Feds Settle Huge Whistleblower Suit Over Medicare Advantage Fraud

One of the nation's largest dialysis providers pays $270 million to stay a whistleblower's allegation that it helped Medicare Advantage insurance plans cheat the government for quite some time.

The settlement by HealthCare Partners Holdings LLC, a part of giant dialysis company DaVita Inc., is considered to become the largest to date involving allegations that some Medicare Advantage plans exaggerate how sick their patients will be to inflate government payments. DaVita, that is headquartered in El Segundo, Calif., did not admit fault.

“This settlement demonstrates our tireless commitment to rooting out fraud that drains too many taxpayer dollars from public health programs like Medicare,” said U.S. Attorney Nick Hanna in announcing the settlement Monday.

Medicare Advantage plans, which now enroll more than One in three seniors nationwide, have faced growing government scrutiny in recent years over their billing practices. A minimum of a half-dozen whistleblowers have filed lawsuits accusing the insurers of boosting payments by overstating how sick people are. In May 2021, two Florida Medicare Advantage insurers agreed to pay nearly $32 million to stay an identical lawsuit.

The DaVita settlement cites improper medical coding by HealthCare Partners from early 2007 with the end of 2021. The company, according to the settlement agreement, submitted “unsupported” diagnostic codes that allowed the health plans to receive higher payments than they were due. Officials didn't identify the health plans that overcharged as a result.

One such “unsupported” code was for a spinal condition referred to as spinal enthesopathy which was improperly diagnosed in patients in Florida, Nevada and California from Nov. 1, 2011, to Dec. 31, 2021, according to the settlement. The agreement did not say just how much health plans took in from the unsupported codes.

The company also contracted with a Nevada firm from 2010 through January 2021 that sent health care providers to go to patients in their homes, a controversial practice that critics have long held is performed largely to inflate Medicare payments. These house calls also generated “unsupported or undocumented” diagnostic codes, based on the settlement.

Officials said that DaVita disclosed the practices to the government. It acquired HealthCare Partners, a large California-based doctors' group, in 2012. I was told that the federal government agreed to a “favorable resolution” of the allegations payment because of the self-disclosure.

In a statement, DaVita said the settlement “reflects close cooperation using the government to deal with practices largely originating with HealthCare Partners.” DaVita said the settlement will be paid with escrow funds set aside by the former owners.

“This case involved illegal conduct by which patients' medical conditions were improperly reported and were not corrected after further review – all with regards to boosting the conclusion,” reads the government's statement.

The settlement also resolves allegations made by whistleblower James Swoben that HealthCare Partners knew that many of the diagnostic codes were unsupported, but failed to report them. The organization reported only cases in which it deserved higher reimbursement, while ignoring codes that would slash payments, an exercise known as “one-way” chart reviews.

Swoben, a former employee of a company that did business with DaVita, will receive approximately $10 million for the settlement of the “one-way” allegations, under the federal False Claims Act, which rewards whistleblowers who expose fraud.