Wall Street Journal Reports UnitedHealth Under Criminal Investigation for Medicare Fraud

The Wall Street Journal has an exclusive report that UnitedHealth is being investigated by the Department of Justice for criminal fraud with respect to Medicare Advantage claims. Note that this is not a Trump Administration initiative per se; UnitedHealth has been subject to civil whistleblower filings where the DoJ joined the whistleblower case as it often does in fraud cases involving government contracts. Nor does this means that the DoJ will actually move forward with a criminal case, particularly since past fraud cases against UnitedHealth have lost in court.

What the article does not make clear enough is that the practice that the DoJ is targeting is upcoding. That is reviewing a patient’s records before a claim is submitted to see if either the classification of the ailment (the diagnosis codes) or the services provided (the procedure codes) can be revised so as to result in a larger insurance claim.

If the DoJ lodges and wins this case, it has the potential to shake up the medical grifting adminisphere in a big way. It would lay the foundations for other criminal cases as well as for private actions. For starters, CalPERS runs a large in-house health insurance program. Similarly, state-run Medicaid programs could pursue hospital system and other large claimants.

What I fail to understand, and hopefully expert readers can explain, is why repeated efforts to target this abuse have not already drawn blood. The very fact that this practice is called “upcoding” as opposed to something more neutral, like “code review,” which could be argued to signify that the intent is merely to correct doctor errors and not to squeeze more money from payors like the government. For instance, how often do these “upcoding” reviews result in claim reclassification so as to lower the amount charged in comparison to how the doctor or hospital originally wrote up the patient care? Similarly, the language I’ve seen in sales pitches for software vendors offering upcoding products to medical practices makes it uncomfortably obvious that the aim is to squeeze more money from insurers, and not give the most accurate presentation possible of the patient’s condition and the services rendered.

This failure, at least with respect to Medicare Advantage to score even a partial win on upcoding absubes, leads me to wonder if the insurer contracts with the government have unusually permissive language which authorizes what on a common-sense basis would seem to be a fraud.

Consider this section of the Journal’s account:

The healthcare-fraud unit of the Justice Department’s criminal division is overseeing the investigation, the people said, and it has been an active probe since at least last summer.

While the exact nature of the potential criminal allegations against UnitedHealth is unclear, the people said the federal investigation is focusing on the company’s Medicare Advantage business practices….

The probe adds to a list of government inquiries into the company, including investigations of potential antitrust violations and a civil investigation of its Medicare billing practices, including at its doctors offices….

The Justice Department’s criminal healthcare fraud unit focuses on crimes such as kickbacks that trigger higher Medicare or Medicaid payments….the unit has turned its focus to insurers in the Medicare Advantage system, where they now oversee taxpayer-funded benefits for more than half the seniors and disabled people in the broader Medicare program….

Medicare Advantage insurers are paid extra for covering sicker patients, creating an incentive to document diagnoses for patients they cover. In some cases, the Journal’s reporting has shown, questionable diagnoses by UnitedHealth added billions to taxpayers’ costs….

The DOJ has struggled to make its case in fraud claims against UnitedHealth in the past. In March, a court-appointed special master recommended that a judge effectively dismiss a whistleblower case against UnitedHealth after concluding the government hadn’t presented evidence that patient diagnoses submitted for payment were inaccurate. The judge in the case hasn’t yet ruled on the recommendation.

That civil case, brought by a former UnitedHealth employee turned whistleblower in 2011 and joined by the government in 2017, concerned claims that UnitedHealth submitted $2 billion worth of diagnoses recorded by doctors that its own reviewers determined weren’t supported by patients’ medical charts.

The DoJ has petitioned the court to reject the special master’s findings. Regardless, this seems like an astonishing outcome. The whistleblower had what sure sounds like a smoking gun, and the special master rejected it? Not having reviewed the case. the only explanations I can fathom are either that the internal reviewers were somehow wrong (then why have them?) or that “mistakes were made” and these claims were submitted in error. But in the latter case, UnitedHealth should still have to pay back the overbilling, even if it is deemed innocent of fraud.

Of course, it could be that the government was overly confident of the strength of the whistleblower evidence, and did not seek to engage in much/any additional discovery. It may be that the prosecutors need evidence of pattern and practice, such as e-mails, PowerPoints or better yet, training documents, that show that upcoding abuses are well institutionalized and the top brass at a minimum knows and approves, and most likely is actively driving this process. That evidence proved to be rampant in the Wells Fargo upselling/upcharging scam, but that got traction because Wells Fargo was so bold as to steal from sacrosanct deposits by dinging customers for services the customer never authorized. Much more so than banks, insurers are run by lawyers. So even if UnitedHealth’s behavior is as bad as one suspects, its executives and relevant staffers have no doubt been very well instructed on internal messaging discipline, so that internal records maintain the party line as to why this upcoding is kosher.

Of course, there is a more mundane explanation for the DoJ’s failure so far to make much progress: they are outmatched. Recall, in an analogous situation, the big reason why the IRS has largely punted on going after the super-rich. It is not for want of trying. But the IRS has lost every large estate case since Newhouse v. Commissioner of Internal Revenue (In re Estate of Newhouse) in 1991. Large estates often involve the valuation of private assets. In private equity, where multiple private equity funds sometimes wind up investing in the same portfolio company, it is not unheard of for their valuations to range from X to 3X, with each investor having a credible case as to why his mark is correct.

To compensate for shortcomings in its own bench, attorneys general sometimes engage private counsel to lead or supplement their team. A high profile example was star litigator and anti-trust expert David Boies leading the government anti-trust case against Microsoft.

So perhaps the DoJ has learned from its past disappointments on these big insurer Medicare Advantage fraud cases and will up its game. One can only hope.