By Fred Schulte, Center for Public Integrity
Giant health insurer Humana Inc. faces multiple federal investigations into allegations that it overbilled the government for treating elderly patients enrolled in its Medicare Advantage plans, court records reveal.
The status of the investigations is not clear, but they apparently involve several branches of the Justice Department. The U.S. Attorney’s Office in Miami wrote in a court document filed in March that officials expect that at least one of the probes will be completed and the findings made public “in the next few months.”
The U.S. Attorney’s branch office in West Palm Beach, Florida has opened a criminal case involving overbilling allegations that the government says is similar to the Miami investigation. Meanwhile, the criminal division of the Justice Department in Washington has reviewed fraud allegations against the company, according to court records.
Humana, which insures more than 2 million people through the Medicare Advantage plans, is also the target of two Florida whistleblower civil lawsuits that allege similar overcharges.
Federal officials disclosed their legal actions in a series of documents unsealed April 30 in one of the whistleblower suits. That suit alleges that a doctor at a clinic in South Florida inflated billings for two dozen or more Humana patients. The case, filed in September of 2010, was unsealed in federal court in Miami earlier this month. The whistleblower added new allegations of overbilling to the Miami lawsuit on Wednesday.
Humana acknowledged the unsealing of the Miami case in a May 7 Securities and Exchange Commission filing, saying it “was continuing to cooperate with and respond to information requests from the U.S. Attorney’s Office.” Humana disclosed in 2012 SEC filings that federal officials were seeking documents “relating to several matters including the coding of medical claims,” an admission that was reported at the time. But the company has offered no details.
Humana spokesman Tom Noland said in an email on Thursday that the company had made “several public disclosures about these matters over a long period of time.” He said that Humana had “self-reported” the matters to the Justice Department criminal division several years ago, but noted: “Humana to our knowledge is not the subject of any criminal investigation.”
Noland added: “We continue to investigate these matters ourselves and to cooperate with the Department of Justice, as we have all along.”
Humana, based in Louisville, Kentucky, is a major federal contractor. Last year, Humana’s Medicare Advantage contracts in Florida alone covered about 415,200 seniors at a cost of $6 billion, according to the company. Nationwide, Humana treated just over 2 million Medicare Advantage patients last year.
The consequences of the legal cases could be far-reaching for privately run Medicare Advantage plans, which now treat nearly 16 million Americans at a cost expected to top $150 billion this year. The plans are proving popular with seniors because they often provide extra benefits, such as eyeglasses and dental care, and can cost less out of pocket than standard Medicare.
The industry also enjoys growing political support in Congress, successfully fighting off attempts by the Obama administration earlier this year to cut its payments. Lawmakers have argued that rate cuts could harm seniors and limit their choices for health care.
But how best to pay the health plans—and whether the plans are paid accurately—has been contentious for years.
Since 2004, Medicare has compensated the health plans based on patient “risk scores,” a formula that’s so complex that many health professionals don’t even pretend to understand its fine points. Federal law enforcement officials also are struggling to monitor billions of dollars in Medicare payments to the booming industry.
“This is a new area,” said Robert Trusiak, a former Justice Department lawyer. “It’s not that easy a concept.”
Essentially, Medicare pays the health plans higher rates for sicker patients and less for those in good health. Medicare Advantage plans diagnose health conditions of each person they enroll and report it to Medicare, which then calculates a risk score and pays accordingly.
Critics, including some academic researchers and government auditors, have argued that the health plans can inflate risk scores by overstating how sick patients are—improperly driving up their revenues and the costs to taxpayers.
That’s what Olivia Graves, a family physician who has practiced for more than three decades in South Florida, alleges in her whistleblower suit. Graves said she sold her medical practice in 2005 and was paid by a check “endorsed by Humana.” A subsequent filing by the government refers to the clinic as Humana-owned. Graves stayed on to work at the practice, now called Plaza Medical Centers, after the sale, according to the suit.
Plaza Medical Centers is run by Michael Cavanaugh, a physician and Spencer Angel, who is its chief executive officer. Both are defendants along with Humana in Graves’ suit. Reached by phone on Thursday Angel said: “I look at this as a disgruntled employee matter. Other than that, I have no comment.” Angel said Cavanaugh also would have no comment.
Graves alleges that one day in April 2010 a former patient of hers who had been treated by Cavanaugh asked to see her. During the encounter, she noticed that Cavanaugh “had listed several diagnostic codes for the patient that did not apply,” according to the suit.
Graves said that when she confronted Cavanaugh he told her that he “did not give a sh*t,” according to the suit. Graves claims she was fired after she began looking up medical files of other patients and questioning the truthfulness of diagnoses listed.
Her lawsuit cites about two dozen examples of what she claims are improper diagnoses. They include the case of an 84-year-old man who was diagnosed with conditions he did not have, including chronic kidney disease, according to the suit.
Graves amended her lawsuit on May 14, adding new allegations. She stated that the clinic had diagnosed an abnormally high number of patients with conditions such as diabetes with complications, which boosted Medicare payments, but were “not supported by the medical records.” The suit alleges that Humana knew about the practices and did nothing to stop the overcharging. The suit argues that Medicare paid thousands of dollars for each patient who was wrongly diagnosed.
The second whistleblower lawsuit against Humana and related clinics, which was filed in U.S. District Court in West Palm Beach during 2012, remains under seal. Federal officials wrote in court filings that the allegations in the case are “very similar” to the Graves case.
Marlene Fernandez-Karavetsos, acting special counsel with the U.S. Attorney’s Office in Miami, said Thursday that the agency does not comment on pending cases.
Court records show that U.S. Attorney’s Office lawyers in South Florida have tried for years to navigate the complex billing system at the heart of the Graves suit. They asked a federal judge on 11 occasions since 2010 to give them more time to investigate.
Under federal law, whistleblowers sue on behalf of the government and can share in any recovery. Federal officials must decide within 60 days whether to join in the suit. However, federal courts often grant the government extensions—to a point.
U.S. District Court Judge Federico A. Moreno appears to have reached that limit on April 24. With time running out, the U.S. Attorney’s Office declined to join the case. However, government lawyers said their own investigation would continue. Moreno ordered the pleadings unsealed but on May 1, granted an emergency request from the government to redact portions of some filings.
Despite the redactions, court records detail years of back and forth with Humana lawyers over the allegations. Federal investigators in Miami notified the company in December 2011 of the Graves case and since then have met at least three times with the company’s lawyers. The government has reviewed records of about 150 patients treated at three Humana-affiliated clinics.
During those negotiations, Miami-based government lawyers learned that the Justice Department’s criminal division in Washington also had been investigating.
“The U.S. Attorney’s Office for the Southern District of Florida learned of an active, pre-existing investigation of Humana triggered by the disclosure of potential fraudulent conduct by Humana to the Criminal Division of the Department of Justice in Washington,” prosecutors wrote in November 2013.
“The conduct at issue is similar in nature, and both investigations continue to move forward on a parallel basis with close coordination and joint meetings and conferences with Humana,” the filing states.
A law enforcement source indicated that investigators are still trying to determine how much of the blame for the alleged overcharges might be the fault of Humana and how much is the responsibility of its individual doctors.
While many health care companies face whistleblower lawsuits, it’s unusual for a major health insurer to face a criminal probe over billing issues. Often, these sorts of disputes are the subject of administrative audits.