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Teresa Ross had been raising objections at work for months when her bosses brought in a psychologist hoping to make her question her own sanity.

A longtime manager at a Seattle health plan called Group Health Cooperative, Ross had opposed changes to the way the company billed Medicare. With the help of a new vendor, the insurer identified new diagnoses for patients, bringing in millions of extra dollars from the government. Ross insisted much of it was fraud. She says she was cut out of meetings.

Then she was invited to one with the psychologist. He asked how she was feeling and revealed that a senior executive had sent him to discuss her objections.

“People aren’t seeing you as a team player,” she recalls him saying. “They’re concerned that you have a loud voice within the organization. And you’re objecting to this thing that’s making us lots of money and everybody’s happy.”

Ross felt blindsided and insulted. The visit made no difference.

Ross had already filed a sealed whistleblower suit against the company, which later merged with Kaiser Permanente in 2017. After years of investigating, the Justice Department took up her case last year. Other whistleblowers came forward too, with allegations accusing Kaiser and some of its competitors of inflating how sick their members appeared to be to get higher payments from Medicare.

The industry vehemently contests the allegations and says that plans get paid appropriately for the risk they take on. But the disputed billing practices at the heart of Ross’s case have become central to the health-care business and, as baby boomers retire, to America’s fiscal future. Medicare covers 64 million people and will spend $900 billion this year, or 4 percent of U.S. gross domestic product. Almost half of people on Medicare now get their benefits through Medicare Advantage — private plans like the one Ross worked for, which get paid more for patients with more severe illnesses. That means a growing share of Medicare’s billions flows through arrangements susceptible to the kind of manipulation that Ross described.

Each year, the plans submit giant data files to Medicare with diagnostic codes meant to reflect their members’ illnesses. Those codes determine how much they get paid. A federal watchdog warned in March that coding differences brought Medicare Advantage plans $12 billion in excess payments in 2020, compared to what traditional Medicare would have paid to cover the same population. The cumulative extra payments since 2007 will soon top $100 billion, according to the Medicare Payment Advisory Commission, or MedPAC.

Those payments mounted as American seniors flocked to the private version of Medicare. Enrollment in Medicare Advantage doubled in the last decade to more than 26 million people, on pace to cover a majority of Medicare beneficiaries.

Insurance companies have built billion-dollar businesses propelled by this growth. UnitedHealth Group, Humana, and CVS Health Corp.’s Aetna unit combined enroll more than half of Medicare Advantage members. Kaiser Permanente, with about 7 percent of the market, isn’t far behind, according to data from the Kaiser Family Foundation, a research group unaffiliated with the health plan.

The industry calls the program a win-win. Medicare Advantage caps members’ out-of-pocket costs and offers extra benefits like dental, vision and hearing coverage that traditional Medicare doesn’t. Private plans also send clinicians on house calls, deliver meals and offer rides to medical appointments, stitching together medical care with services intended to address members’ social needs.

The program’s growing popularity has made it politically powerful. Republicans extoll its private-sector innovation while Democrats know that enrollees are disproportionately low-income and people of color. An industry coalition recently touted a letter signed by 346 U.S. representatives — more than 80 percent of the House — urging the Biden administration to “provide a stable rate and policy environment” for the program. Soon after, Medicare proposed payment rates for 2023 that an analyst for Veda Partners called “surprisingly good news for industry.”

Yet rising Medicare Advantage enrollment has also prompted warnings about the cost. The program’s hospital trust fund is projected to be depleted in 2026. “Failure to stem the excess spending created by coding intensity further jeopardizes the Medicare program’s already challenging fiscal sustainability,” MedPAC wrote in a comment letter to Medicare officials in March.

The industry has billions at stake in how the payments are calculated. In February, UnitedHealth asked the Supreme Court to review a case it lost on appeal challenging a policy to make insurers return payments for unsupported diagnoses. The policy “imposes potentially billions of dollars in additional payment obligations” on plans and would destabilize the Medicare Advantage program, the company said in its petition. Letting the decision stand threatens to reduce benefits and increase costs for seniors in the program, UnitedHealth argued.

Official scrutiny is growing. The Department of Justice called policing Medicare Advantage an important priority on its anti-fraud agenda. The agency said in February that it pursued health plans that gamed the system “by submitting unsupported diagnosis codes to make their patients appear sicker than they actually were,” and cited Ross’s case as an example. Ross’s attorneys estimate the scope of such frauds reaches into the billions of dollars.

Ross filed her complaint against Group Health under seal a decade ago, and it remained a secret for seven years. With the aid of other whistleblowers, the Justice Department has also sued industry giants including UnitedHealth, Anthem Inc. and Cigna Corp. over similar allegations in recent years. The companies are fighting the cases.

Now it’s up to the courts to decide which practices are legitimate and which constitute fraud. Ross remains shaken by her experience. Coming forward wasn’t easy, she said. “The easy thing would’ve been to sit down and just let it happen.”

Ross, 57, grew up outside Seattle, a math whiz in a family that kept busy with music lessons and school activities. Her father had a heart attack while she was in high school, and she spent a lot of time at the hospital, pressing his doctors for information. That early exposure coupled with her mathematical acumen led Ross into a career in an obscure corner of the health-care industry. In 1998, she arrived at a nonprofit insurer called Group Health Cooperative to lead a division building statistical models of patient risk.

In the 2000s, these models became central to the growing Medicare Advantage industry. Money hinged on the illnesses that plans documented for their members. Traditional Medicare pays doctors and hospitals directly for each test or service. In Medicare Advantage, health plans get a fixed payment from the government for each member they take on. The program will spend on average about $14,000 per enrollee this year. Through a process called risk adjustment, added diagnoses typically bump payments by $1,000 to $5,000, sometimes even $10,000, according to MedPAC. It’s meant to compensate insurers for taking on sicker patients and discourage them from cherry-picking healthy people.

Health-care companies developed increasingly sophisticated methods to maximize payments. A cottage industry of vendors emerged to help them. They mine data from patient charts, send staff to do health-risk assessments in patients’ homes and prod doctors to review potentially missed diagnoses.

Ross said she and Group Health originally embraced the system as a way to identify patients who needed care but weren’t getting it. “It’s not just digging for dollars,” she said. “It’s improving care.”

Her whistleblower suit and the Justice Department complaint that followed describe a growing pressure within the company to engineer higher risk scores for greater payments. She rebuffed one vendor called Leprechaun LLC hired in 2008 that wanted to submit claims “based on documentation that was clearly inadequate,” according to Ross’s complaint.

By 2011, Group Health’s finances deteriorated, and it was facing downgrades from credit raters. That fall, Group Health’s chief executive officer met a counterpart from a Buffalo plan called Independent Health, which had just formed a new subsidiary focused on risk adjustment called DxID, according to Ross’s complaint. In an early pitch, DxID CEO Betsy Gaffney told one of Ross’s colleagues that Group Health’s internal approach to risk-adjustment “is really putting you back financially,” according to the Justice Department complaint. “I get what the purpose of the policies are theoretically, and even kind of agree philosophically, but it is very restrictive,” she wrote in a November 2011 email.

Group Health hired DxID the next month on a contingency basis. The vendor would keep 20 percent of any new revenue it brought in from combing old patient charts to uncover missed diagnoses. Gaffney proposed new ways to identify patients who suffered from illnesses like chronic kidney disease or low oxygen levels, a condition called hypoxia, according to the Justice Department complaint.

Ross recalls her managers lit up when they realized how much money it might bring in. Reviewing two years of data, DxID added thousands of potential diagnoses that increased Group Health’s revenue by $32 million, the U.S. alleged. But when Ross checked DxID’s work, she found that three-quarters of the diagnostic codes it submitted for payment lacked proper documentation and didn’t stand up to scrutiny, according to her complaint.

The plan got paid for one patient’s depression diagnosis even though a physician said it had resolved and the patient now had “an amazingly sunny disposition,” according to Ross’s complaint. It claimed another patient had kidney complications from diabetes even after a doctor had explicitly ruled that diagnosis out.

DxID would pull illnesses from the “problem list” doctors maintained in electronic medical records, a section of the chart that sometimes contained old or resolved conditions, Ross said. The company also used lab tests or other orders as proxies to infer diagnoses, even when clinicians had not documented the illnesses. For example, patients getting supplemental oxygen were assumed to have hypoxia, even though oxygen can be prescribed for less serious problems like sleep apnea, the complaint says. Later DxID would send physicians “addendum” forms to update charts with suggested diagnoses, paying them $25 to fill them out, the U.S. alleged.

This approach produced some unlikely results. One patient’s depression was supposedly documented during a visit to an ophthalmologist, according to Ross’s complaint. In another case, when Gaffney was working for Independent Health, a woman was coded for prostate cancer, because “when a married couple has any disease, both were assigned to that disease,” she wrote in an email, according to the Justice Department complaint.

As Ross and her colleagues reviewed the submissions, they found DxID was adding diagnoses that doctors hadn’t made. “Coders are not allowed to diagnose anything,” Ross said. “That’s for doctors.”

Despite Ross’s protests, Group Health adopted most of the coding policies DxID proposed, Ross and the Justice Department allege. Her managers spurned her, she said, and eventually brought in the psychologist. Ross’s attorney, Mary Inman, a partner at whistleblower law firm Constantine Cannon, said Ross’s experience fits a pattern of tactics used to isolate corporate dissenters. “This is where you get the whistleblower to start to doubt herself,” Inman said. “That’s part of the corporate playbook that we see in these cases.”

Ross wasn’t dissuaded. In April 2012, after 14 years in a job she loved, she filed her complaint in federal court for the Western District of New York, where DxID was based. “The company that I had known to be ethical all of a sudden wasn’t,” she said. “They didn’t care about whether or not it was compliant. At least in my eyes, they were more concerned about what Betsy Gaffney was hanging out in front of them, which was millions and millions of dollars.”

Attorneys for Gaffney didn’t respond to multiple requests for comment. In a statement to the Buffalo News last year, they said she was “unfortunate victim of an ancient lawsuit premised on inaccurate allegations.” In legal filings seeking to dismiss the case, the defendants characterized the dispute as “good faith disagreements over objectively ambiguous coding criteria” and said that the allegations from Ross and the Department of Justice don’t meet the standards of a False Claims Act claim.

Whistleblowers file their initial complaints under seal to give the government time to investigate and decide whether to proceed. In Ross’s case, it lasted years. She left Group Health the year after she filed her complaint and moved on to other jobs while her case sat sealed on the docket.

Mostly unknown to Ross, other whistleblowers were coming forward with similar accounts at other companies, and federal investigators were building cases of their own. Both targeted some of the largest companies in the industry, which increasingly relied on Medicare Advantage as a source of profitable growth.

In 2017, the Justice Department intervened in a case against UnitedHealth, the largest Medicare Advantage provider. It sued Anthem in 2020. A whistleblower suit against Cigna was also unsealed that year. The companies are fighting the cases and have disputed allegations of wrongdoing. CVS Health and Humana have also both disclosed investigations into their risk adjustment practices and said they’re cooperating with the probes. UnitedHealth and CVS declined to comment for this story. Representatives for Anthem, Cigna and Humana didn’t respond to requests for comment. The Department of Justice declined to comment.

In 2017, Group Health was acquired by Kaiser Permanente, the giant California-based HMO. Ross’s own suit was unsealed in 2019, when the U.S. initially said it would not intervene but would keep investigating.

Kaiser Permanente’s Washington state subsidiary denied Ross’s allegations. Without admitting liability, the health plan resolved the lawsuit in 2020 in a settlement for $6.3 million — about one-fifth of the revenue increase Ross attributed to the practices in two years of its engagement with DxID. Ross was awarded $1.5 million, with the rest recovered by the government.

Kaiser Permanente spokesman Marc Brown said in an email that Group Health “submitted its data in good faith and in reliance on recommendations by DxID, its contracted risk adjustment vendor, which purported to be an expert in this area.”

DxID ceased operations last summer. But the U.S. attorney in the Western District of New York is pursuing the civil fraud claims Ross initiated against the vendor, its parent company Independent Health, and Gaffney as an individual defendant.

Independent Health and DxID deny wrongdoing and have moved to dismiss the lawsuit. “We believe the coding policies being challenged here were lawful and proper and all parties were paid appropriately,” Independent Health said in a statement. “Independent Health and DxID diligently navigate complex and vague coding criteria to ensure that all diagnosis and billing codes properly reflect our members’ medical conditions and are supported with documentation in the members’ medical records.” The company also said its plans received high ratings from Medicare.

Last summer, the Department of Justice intervened in six other cases against Kaiser Permanente filed by separate whistleblowers alleging that it defrauded Medicare through inflated risk codes. The health system says it will fight the suits and defended its audit record with Medicare. “Our policies and practices represent well-reasoned and good-faith interpretations of sometimes vague and incomplete guidance,” Kaiser Permanente said. The company declined interview requests.

The cases could take years to resolve. Ross, who struggled initially with her decision to come forward, has been heartened by the number of counterparts across the industry who raised similar concerns. “It took a long time for the government to really understand what was happening to them in this space,” she said.



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