Two insurers pay $31 million in Medicare Advantage fraud settlement

Two managed-care providers — Freedom Health and Optimum Healthcare — agreed to pay $31.7 million to settle claims that they fraudulently billed the CMS through the Medicare Advantage program.

A whistle-blower lawsuit alleged the insurers submitted false claims from 2008 to 2013 in order to inflate reimbursement dollars for some of its Medicare Advantage plans, according to the Department of Justice.

In addition, the DOJ claims Freedom Health misrepresented the size of its network of providers in an application to the CMS in 2008 so it could expand into new counties in Florida and in other states. Freedom Health's former COO Siddhartha Pagidipati has also agreed to pay $750,000 to resolve his role in this alleged scheme.

The lawsuit was filed by Dr. Darren Sewell, a former Freedom and Optimum employee from 2007 to 2012.

Both Freedom Health and Optimum are owned by America's 1st Choice Holdings of Florida, a holding company.

Freedom Health denied any wrongdoing. "We have agreed to resolve disputed claims without any admission of liability in order to avoid delay and the expense of litigation, so that we can focus on providing quality care, member service and maintaining the highest Medicare star ratings," said Bijal Patel, corporate counsel for Freedom Health and Optimum HealthCare, in a statement.

As part of the settlement, Freedom Health and Optimum have also entered into a corporate integrity agreement with the HHS' Office of Inspector General. Under the terms of the five-year agreement, Freedom Health and Optimum have agreed to develop a compliance program which includes hiring a compliance officer and a compliance committee. The board must also oversee the compliance program to ensure it's following federal standards.

Acting U.S. Attorney for the Middle District of Florida Stephen Muldrow said in a statement that the settlement underscored his office's commitment to combatting healthcare fraud, and noted Medicare Advantage's increasing importance in the overall healthcare industry.

The DOJ has made efforts in recent years to highlight overbilling and fraud among Medicare Advantage plans. The federal government has joined two lawsuits against United Health Group alleging fraud in the Medicare Advantage program. The agency is also investigating Aetna, Health Net, Humana and Cigna's Bravo Health to determine if they have been engaging in medical upcoding.

Under the Medicare Advantage program, the government pays private health plans more for sicker members. These risk scores were created to incentivize plans to cover all seniors regardless of their health status, but there have been several whistle-blower lawsuits in recent years that allege health plans have been inflating the scores to collect more funds.

The DOJ's settlement with Freedom Health and Optimum marks one of the few cases that have been resolved.