A Florida health insurance company and its former chief operating officer will pay $32.5 million to settle a whistle-blower lawsuit that alleged the insurer defrauded the federal government for years by falsifying claims to make its members appear sicker than they really were in order to extract bigger payments from Medicare.
In a federal lawsuit unsealed this week, the Justice Department said that Freedom Health, a Tampa-based HMO, gamed diagnosis codes from 2008 to 2013 to inflate reimbursements for members of the company’s Medicare Advantage plans in Florida.
The higher reimbursements are known as “risk adjustment,” and they’re supposed to offset the higher cost of treating sicker patients. But the federal complaint, initiated by Freedom’s former chief medical officer, said that the members either were treated for conditions they did not have or they never received additional care.
Freedom Health and its affiliate, Optimum Healthcare, covered more than 123,000 Floridians in 25 counties through its Medicare Advantage plans in April 2017, according to federal estimates.
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The Justice Department also accused Freedom of lying to federal regulators about the size and makeup of its network of doctors, hospitals and other healthcare providers in a 2008 application to expand into new counties in Florida and in other states.
Freedom submitted to the Centers for Medicare and Medicaid Services a directory of hospitals, doctors and specialists that were purportedly in its network but who never agreed to provide care for Freedom’s members, effectively creating “an illusion,” said Mary Inman, a lead attorney for the whistle-blower, Darren D. Sewell, a physician who worked for Freedom from 2007 to 2012.
Doctors were unable to refer Freedom members to specialists, Inman said, and one Central Florida patient cited in the complaint had to travel hundreds of miles for a mammogram and bone density test.
Freedom’s corporate attorney, Bijal Patel, issued a written statement on June 2 noting that the insurer has received high ratings for quality and customer satisfaction, and that the company settled in order to “avoid delay and the expense of litigation.”
“Medicare managed care is a complex and constantly changing industry in which it is common to have differing interpretations of regulations,” Patel said in the statement.
Freedom’s former chief operating officer, Siddhartha Pagidipati, who agreed to pay $750,000 to resolve his alleged role in the scheme to expand into new counties and states without an adequate provider network, issued a written statement calling the claims in the whistleblower lawsuit “disputed”.
As of May, Freedom and its affiliate, Optimum Healthcare, operated in 25 Florida counties — including Miami-Dade, Broward and Palm Beach — and covered more than 123,000 people statewide, according to federal enrollment data.
The company will pay $31.7 million to settle the two fraud allegations: $16.7 million for the risk adjustment claims and $15 million for the provider network charge.
Inman said that in recent years, as evidence has grown that many Medicare Advantage plans routinely overbill the government, the Justice Department has stepped up prosecution of risk adjustment fraud. In March, the federal government joined two lawsuits against United Health Group alleging a similar type of risk adjustment fraud in that insurer’s Medicare Advantage plans.
Medicare Advantage has become increasingly popular for older Americans, who qualify at age 65. The plans cover almost 18 million people — nearly one-third of all Medicare beneficiaries — and it’s big business in South Florida, where 61 percent of enrollees or more than 460,000 people are signed up for Medicare Advantage in Miami-Dade and Broward counties, according to federal estimates.
Sewell filed the lawsuit against Freedom in 2009, and his allegations led to an undercover FBI investigation in which Sewell participated, Inman said. He died in September 2014 but his estate is entitled to receive a share of the settlement, about $4.8 million to $8.1 million, Inman said.
Though Freedom Health admitted no wrongdoing in the settlement, the company also will enter into a corporate integrity agreement with the Department of Health and Human Services detailing steps the insurer will take to comply with federal law, including the establishment of a compliance committee, written standards and independent reviews.
This story has been updated to include a statement from Freedom Health and its former executive, Siddhartha Pagidipati.