Skip to main content
Sister Publication Links
  • ESG: THE NEW IMPERATIVE
Subscribe
  • Sign Up Free
  • Login
  • Subscribe
  • News
    • Current News
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • Transformation
    • People
    • Regional News
    • Digital Edition (Web Version)
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • Midwest
    • Northeast
    • South
    • West
  • Digital Health
  • Insights
    • ACA 10 Years After
    • Best Practices
    • Special Reports
    • Innovations
  • Opinion
    • Bold Moves
    • Breaking Bias
    • Commentaries
    • Letters
    • Vital Signs Blog
    • From the Editor
  • Events & Awards
    • Awards
    • Conferences
    • Galas
    • Virtual Briefings
    • Webinars
    • Nominate/Eligibility
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • Best Places to Work in Healthcare
    • Excellence in Governance
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top 25 Emerging Leaders
    • Top 25 Innovators
    • Diversity in Healthcare
      • - Luminaries
      • - Top 25 Diversity Leaders
      • - Leaders to Watch
    • Women in Healthcare
      • - Luminaries
      • - Top 25 Women Leaders
      • - Women to Watch
    • Digital Health Transformation Summit
    • ESG: The Implementation Imperative Summit
    • Leadership Symposium
    • Social Determinants of Health Symposium
    • Women Leaders in Healthcare Conference
    • Best Places to Work Awards Gala
    • Health Care Hall of Fame Gala
    • Top 25 Diversity Leaders Gala
    • Top 25 Women Leaders Gala
    • - Hospital of the Future
    • - Value Based Care
    • - Supply Chain
    • - Hospital at Home
    • - Workplace of the Future
    • - Digital Health
    • - Future of Staffing
    • - Hospital of the Future (Fall)
  • Multimedia
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Video Series - The Check Up
    • Sponsored Video Series - One on One
  • Data Center
    • Data Center Home
    • Hospital Financials
    • Staffing & Compensation
    • Quality & Safety
    • Mergers & Acquisitions
    • Data Archive
    • Resource Guide: By the Numbers
    • Surveys
    • Data Points
  • MORE +
    • Contact Us
    • Advertise
    • Media Kit
    • Newsletters
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Legal
December 20, 2022 02:48 PM

How Medicare Advantage plans avoided auditors, overcharged taxpayers by millions

Fred Schulte and Holly K. Hacker, Kaiser Health News
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Surprise Billing2.jpg

    In April 2016, government auditors asked a Blue Cross Medicare Advantage health plan in Minnesota to turn over medical records of patients treated by a podiatry practice whose owner had been indicted for fraud.

    Medicare had paid the Blue Cross plan more than $20,000 to cover the care of 11 patients seen by Aggeus Healthcare, a chain of podiatry clinics, in 2011.

    Blue Cross said it couldn’t locate any records to justify the payments because Aggeus shut down in the wake of the indictment, which included charges of falsifying patient medical files. So Blue Cross asked the Centers for Medicare & Medicaid Services for a “hardship” exemption to a strict requirement that health plans retain these files in the event of an audit.

    CMS granted the request and auditors removed the 11 patients from a random sample of 201 Blue Cross plan members whose records were reviewed.

    A review of 90 government audits, released exclusively to KHN in response to a Freedom of Information Act lawsuit, reveals that health insurers that issue Medicare Advantage plans have repeatedly tried to sidestep regulations requiring them to document medical conditions the government paid them to treat.

    The audits, the most recent ones the agency has completed, sought to validate payments to Medicare Advantage health plans for 2011 through 2013.

    As KHN reported late last month, auditors uncovered millions of dollars in improper payments — citing overcharges of more than $1,000 per patient a year on average — by nearly two dozen health plans.

    The hardship requests, together with other documents obtained by KHN through the lawsuit, shed light on the secretive audit process that Medicare relies on to hold accountable the increasingly popular Medicare Advantage health plans — which are an alternative to original Medicare and primarily run by major insurance companies.

    Reacting to the audit findings, Sen. Chuck Grassley (R-Iowa) called for “aggressive oversight” to recoup overcharges.

    “CMS must aggressively use every tool at its disposal to ensure that it’s efficiently identifying Medicare Advantage fraud and working with the Justice Department to prosecute and recover improper payments,” Grassley said in a written statement to KHN.

    Medicare reimburses Medicare Advantage plans using a complex formula called a risk score that computes higher rates for sicker patients and lower ones for healthier people.

    But federal officials rarely demand documentation to verify that patients have these conditions, or that they are as serious as claimed. Only about 5% of Medicare Advantage plans are audited yearly.

    When auditors came calling, the previously hidden CMS records show, they often found little or no support for diagnoses submitted by the Advantage plans, such as chronic obstructive pulmonary disease, diabetes, or vascular disease. Though auditors look at the records of a relatively small sample of patients, they can extrapolate the error rate to the broad population of patients in the Medicare Advantage health plan and calculate millions of dollars in overpayments.

    Overall, CMS auditors flagged diagnostic billing codes — which show what patients were treated for — as invalid more than 8,600 times. The audits covered records for 18,090 patients over the three-year period.

    In many cases, auditors found that the medical credentials of the healthcare provider who made the diagnosis were unclear, the records provided were unacceptable, or the record lacked a signature as required. Other files bore the wrong patient’s name or were missing altogether.

    The rates of billing codes rejected by auditors varied widely across the 90 audits. The rate of invalid codes topped 80% at Touchstone Health, a defunct New York HMO, according to CMS records. The company also was shown to have the highest average annual overcharges — $5,888 per patient billed to the government.

    By contrast, seven health plans had fewer than 10% of their codes flagged.

    Not a Modern Healthcare subscriber? Sign up today.

    Registering excuses


    One Medicare Advantage health plan submitted 57 hardship requests, more than any other insurer, though CMS approved only six. In three cases, the health plans said the records were destroyed in floods. Another cited a warehouse fire, and two said the records couldn’t be turned over because a doctor had been convicted for his role in illegally distributing millions of oxycodone pills through his network of pain clinics.

    Other Medicare Advantage health plans argued they had no luck retrieving medical records from doctors who had moved, retired, died — and in some cases been arrested or lost their licenses for misconduct.

    CMS found most excuses wanting, telling health plans they granted exceptions only in “truly extraordinary circumstances.” CMS said it receives about 100 of these requests for each year it audits and approves about 20% of them.

    The Medicare Advantage plan issued by Minnesota Blue Cross won its appeal after it relied on Aggeus Healthcare for diagnoses of vascular disease for 11 of its patients who got podiatry care.

    Dr. Yev Gray, a Chicago podiatrist who owned the Aggeus chain that operated in more than a dozen states, was indicted on federal fraud charges in Missouri in October 2015.

    The indictment accused him of creating an electronic medical record that fraudulently added billing codes for treatment of medical conditions patients didn’t necessarily have, including vascular disease.

    Gray pleaded guilty in May 2017 to charges of conspiracy to defraud the United States and making false statements related to healthcare matters. He was sentenced to 90 months in prison.

    Blue Cross said it “terminated” its network agreements with Aggeus about two weeks after learning of the indictment. Jim McManus, director of public relations for Blue Cross and Blue Shield of Minnesota, had no comment on the case but said the insurer “is committed to investigating credible cases of fraud, waste, and abuse.”

    Dara Corrigan, a CMS deputy administrator, said that as a “general matter,” its Medicare Advantage audits “are not designed to detect fraud, nor are they intended to identify all improper diagnosis submissions.”

    Download Modern Healthcare’s app to stay informed when industry news breaks.

    Protecting taxpayers


    The costs to taxpayers from improper payments have mushroomed over the past decade as more seniors pick Medicare Advantage plans. CMS has estimated the total overpayments to health plans for the 2011-2013 audits at $650 million, yet how much it will eventually claw back remains unclear.

    Payment errors continue to be a drain on the government program. CMS has estimated net overpayments to Medicare Advantage plans triggered by unconfirmed medical diagnoses at $11.4 billion for 2022.

    “This isn’t a partisan issue,” said Sen. Sherrod Brown (D-Ohio). “I’ve requested a plan from CMS as to how they plan to recoup these taxpayer-funded overpayments and prevent future overbilling.”

    Leslie Gordon, an acting director of healthcare for the Government Accountability Office, said CMS needs to speed up the audit and appeals process to get quicker results.

    “That is money that should be recovered,” Gordon told KHN.

    As Medicare Advantage faces mounting criticism from government watchdogs and in Congress, the industry has tried to rally seniors to its side while disputing audit findings and research that asserts the program costs taxpayers more than it should.

    AHIP, an insurance industry trade group, criticized KHN’s reporting on the newly released audits as “misleading,” while the pro-industry group Better Medicare Alliance said the audits were “in some cases, more than a decade old.”

    Jeff De Los Reyes, a senior vice president at GHG Advisors healthcare consulting group, said he believes the health plans have improved their documentation in recent years. But, he said, “coding is never 100% perfect and there will be errors despite the best of intentions.”

    Rep. Katie Porter, a Democrat from Southern California and a critic of Medicare Advantage, countered: “When big insurance bills taxpayers for care it never intends to deliver, it is stealing our tax dollars.”

    Kaiser Health News is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation which is not affiliated with Kaiser Permanente.

    Related Article
    Hidden audits reveal millions in Medicare Advantage overcharges
    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    Surprise Billing2.jpg
    Providers score another win in surprise billing litigation
    drugs_money
    Drugmakers restrict 340B sales after appellate court ruling
    Most Popular
    1
    More healthcare organizations at risk of credit default, Moody's says
    2
    Centene fills out senior executive team with new president, COO
    3
    SCAN, CareOregon plan to merge into the HealthRight Group
    4
    Blue Cross Blue Shield of Michigan unveils big push that lets physicians take on risk, reap rewards
    5
    Bright Health weighs reverse stock split as delisting looms
    Sponsored Content
    Daily Dose Newsletter: Sign up to receive a late afternoon weekday roundup of that day’s breaking news and developments in healthcare.
    Get Newsletters

    Sign up for enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today
    MH Magazine Cover

    MH magazine offers content that sheds light on healthcare leaders’ complex choices and touch points—from strategy, governance, leadership development and finance to operations, clinical care, and marketing.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS

    Our Mission

    Modern Healthcare empowers industry leaders to succeed by providing unbiased reporting of the news, insights, analysis and data.

    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • News
      • Current News
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • Transformation
        • Patients
        • Operations
        • Care Delivery
        • Payment
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition (Web Version)
    • Digital Health
    • Insights
      • ACA 10 Years After
      • Best Practices
      • Special Reports
      • Innovations
    • Opinion
      • Bold Moves
      • Breaking Bias
      • Commentaries
      • Letters
      • Vital Signs Blog
      • From the Editor
    • Events & Awards
      • Awards
        • Nominate/Eligibility
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • Best Places to Work in Healthcare
        • Excellence in Governance
        • Health Care Hall of Fame
        • Healthcare Marketing Impact Awards
        • Top 25 Emerging Leaders
        • Top 25 Innovators
        • Diversity in Healthcare
          • - Luminaries
          • - Top 25 Diversity Leaders
          • - Leaders to Watch
        • Women in Healthcare
          • - Luminaries
          • - Top 25 Women Leaders
          • - Women to Watch
      • Conferences
        • Digital Health Transformation Summit
        • ESG: The Implementation Imperative Summit
        • Leadership Symposium
        • Social Determinants of Health Symposium
        • Women Leaders in Healthcare Conference
      • Galas
        • Best Places to Work Awards Gala
        • Health Care Hall of Fame Gala
        • Top 25 Diversity Leaders Gala
        • Top 25 Women Leaders Gala
      • Virtual Briefings
        • - Hospital of the Future
        • - Value Based Care
        • - Supply Chain
        • - Hospital at Home
        • - Workplace of the Future
        • - Digital Health
        • - Future of Staffing
        • - Hospital of the Future (Fall)
      • Webinars
    • Multimedia
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Video Series - The Check Up
      • Sponsored Video Series - One on One
    • Data Center
      • Data Center Home
      • Hospital Financials
      • Staffing & Compensation
      • Quality & Safety
      • Mergers & Acquisitions
      • Data Archive
      • Resource Guide: By the Numbers
      • Surveys
      • Data Points
    • MORE +
      • Contact Us
      • Advertise
      • Media Kit
      • Newsletters
      • Jobs
      • People on the Move
      • Reprints & Licensing