Court ruling could limit CMS’ ability to prevent insurers from upcoding
EXPERTS ARE WARNING that a federal judge has handcuffed the CMS in its ability to combat upcoding practices by Medicare Advantage plans.
U.S. District Judge Rosemary Collyer earlier this month vacated the 2014 rule that required Medicare Advantage plans to return overpayments to the government within 60 days of identifying them or they would be considered in violation of the False Claims Act and potentially subject to civil lawsuits, damages and penalties. Overpayments include diagnostic codes sent to the CMS for payment that are not documented in a patient’s medical chart. UnitedHealthcare had sued the CMS over the rule.
Whistle-blower lawsuits have challenged insurers, including UnitedHealthcare, for combing patient medical charts to find and report all possible diagnoses to submit for additional Medicare payments—a practice known as upcoding—but not deleting codes they knew were inaccurate.
Healthcare experts said that the overpayment rule was meant to help curb upcoding and fraudulent billing; vacating it paves the way for more of the same. It also gives insurers more tools to defend themselves against False Claims Act liability. Already, UnitedHealth has filed a statement in a pending Medicare Advantage whistle-blower suit explaining that Collyer’s decision could affect the whistle-blower’s claims.
The ruling “is really harmful to taxpayers and to the Medicare program in that all the levers in the Medicare Advantage program are lined up for plans to be able to control their coding destiny,” said Tim Gronniger, a former CMS official who is now senior vice president of development and strategy at Caravan Health, which helps build accountable care organizations. “The idea that CMS should be handcuffed in tracking behavior of Medicare Advantage plans is totally backwards.”
The CMS aims to pay traditional Medicare and Advantage plans in a way that is “actuarially equivalent.” But the judge decided the payments are not actuarially equivalent and violate federal law because the CMS does not audit traditional Medicare data, which are known to be riddled with errors. The agency requires Medicare Advantage data to be 100% accurate or insurers have to make back payments. Basing Advantage payments on “flawed data” makes those plans’ patients look healthier than they are, resulting in lower payments, Collyer wrote.
“The effect of the 2014 overpayment rule, without some kind of adjustment, is that Medicare Advantage insurers will be paid less to provide the same healthcare coverage to their beneficiaries than CMS itself pays for comparable patients,” Collyer wrote in the order.
That research files in the face of these conclusions, according to experts watching the decision. The Medicare Payment Advisory Commission’s latest report showed that payments to Medicare Advantage were 2% to 3% higher in 2016 than they would have been if those same patients were treated under fee-forservice Medicare. That’s because Advantage plans’ coding practices have resulted in their enrollees having an average risk score that’s 8% higher than similar Medicare fee-for-service beneficiaries, despite strong evidence that Advantage members are not sicker.
The judge’s decision also dealt with whether the 2014 overpayment rule puts a more burdensome obligation on insurers to identify and report overpayments to the CMS than the False Claims Act does. Few pages of the opinion are devoted to this question, but the conclusion has big consequences, legal experts said.
Under the False Claims Act and the ACA, insurers are liable for false claims if they had actual knowledge, deliberately ignored or recklessly disregarded the fact that a false claim was submitted to the government.
But UnitedHealth alleged, and the judge agreed, that the 2014 rule imposed a more stringent standard: negligence. Under that holding, insurers would be liable for violating the False Claims Act if they should have known that there was an overpayment and didn’t report it. “Not being Congress, CMS has no legislative authority to apply more stringent standards to impose FCA consequences through regulation,” Collyer ruled.
Brad Robertson, a partner at law firm Bradley in Birmingham, Ala., said the opinion calls into question any overpayment case that is based on negligence, and there are many of those. So in a case where an insurer has not actually identified an overpayment but the government alleges it should have known about one, the ruling “gives the insurer more arguments than it had before in its defense,” Robertson said.
That doesn’t mean it’s a good idea for insurers to abandon all compliance programs, he said, because the CMS could either appeal the judge’s ruling
● or issue a new overpayment rule.