The American Hospital Association on Thursday urged the Justice Department to conduct more False Claims Act investigations of Medicare Advantage insurers for denying patients access to services and payments to providers.
But whether the False Claims Act applies to Medicare Advantage prior authorization denials is up for debate.
AHA's letter to the Justice Department cited a recent federal investigation that found Medicare Advantage plans have used prior authorization to deny beneficiaries access to medically necessary care. The association said civil and criminal penalties are necessary to prevent fraud by some Medicare Advantage insurers.
The AHA asked the department to set up a task force to conduct False Claims Act investigations of insurers that frequently deny care to beneficiaries or payment to providers.
"It is time for the Department of Justice to exercise its False Claims Act authority to both punish those (Medicare Advantage organizations) that have denied Medicare beneficiaries and their providers their rightful coverage and to deter future misdeeds," the letter sent to Acting Assistant Attorney General Brian Boynton said.
The False Claims Act is generally used in healthcare to prosecute providers who submitted a claim for Medicare or Medicaid payment that they know is fraudulent. Healthcare companies paid nearly 90% of fraud settlements collected by the Justice Department in 2021.
When the federal government targets Medicare Advantage insurers for false claims, it's typically because an insurer has been making members appear sicker than they are.
The Supreme Court ruled in 2016 that companies are liable under the False Claims Act if they lied by omission to the government, so long as certain conditions are met. Courts have also ruled that federal healthcare claims are fraudulent if care was provided so poorly that it essentially didn't amount to care at all.
But the recent investigation found that current Medicare guidance on medical necessity reviews is vague. Bill Horton, a partner at law firm Jones Walker, said the False Claims Act could be too strong of an enforcement mechanism for Medicare Advantage prior authorization denials.
"I think there is some danger in using the False Claims Act, which is a big hammer, against things that might be differences of medical opinion or might simply be differences of interpretation of unclear regulations and policies," Horton said. "That is not at all to say there is not a problem… I just don't see the False Claims Act as being the right tool."
Insurers must certify they're in compliance with Medicare guidelines to receive capitated payments from the Centers for Medicare and Medicaid Services, said Jay Dewald, head of healthcare investigations at law firm Norton Rose Fulbright. There's an argument to be made that an insurer is lying to CMS if it routinely denies care it told the agency it would cover, he said.
"Every one of these problems, they always prejudice the beneficiaries, but they always benefit the health insurance company's bottom line," Dewald said. "When you see these problems stack up like that, so consistently in favor of the companies, and it's so profit focused, I think at that point, you really begin to trigger some of the knowledge elements of the False Claims Act—should they have known better?"
AHA also wrote to CMS on Thursday urging more oversight of Medicare Advantage plans. The hospital lobby asked CMS to create standardized reporting on prior authorization metrics, enforce non-compliance penalties for plans and stop plans from claiming diagnoses for risk adjustment when they've denied coverage for treatment of that diagnosis.
The organization requested a meeting with CMS to discuss fixing Medicare Advantage prior authorization.
Insurers and providers have been sparring over prior authorization for years. Almost 90% of providers reported prior authorization felt burdensome, according to a 2021 Medical Group Management Association survey. But insurers maintain the system prevents unnecessary care and excess costs.