Beyond the Byline: Whistleblower claims that Aetna inflated provider network in 13 states

Modern Healthcare Hospital Operations Reporter Alex Kacik and Insurance Reporter Nona Tepper talk about a lawsuit that was unsealed recently alleging that Aetna operated a shadow network of pediatric primary-care doctors.

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Music Credit: Coffee by Cambo

Alex Kacik: Hello and welcome to Modern Healthcare's Beyond the Byline, where we offer a behind the scenes look into our reporting. I'm Alex Kacik. I write about hospital operations. Insurance reporter Nona Tepper is joining me today to talk about a new whistleblower lawsuit filed against Aetna. Thanks for joining me, Nona.

Nona Tepper: Thanks Alex.

Alex Kacik: So Nona, you covered a lawsuit that was unsealed recently alleging that Aetna operated a shadow network of pediatric primary care doctors. So what were some of the allegations?

Nona Tepper: I want to start by saying, and echoing your point that these are just allegations. We don't know if this is true and yeah just a heads up there. But basically the lawsuit was saying that Aetna was lying about the number of providers it had in its network. And it could do this for a number of reasons. Maybe to attract members to its network with the ploy that, oh, 'your doctor is, we've got a contract with them. You're not going to have to change your provider.' Maybe as a way to frustrate members in like kind of a weird backward sense by making it harder for them to schedule an appointment. That makes things more like likey to skip an appointment or less likely to see the doctor. And the reason that this lawsuit says that they potentially did this is so they could secure Medicaid contracts in the state of Pennsylvania.

Alex Kacik: And these contracts are usually pretty competitive. Different states will put out requests for proposals and then, they'll offer different bids. But yeah, I imagine if you say you have a big network of providers, this could give you a leg up when you're trying to cater for like this specific pediatric population.

Nona Tepper: Totally. These contracts are super competitive and they're only getting more so. There's new insurance in the Medicaid managed care market. So there's more insurers that you're going to have to compete with, as well as more states are also expanding their Medicaid programs and looking to manage care as a way to stabilize costs. And theoretically offer more preventative services and more services around the social determinants of health.

I also think there's a proposal by the democrats in Congress that says they want to make a federal Medicaid managed care program option. And they would do that in unexpanded states, which represent a huge portion of prospective enrollees, which would be a huge dollar amount. So although Medicaid Managed Care actually delivers the lowest profit margins among insurers lines of business, these are still big contracts and they're still very competitive. Aetna for instance, is actually suing the state of Pennsylvania right now because it was not awarded a contract in its recent bid for Medicaid managed care, despite the fact that this lawsuit exists.

Alex Kacik: Interesting. Yeah. So just a little background on qui tam lawsuits. I know we both covered them and they're informally known as 'whistleblower lawsuits.' And they're filed by a realtor on behalf of the government to recover taxpayer money spent on fraudulent claims and they're sealed initially, and through the initial proceedings and eventually opened to the public. And the government can intervene on these, which they do in one in four cases. Or they do in fewer than one in four cases. And then they could also allow the realtor to proceed and just having them oversee the case or they can move to dismiss.

And there was a memo, a Granston Memo that was put in place in 2018 to try to weed out frivolous lawsuits over concern that whistleblowers were solely filing lawsuits for their share of the settlement, because they'll get a portion, if they're successful. But what do we know...like a lot of times they're brought by former employees. So what do we know about who filed this amended complaint against Aetna?

Nona Tepper: Good question. Yeah, this lawsuit, you're right, was filed by a whistleblower. She was a former Aetna employee. She was a nurse quality consultant, I believe, and she was in charge of investigating why the number of annual visits among Aetna was Medicaid managed care members who are under the age of 21. They were seeing the doctor less than the state average. At the time, Aetna said it's discrimination by providers. They don't want to see Medicaid enrollees, maybe their rates are lower or whatever that may be. Aetna also blamed parental negligence on the part of these Medicaid enrollees, but after this investigator whose name was Carol Wessner started looking into it. I guess she said she found Aetna was falsifying its provider network.

So they were listing providers who were either out of network, out of state who didn't see children and in some cases who were dead and they were assigning them to these Medicaid enrollees and saying, 'hey, you have to perform this federal requirement to see these kids once a year.'

Alex Kacik: So the plaintiff Carol Wessner, she alleged that Aetna misrepresented its primary-care networks in all 13 states, the insurer's Medicaid contracts. This seemed to concentrate on Pennsylvania, but if those allegations are proven true, what's the significance of that?

Nona Tepper: That's a huge deal. If Aetna was lying about its Medicaid managed care provider network in 13 states, obviously there's legal ramifications. It would be violating the False Claims Act.  And that's what this lawsuit is filing under. There's also business ramifications.

As we've said, you know, it's a really competitive market out there and that would have helped Aetna secure these highly lucrative and five-year contracts, so it adds some stability to their business. And also I think there's also life and death consequences here. Like by assigning someone a provider who is potentially dead, you're saying they're not going to go to the doctor that year. They're not going to get the care they need and they're not going to have like a good experience in the healthcare industry.

We know that Medicaid enrollees are disproportionately poor people of color. Like you could widen national health disparities there, and you could also like reinforce some people's belief like distrust of the medical industry. So there's huge ramifications if this is a national problem or even just a local problem in Pennsylvania.

Alex Kacik: Sure. And I imagine it could spur some lawsuits as well from competitors, you know, if they think they were unfairly matched in this bidding process, competing for these pretty lucrative Medicaid contracts. I imagine they could try to recoup their alleged damages or losses for not gaining those contracts, too.

I'm not as familiar with these types of lawsuits when it comes to these shadow networks, but, you know, we have been tracking the Justice Department investigating claims against insurers, including Aetna, that they manipulated risk adjustment scores for their Medicare Advantage patients to get paid more. And so they would allegedly charge the government for more complex care, if they had co-morbidities or other issues that were making their care more complicated. They may say that this patient has a higher score, even though they maybe weren't as sick as they represented through those numbers. So I know their insurers have their kind of reasoning and justification behind this, and some of it may be administrative oversight or negligence. But it sounds like there are different avenues that federal regulators are looking at to ensure that these insurers are making sure, are above bar.

Nona Tepper: Totally. Medicare Advantage, I think you're more likely to see the risk adjustment inflation in those plans. I haven't seen it in Medicaid yet, but that doesn't mean it doesn't exist, and I think like another part of the Medicare Advantage story is like it's spending is rising faster than traditional Medicare spending. So the amount spent on enrollee, but we have no reason to believe that Medicare Advantage members are sicker. And it also comprises a larger portion of the Medicare federal budget than the population that it represents. So I believe it represents like 46% of the federal budget for Medicare, but it only represents 42% of enrollees. So the amount we're spending is increasing, but we don't have reason to believe that its enrollees are sicker or that they're healthier either, that it leads to better patient outcomes.

Alex Kacik: Got you. And just so we understand, you know, these insurers, whether it's like a managed care organization, they administer some of these claims on behalf of these different organizations that continue to grow, as you mentioned. So they have oversight over some of these Medicaid managed care plans or Medicare Advantage.

Nona Tepper: Yeah. So basically managed care takes over a portion of a state's like enrollees for Medicaid Managed Care, and they're like, 'we are generally going to enroll these in a per member per month basis.' So they'll receive a flat fee monthly to manage the care of each of these members, and basically their value proposition is like for states, especially during COVID. Like 'we'll help you add some stability to your budget and we'll also decrease your costs because we're going to better manage your care and provide longitudinal care and preventative services as well as services around the social determinants of health.' So like rides to the doctor's office, fresh food, affordable housing.

But there is some question about whether it actually does save money? Because Medicaid managed care contracts, they're allowed to spend 85% of their... or they are allowed to spend 15% of their profits on administration or just like keep them. But some local health authorities have said, 'well, hey, we can administer Medicaid. Traditional Medicaid fee for service for 5% administrative costs.'

I know that was part of the issue in Oklahoma where the governor and actually the local healthcare authority wanted Medicaid managed care to pass, but voters and the American Hospital Association, the local hospital association were opposed to it and ultimately the measure was voted down and although Oklahoma expanded Medicaid, it's traditional fee for service Medicaid.

Alex Kacik: Got you. And I know you mentioned off the top it was a federal legislation to expand some of these Medicaid Managed Care programs. But either way, there's some states that are pushing to expand Medicaid. So I imagine this could be a potential growth area and in a regulatory oversight, it would probably have to ramp up too.

Nona Tepper: Yeah, it's a big growth area, especially during like an economic downturn or when unemployment is so high. There's more government enrollees than there are commercial. So your government Medicaid managed care members are growing and that revenue's growing. Whereas the amount you may be getting from your employer customers might be declining. So that's also part of the equation there. And oversight is always a good thing.

Alex Kacik: And Nona, well thanks for breaking it down for us. Appreciate you taking the time.

Nona Tepper: Thanks for having me.

Alex Kacik: All right. Thank you all for listening. If you'd like to subscribe and support our work, there's a link in the show notes. You can subscribe to Beyond the Byline on Spotify or wherever you listen to your podcasts. You can stay connected with our work by following Nona and I in Modern Healthcare on Twitter and LinkedIn. We appreciate your support.