Government’s Crackdown on Risk Adjustment Fraud Continues

The DOJ Sept. 13 filing of a complaint in intervention in a case against Buffalo-based Independent Health (IH) and its coding consultant subsidiary, DxID is the latest example.

This summer, the U.S. Department of Justice’s (DOJ’s) enforcement in the Medicare Advantage (MA) program heated up and reached a tipping point with DOJ’s intervention in and consolidation of six whistleblower cases against Kaiser Permanente alleging risk adjustment fraud; the United States’ victory in UnitedHealthcare Ins. Co. v. Becerra, an influential case at the D.C. Circuit Court of Appeals challenging a rule that required MA organizations to return known overpayments; and Sutter Health’s agreement to a $90 million settlement in yet another MA risk adjustment fraud case.  

Now, for the third month in a row, yet another MA risk adjustment fraud case has advanced, with the government’s Sept. 13 filing of a complaint in intervention in a case against Buffalo-based  Independent Health (IH), its coding consultant subsidiary, DxID, and DxID’s former CEO, Betsy Gaffney.  Constantine Cannon whistleblower client Teresa Ross first filed the qui tam action in 2012 under the False Claims Act, which permits private parties to sue on behalf of the government for false claims and receive a share of up to 30 percent of the government recovery.

In one of the first times the federal government has targeted a coding company in its risk adjustment litigation, the government alleges that IH knowingly submitted false diagnoses to increase risk adjustment payments it received under the Medicare Advantage program – and that DxID, a coding company IH founded and then hired to conduct retrospective chart review and addenda services, mined charts for upcoding opportunities that could fraudulently increase Medicare payments. DxID, which also provided these services to other MA organizations (MAOs), billed the MAOs on a contingent basis, under which DxID would receive up to 20 percent of marginal payments the MAOs received as a result of DxID’s coding work, thereby creating perverse incentives for DxID to add new risk-adjusted diagnoses and ignore improper ones that, if corrected, would decrease Medicare payments. 

The United States further alleges that DxID, led by Ms. Gaffney, coded conditions that were not documented in the patients’ medical record, as required by Centers for Medicare & Medicaid Services (CMS) rules, and asked healthcare providers to sign addenda forms up to a year after an encounter, going back into files long after physician visits to add diagnosis codes to patient medical records that were based not on a physician’s assessment, but rather on impermissible laboratory tests, durable medical equipment claims, or diagnostic testing. IH then used the addenda, the complaint alleges, as substantiation for adding risk-adjusting diagnoses that were not documented during the patient encounter, in violation of Medicare requirements.

According to the DOJ complaint, such actions sometimes led to absurd results, citing cases in which a visit to the ophthalmologist resulted in a coding of pancreatitis. Characterizing the scope of the harm, the government alleges that DxID submitted thousands of unsupported medical condition codes on behalf of Independent Health between 2010 and 2017, resulting in “tens of millions” of dollars in overcharges. 

Next up in the case is an expected motion to dismiss, due to be filed by the defendants in mid-November. We will keep readers up to date on this case and other important developments in the government’s crackdown on risk adjustment fraud in the Medicare Advantage program.


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