Healthcare Business News

$115 million in overpayments alleged

By Joe Carlson
Posted: June 6, 2012 - 5:45 pm ET

(Story updated with additional comment at 5:55 p.m. ET.)

A subsidiary of UnitedHealth Group was accused by auditors of receiving as much as $115 million in overpayments from the CMS in 2007 by inappropriately using patient diagnosis codes to increase risk-adjusted reimbursements in the population-based insurance program Medicare Advantage.

The HHS inspector general's audit (PDF) says the company, PacifiCare of Texas, claimed in one instance that it should receive enhanced payments for a patient with leg pain and difficulty walking because the beneficiary had a previous diagnosis for major recurrent depression. In another example, PacifiCare submitted a risk-adjusted claim involving vascular disease for a patient who was treated for dropping a heavy can on her foot.

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The federal auditors said they turned up $183,000 in actual overpayments on 100 randomly selected claims, and then extrapolated that to conclude PacifiCare had probably received about $115 million too much in 2007. However, the office stopped short of recommending the CMS collect the projected figure from the company, saying PacifiCare officials should “work with” the Medicare agency to come up with an appropriate payment adjustment.

In an e-mailed statement Wednesday, a UnitedHealth spokeswoman said, "We respectfully disagree with the conclusions of the Office of the Inspector General's report. The audit does not follow Medicare's own guidelines, standards or accepted methodology for validating risk-adjustment payments. In fact, it differs significantly from CMS's adopted methodology. The OIG appears to have relied instead on a flawed and inaccurate methodology of its own making."

Federal officials said the “significant error rate” in the PacifiCare claims stemmed from lack of error correction and patient-chart validation policies and procedures, including UnitedHealth Group's claims that providers of care—not the insurer—are responsible for the accuracy of diagnosis codes submitted for PacifiCare's Medicare Advantage beneficiaries.

PacifiCare, one the nation's largest Medicare Advantage providers, took exception to a prior draft of the audit and asked that the inspector general either substantially revise its report or keep it confidential.

“PacifiCare strongly disagrees with the findings in the draft report and believes that the analysis, methodology, and extrapolation used by the OIG in its audit are flawed,” wrote Thomas Paul, CEO of United senior-care subsidiary Ovations, in a 38-page response to the audit that was included as an appendix to the inspector general's report. “Significantly, the OIG fails to account for the underlying complexities of risk adjustment payments in its audit methodology, and as a result, grossly overestimates an alleged overpayment amount.”

After receiving Paul's report, auditors did not change their findings or recommendations based on the company's protest, the final report says.

However, the inspector general's office said it would be appropriate to allow PacifiCare to negotiate a refund to the CMS based on an April 15, 2010, notice in the Federal Register (PDF) from the CMS stating that it was examining the impact of errors rates in Medicare fee-for-service data and how that impacts potential Medicare Advantage payments.

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