Whistleblower Triggers $32.5 Million Settlement with Florida Managed Care Organization

The second of two recent lawsuits against Medicare Advantage Organizations (MAOs) was announced on Tuesday, when the U.S. Department of Justice reported a $32.5 million settlement with Freedom Health Inc. and Optimum Healthcare, MAOs based in Tampa, Fla.

The reported settlement resolves allegations that the insurers violated the False Claims Act by engaging in illegal schemes to maximize their payment from the government in connection with their Medicare Advantage plans, according to a Justice Department news release posted on its website. Former Freedom Health Chief Operating Officer (COO) Siddhartha Pagidipati agreed to pay $750,000 to resolve his alleged role.

The whistleblower complaint, unsealed on Tuesday, alleged that Freedom and Optimum gamed risk-adjustment frameworks used by the Centers for Medicare & Medicaid Services (CMS) to make extra payments to MAOs for sicker patients or patients with multiple chronic conditions. 

News of Tuesday’s settlement came on the heels of a story first reported by the New York Times on May 15 of a whistleblower lawsuit alleging that UnitedHealth Group annually made tens of billions of dollars in improper payments to insurers over the course of years. Benjamin Poehling, a Minnesota resident who once worked for UnitedHealth Group (UHG), made the allegations, also under the False Claims Act.

The Justice Department alleged that Freedom and Optimum submitted or caused others to submit unsupported diagnosis codes to CMS, resulting in inflated reimbursements from 2008 to 2013. The government also alleged that material misrepresentations were made to CMS regarding the scope and content of its network of providers in applying to CMS in 2008 to expand into new counties in Florida and other states.

The case was filed by Darren Sewell, MD in 2009. Sewell, who died in 2014, started working for Freedom Health in 2008 and filed his lawsuit in 2009. 

“At the time of his death in September 2014, Dr. Sewell believed that risk-adjustment fraud was not limited to the conduct alleged in his complaint against Freedom Health and Optimum Healthcare, but rather was also being practiced at other Medicare Advantage plans throughout the industry, both large and small,” said Mary Inman, a whistleblower attorney at Constantine Cannon LLP who represents both Dr. Sewell in this matter and Poehling in his whistleblower action against UHG. “The Government’s intervention in February 2017 in a False Claims Act case filed by another whistleblower, Benjamin Poehling, against UnitedHealth Group, the nation’s largest operator of Medicare Advantage plans, alleging risk adjustment fraud, shows that Dr. Sewell’s prediction was right.”

Whether there was one or multiple factors that ultimately created a tipping point in favor of blowing the whistle, Inman told RACmonitor that she and her colleagues believe that what motivated Sewell to come forward was his concern, “borne from his training as a medical doctor who abided by his Hippocratic Oath, that Freedom’s and Optimum’s fraudulent practice of expanding its service areas into counties where it did not have an adequate provider and hospital network, as alleged in his complaint, compromised patient care.”

“His lawsuit raised concerns about several issues that he saw in his short time at the company,” Edward Arens, co-counsel with the law firm Phillips & Cohen, LLP, wrote in an email to RACmonitor.

“Medicare Advantage plans and risk adjustment in particular are enormous potential sources of fraud. The government is protecting both taxpayers and patients when it polices those areas carefully,” Arens added. 

Arens said Sewell filed his lawsuit to ensure that all Medicare beneficiaries receive the services they are promised, whether they receive traditional Medicare or choose to enroll in a Medicare Advantage plan. Sewell believed it was important to alert the government to his allegations, Arens said, adding that Tuesday’s settlement “is a testament to Dr. Sewell’s courageous decision.”

“Dr. Sewell hoped that his case would send a message to Medicare Advantage plans that they must live up to their promises,” Arens said. “He would have wanted people who find themselves in his position to come forward and blow the whistle – a decision that can benefit both patients and taxpayers.”