Two US health insurers pay $32.5m in Medicare fraud settlement


Two US health insurers pay $32.5m in Medicare fraud settlement

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Two Florida-based health insurers and operators of Medicare managed healthcare insurance plans, Freedom Health and Optimum Healthcare, have agreed to pay $32.5 million to settle a whistleblower case over the allegations of Medicare and Medicaid fraud.

The lawsuit was filed in 2009 by late Dr. Darren Sewell, a former chief medical officer who worked at Freedom and Optimum from 2007 to 2012. Sewell passed away in 2014 but the case continued.

Under the settlement agreements, the Tampa-based companies, run by Dr. Kiranbhai Patel, and Siddhartha Pagidipati, will pay the US government $16.7 million to resolve the allegations of risk adjustment fraud and $15 million for the allegedly fraudulent expansion of their service areas, for a total settlement amount of $31.7 million.

Pagidipati, Freedom's former chief operating officer, will pay the United States $750,000 to resolve allegations regarding his role in the allegedly fraudulent expansion of Freedom's and Optimum's service areas.

The whistleblower complaint alleged that Freedom and Optimum improperly gamed a feature of the Medicare Advantage program known as risk adjustment, or risk scoring, which allows Medicare to make additional payments to managed-care plans based on the plan members' health-risk scores, which are calculated using patients' medical diagnoses.

Higher risk scores are supposed to reflect treatment of sicker patients, and risk-adjustment reimbursement is designed to offset increased costs associated with treating these patients. The lawsuit alleged that Freedom and Optimum fraudulently inflated their members' risk scores and the corresponding risk adjustment payments they received from CMS, the complaint alleges, by claiming their members were treated for conditions they either did not have or were not treated for.

The complaint also alleged that Freedom and Optimum, with the help of Pagidipati, fraudulently induced the Centers for Medicare & Medicaid Services (CMS), which administers the programs, to allow them to expand their health insurance offerings into new counties in Florida and the Carolinas by falsely representing that they had a sufficient network of doctors, clinics, and hospitals available to serve their enrollees in the expanded service area when they had no such networks in place.

The whistleblower settlement over risk adjustment fraud is the nation's largest.

"This is the largest whistleblower settlement involving health insurers' manipulation of their members' risk scores," said whistleblower attorney Mary Inman. "A $16.7 million recovery sends an important signal to health insurers that the government is serious about risk adjustment fraud. I wish my client were here to see it."

Medicare, Medicaid fraud, Freedom Health, Optimum Healthcare, Darren Sewell, Kiranbhai Patel, Siddhartha Pagidipati, Florida, US. Lawsuit