Humana facing new federal scrutiny over private Medicare plans

Introduction

Giant health insurer Humana, Inc. faces new scrutiny from the Justice Department over allegations it has overcharged the government by claiming some elderly patients enrolled in its popular Medicare plans are sicker than they actually are.

The Louisville, Kentucky-based company disclosed the Justice Department’s recent civil “information request” in an annual report filed with the Securities and Exchange Commission on Feb. 18. The company noted that it is cooperating with authorities.

“We continue to cooperate with and voluntarily respond to the information requests from the Department of Justice and the U.S. Attorney’s Office,” Humana wrote.

The privately run Medicare Advantage plans offer seniors an alternative to standard Medicare, which pays doctors for each service they render. By contrast, under Medicare Advantage, the health plans are paid a set fee monthly for each patient based on a complex formula known as a risk score. Essentially, the government pays higher rates for sicker patients and less for those in good health.

But overcharges related to inflated risk scores, intentional or not, have cost taxpayers billions of dollars in recent years, as the Center for Public Integrity reported in a series published last year.

The Center first disclosed multiple investigations of the Humana Medicare Advantage plan last May based on records filed by the U.S. Attorney’s Office in a Miami civil suit.

But Humana’s SEC disclosure offers fresh details into the wide scope of the Justice review, indicating it is taking aim at a range of common Medicare Advantage billing practices and fraud controls, as well as Humana’s use of home health assessments of patients in its plans. The industry argues these “house calls” improve the health of elderly patients, but federal officials have been concerned that the primary objective is to raise risk scores and revenues.

Humana said the Justice Department had requested a range of records about “our business and compliance practices related to risk adjustment data generated by our providers and by us, including medical record reviews conducted as part of our data and payment accuracy compliance efforts, the use of health and well-being assessments, and our fraud detection efforts.”

The disclosure drew attention on Capitol Hill.

“I’ll watch this investigation to see if it might result in ways to improve risk adjustment policy, either through [Centers for Medicare and Medicaid Services] action on its own or legislation if necessary,” said Senate Judiciary Committee chairman Chuck Grassley (R-Iowa). “If the policy drives over-billing, it should be fixed.”

The government probe comes at an inopportune time for the burgeoning Medicare Advantage industry, which is mounting an intense lobbying and advocacy effort to stave off proposed government funding cuts.

The Centers for Medicare and Medicaid Services is set to release proposed funding levels for 2016 on Friday. More than 16 million seniors have joined these private health plans. Humana has enrolled about 3.2 million people in Medicare Advantage plans.

What will happen to the rates is not yet clear. But the Obama administration’s 2016 budget seeks to cut some $36 billion from Medicare Advantage plans over the next decade related to oversized risk scores.

Allegations that some Medicare Advantage plans manipulate risk scores, a process known in the industry as “upcoding,” have been surfacing over the past year in the federal courts.

The Center for Public Integrity has previously reported on several of these whistleblower lawsuits, including one filed by a Miami doctor against Humana.

In that case, Olivia Graves alleges that a Humana medical center had diagnosed abnormally high numbers of patients with diseases such as diabetes with complications that boosted Medicare payments — diagnoses that “were not supported by medical records.” Graves alleges that Humana knew about the overcharges but took no action to stop them. Humana has denied the allegations.

And in early February, a federal grand jury in West Palm Beach, Fl. indicted Dr. Isaac Kojo Anakwah Thompson on eight counts of health care fraud. He’s accused of cheating Medicare out of about $2.1 million by inflating risk scores of some Humana-enrolled patients. Thompson, 55, is free on a $1 million bond and has declined comment through his lawyer.

The Florida indictment did not accuse Humana of wrongdoing, but company spokesman Tom Noland said that it had repaid the government. He declined to say how much.

New scrutiny of home visits also could prove troublesome for the industry. At least one whistleblower, a former manager at a California firm that does medical home visits, has alleged that the process was abused to inflate risk scores.

Humana has been a major promoter of these home assessments. In an email to the Center today, Noland wrote: “We believe in continuing to do in-home assessments as we see this as an important step in establishing care management plans for our members living with multiple chronic conditions.”

Noland declined to say how many of the home assessments Humana has performed. But the company has previously said that it conducted the assessments for about 531,000 members in the first three months of 2014.

Though house calls have become a ritual for hundreds of thousands of seniors in Medicare Advantage plans, federal officials remain concerned about their costs.

A Center for Public Integrity investigation published last year found that the home health assessment industry has flourished even as federal officials struggled to prevent Medicare Advantage plans from tuning up risk scores and overcharging the government by billions of dollars. By the government’s own estimates, nearly $70 billion in “improper” payments were made to Medicare Advantage plans from 2008 through 2013, mostly overbillings tied to inflated risk scores.

CMS officials have indicated that they might bar use of home visits for assessing a patient’s health and a decision to do so could be announced as early as Friday. In the past, however, CMS has backed down from restricting the visits after protests from Medicare Advantage plans.

The Florida criminal case is expected to provide a rare look inside the complexities of the Medicare Advantage payment system.

According to the grand jury, Humana paid Thompson, who ran medical centers in Delray Beach and Boynton Beach, about 80 percent of the money it received from CMS for treating patients. In exchange, the medical center was responsible for paying for all of the members’ medical care.

Humana uses records coded by its doctors to justify each patient’s risk score. Certain medical conditions deemed expensive to treat raise the score and thus the government payment for that patient. The accuracy of those scores is at the heart of the case against Thompson — and the federal probe.

Thompson allegedly reported “false and fraudulent” diagnoses to Humana, which then passed them on to Medicare for payment. The indictment cites eight patients with three medical conditions, including four people said to have “ankylosing spondylitis,” a disease of the spine that can cause abnormal bone growth.

The indictment states that as a result of the inflated risk scores Medicare made “excessive payments” of at least $2,114,332.33.

Humana spokesman Noland said the company “has reimbursed the government to ensure that both the 20 percent and the 80 percent were paid back in full, thus making the government whole.”