being scrutinized by governmental agencies and the courts. Here are four examples:

Biden Administration Action
On 12/7/23, the Biden Administration announced steps to increase transparency in the MA space. One of the Administration’s steps was to issue an RFI to solicit public feedback. According to the Administration, the government is expected to pay $7 trillion to MA plans over the next decade. The Biden Administration is focusing on (i) access to care, (ii) prior authorizations, (iii) provider directories, (iv) supplemental benefits, (v) marketing, (vi) care quality and outcomes, and (vii) value-based care.

Senate Committee Report
A Report was issued by the Majority Staff of the U.S. Senate Committee on Finance. According to the Report:

• The number of complaints about MA marketing more than doubled from 2020 to 2021.
• MA marketing is too aggressive and results in false and misleading information being provided to seniors.
• Seniors are besieged with in-person encounters, television ads, telemarketers, and robo-calls.

CIGNA Group Settlement
The Department of Justice (“DOJ”) published a press release on September 30, 2023 that states as follows:

The Cigna Group, headquartered in Connecticut, agreed to pay $172,294,350 to resolve allegations that it violated the False Claims Act by submitting and failing to withdraw inaccurate and untruthful diagnosis codes for its Medicare Advantage Plan (“MA”) enrollees in order to increase its payments from Medicare.

CMS pays the MA Plans a fixed monthly amount for each beneficiary who enrolls. CMS adjusts these monthly payments to account for various “risk” factors that affect expected health expenditures for the beneficiary, to ensure that MA Plans are paid more for those beneficiaries expected to incur higher healthcare costs and less for healthier beneficiaries expected to incur lower costs. To make these adjustments, CMS collects “risk adjustment” data, including medical diagnosis codes, from the MA Plans.

According to the press release, Cigna owns and operates MA Organizations that offer MA Plans to beneficiaries across the country. The United States alleged that Cigna submitted inaccurate and untruthful patient diagnosis data to CMS in order to inflate the payments it received from CMS, failed to withdraw the inaccurate and untruthful diagnosis data and repay CMS, and falsely certified in writing to CMS that the data was accurate and truthful. The settlement resolves these allegations.

“Over half of our nation’s Medicare beneficiaries are now enrolled in Medicare Advantage plans, and the government pays private insurers over $450 billion each year to provide for their care,” said Deputy Assistant Attorney General Michael D. Granston of the Justice Department’s Civil Division. “We will hold accountable those insurers who knowingly seek inflated Medicare payments by manipulating beneficiary diagnoses or any other applicable requirements.”

The United States alleged that, for payment years 2014 to 2019, Cigna operated a “chart review” program, pursuant to which it retrieved medical records (also known as “charts”) from healthcare providers documenting services they had previously rendered to Medicare beneficiaries enrolled in Cigna’s plans. Cigna retained diagnosis coders to review those charts to identify all medical conditions that the charts supported and to assign the beneficiaries diagnosis codes for those conditions. Cigna relied on the results of those chart reviews to submit additional diagnosis codes to CMS that the healthcare providers had not reported for the beneficiaries to obtain additional payments from CMS. However, Cigna’s chart reviews also did not substantiate some diagnosis codes that were reported by providers and previously submitted by Cigna to CMS.  Cigna did not delete or withdraw these inaccurate and untruthful diagnosis codes which would have required Cigna to reimburse CMS. Thus, the United States alleged that Cigna used the results of its chart reviews to identify instances where Cigna could seek additional payments from CMS, while improperly failing to use those same results when they provided information about instances where Cigna was overpaid.

…

The United States further alleged that Cigna reported diagnosis codes to CMS that were based solely on forms completed by vendors retained and paid by Cigna to conduct in-home assessments of plan members. The health care providers (typically nurse practitioners) who conducted these home visits did not perform or order the diagnostic testing or imaging that would have been necessary to reliably diagnose the serious, complex conditions reported, and were in many cases prohibited by Cigna from providing any treatment during the home visits for the medical conditions they purportedly found. The diagnoses at issue were not supported by the information documented on the forms completed by the vendors and were not reported to Cigna by any other healthcare provider who saw the patient during the year in which the home visit occurred. Nevertheless, Cigna submitted these diagnoses to CMS to claim increased payments, and falsely certified each year that the diagnosis data it submitted was “accurate, complete, and truthful.”

“For years, Cigna submitted to the Government false and invalid diagnosis information for its Medicare Advantage plan members. The reported diagnoses of serious and complex conditions were based solely on cursory in-home assessments by providers who did not perform necessary diagnostic testing and imaging. Cigna knew that these diagnoses would increase its Medicare Advantage payments by making its plan members appear sicker,” said Damian Williams, United States Attorney for the Southern District of New York. “This Office is committed to holding insurers accountable if they seek to manipulate the Medicare Advantage Program and boost their profits by submitting false information to the Government.”

The United States further alleged that, for payment years 2016 to 2021, Cigna knowingly submitted and/or failed to delete or withdraw inaccurate and untruthful diagnosis codes for morbid obesity to increase the payments it received from CMS for numerous beneficiaries enrolled in its MA plans. The medical records for individuals diagnosed as morbidly obese typically include one or more Body Mass Index (BMI) recordings. Individuals with a BMI below 35 cannot properly be diagnosed as morbidly obese. However, Cigna submitted or failed to delete inaccurate and untruthful diagnosis codes for morbid obesity for individuals lacking a BMI of 35 or above, and these codes increased the payments made by CMS.

In connection with the settlement, Cigna entered into a five-year Corporate Integrity Agreement (“CIA”) with the Office of Inspector General (“OIG”). The CIA requires that Cigna implement numerous accountability and auditing provisions. On an annual basis, top executives and members of the Board of Directors must make certifications about Cigna’s compliance measures, Cigna must conduct annual risk assessments and other monitoring, and an independent review organization will conduct multi-faceted audits focused on risk adjustment data.

“Medicare Advantage plans that submit false information to increase payments from CMS show blatant disregard for the integrity of these vital federal health care funds,” stated Christian J. Schrank, Deputy Inspector General for Investigations with the OIG. “Such actions are an affront to the Medicare program and the millions of patients who rely on its services. Working with our law enforcement partners, our agency will continue to prioritize investigating alleged fraud that targets the Medicare Advantage program.”

The civil settlement of the home visit allegations includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act by Robert A. Cutler, a former part-owner of a vendor retained by Cigna to conduct home visits.  Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery.  The qui tam case is captioned United States ex rel. Cutler v. Cigna Corp., et al., No. 3:21-cv-00748 (M.D. Tenn.). As part of the settlement, Mr. Cutler received $8,140,000.

Martin’s Point Health Care Settlement
The DOJ published a press release on July 31, 2023 that states as follows:

According to a July 31, 2023 DOJ press release, Martin’s Point Health Care Inc. (Martin’s Point), headquartered in Portland, Maine, has agreed to pay $22,485,000 to resolve allegations that it violated the False Claims Act by submitting inaccurate diagnosis codes for its Medicare Advantage Plan enrollees in order to increase reimbursements from Medicare.

Under Medicare Advantage, also known as the Medicare Part C program, Medicare beneficiaries have the option of enrolling in managed care insurance plans called Medicare Advantage Plans (“MA Plans”). MA Plans are paid a per-person amount to provide Medicare-covered benefits to beneficiaries who enroll in one of their plans. CMS adjusts the payments to MA Plans based on demographic information and the diagnoses of each plan beneficiary. The adjustments are commonly referred to as “risk scores.” In general, a beneficiary with diagnoses more expensive to treat will have a higher risk score, and CMS will make a larger risk-adjusted payment to the MA Plan for that beneficiary.

Martin’s Point operates Medicare Advantage plans for beneficiaries living in Maine and New Hampshire. The United States alleged that, from 2016 to 2019, Martin’s Point engaged in chart reviews of their Medicare Advantage beneficiaries to identify additional diagnosis codes that had not been submitted to Medicare. Many of the additional codes submitted, however, were not properly supported by the patients’ medical records. The government alleged that Martin’s Point nevertheless submitted those diagnosis codes, which resulted in higher payments from CMS.

“The government expects those who participate in Medicare Advantage to provide accurate information to ensure that proper payments are made for the care received by enrolled beneficiaries,” said Deputy Assistant Attorney General Michael D. Granston of the Justice Department’s Civil Division, Commercial Litigation Branch. “Today’s result sends a clear message to the Medicare Advantage community that the United States will take appropriate action against those who knowingly submit inflated claims for reimbursement.”

“It is a privilege for health plans to provide services to Medicare beneficiaries, not a right. Medicare Advantage Plan sponsors that submit inaccurate claim information in order to justify inflated payments undermine the financial integrity of the program,” said Deputy Inspector General for Investigations Christian J. Schrank at the Office of Inspector General (“OIG”). “HHS-OIG remains committed to protecting taxpayer-funded health care programs, including Medicare Advantage.”

The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act by Alicia Wilbur, a former manager in Martin’s Point’s Risk Adjustment Operations group. Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery. The qui tam case is captioned U.S. ex rel. Wilbur v. Martin’s Point Health Care Inc., No. 2:18-cv-00254 (DME). As part of today’s resolution, the whistleblower will receive approximately $3.8 million.

Conclusion
Until recently, MA plans were (in the eyes of the government) “black holes.” There was virtually no oversight by CMS of MA plans. It seemed like the approach by CMS and Congress was “out of sight, out of mind.” As long as there was not a public outcry, CMS and Congress seemed content to let MA plans operate without accountability.

This is finally beginning to change. Governmental regulators are taking notice that (i) the MA program is more expensive than traditional Medicare fee-for-service, (ii) there are too many incidents of MA plan enrollees not receiving proper care, (iii) the elderly are being subjected to abusive marketing practices, and (iv) providers and suppliers are being unfairly treated.

Interestingly, we are seeing the same phenomenon in the pharmacy/PBM space. Like MA plans, PBMs serve as the “middlemen” between (i) payors on the one hand and (ii) providers, suppliers and patients on the other hand. For decades, PBMs have been a “black hole” and spent a great deal of lobbying money. And so until recently, PBMs were left alone by governmental regulators. As is happening in the MA space, PBMs are now also under scrutiny. As with MA plans, the PBM middleman business model is vulnerable to abuse.

The hope is that we will see government-imposed reforms on the MA system. And as exemplified by the Cigna Group and Martin’s Point Health Care settlements, the most efficient watchdog is the whistleblower…the employee/vendor who has knowledge of fraudulent activities.

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, a law firm with a national health care practice based in Texas. He represents pharmacies, infusion companies, HME companies, manufacturers, and other health care providers throughout the United States. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization and can be reached at (806) 345-6320 or [email protected].

AAHOMECARE’S EDUCATIONAL WEBINAR

Cash-Only Retail: How to Succeed 

Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato

Tuesday, April 16, 2024

1:30-2:30 p.m. CENTRAL TIME

The DME industry primarily serves the elderly. This means that most DME suppliers are dependent on traditional Medicare and Medicare Advantage for most of their revenue. But as DME suppliers know from experience, it can be challenging to be so tied to Medicare. This is where retail comes in. There are 78 million Baby Boomers who are retiring at the rate of 10,000 per day. Many Boomers are willing to pay cash for “Cadillac” items rather than being limited to the “Cavalier” items paid for by Medicare. This program will present the legal parameters within which DME suppliers can move into the retail space. The issues to be presented will include the following:

• Whether the retail business should be (i) under the supplier’s existing Tax ID # or (ii) operated by a separate legal entity.
• State DME licensure.
• Selling Medicare-covered items at a discount off the Medicare allowable.
• Obtaining physician prescriptions.
• Collection and payment of sales tax.
• Qualification as a “foreign” corporation.
• Required notification to a Medicare beneficiary even though the supplier does not have a PTAN.

Register for Cash-Only Retail: How to Succeed on Tuesday, April 16, 2024, 1:30-2:30 p.m. CT, with Jeffrey S. Baird, Esq., Brown & Fortunato.

Members:  $99
Non-Members:  $129