Medicare Advantage Provider Independent Health to Pay up to $98M to Settle False Claims Act Suit

BUFFALO, N.Y. — U.S. Attorney Trini E. Ross announced today that Independent Health Association and its affiliate, Independent Health Corporation (collectively, Independent Health) have agreed to pay up to $98 million to resolve allegations that they violated the False Claims Act by knowingly submitting or causing the submission of invalid diagnosis codes to Medicare for Medicare Advantage Plan enrollees to increase payments that Independent Health received from Medicare. Independent Health is headquartered in Buffalo, New York.

Under Medicare Advantage, also known as the Medicare Part C program, Medicare beneficiaries have the option of enrolling in managed care insurance plans called Medicare Advantage Plans (MA Plans). MA Plans are paid a per-person amount to provide Medicare-covered benefits to beneficiaries who enroll in one of their plans. The Centers for Medicare and Medicaid Services (CMS), which oversees the Medicare program, adjusts the payments to MA Plans based on demographic information and the diagnoses of each plan beneficiary. The adjustments are commonly referred to as “risk scores.” In general, a beneficiary with diagnoses more expensive to treat will have a higher risk score, and CMS will make a larger risk-adjusted payment to the MA Plan for that beneficiary.

Independent Health operates MA plans for beneficiaries living in western New York. As alleged by the United States, Independent Health created a wholly owned subsidiary, DxID LLC, to retrospectively search medical records and query physicians for information that would support additional diagnoses that could be used to generate higher risk scores, and DxID provided these services to Independent Health and other MA Plans. The United States filed a complaint alleging that, from 2011 through at least 2017, Independent Health, with the assistance of DxID and its founder and chief executive, Betsy Gaffney, knowingly submitted diagnoses to CMS that were not supported by the beneficiaries’ medical records in order to inflate Medicare’s payments to Independent Health.

“To protect the integrity of Medicare and other federal health care programs, my office is committed to ensuring that each and every dollar meant for Medicare beneficiaries is spent appropriately and in accordance with the law,” said U.S. Attorney Trini E. Ross for the Western District of New York. “As this settlement makes clear, we will diligently pursue those who defraud government programs.”

“The government expects those who participate in Medicare Advantage to provide accurate information to ensure that proper payments are made for the care received by enrolled beneficiaries,” said Deputy Assistant Attorney General Michael Granston of the Justice Department's Civil Division. “Today’s result sends a clear message to the Medicare Advantage community that the United States will take appropriate action against those who knowingly submit inflated claims for reimbursement.”

“Medicare Advantage Plans that attempt to game federal programs for profit must be held accountable through rigorous oversight and enforcement,” said Deputy Inspector General Christian J. Schrank of the Department of Health and Human Services Office of Inspector General (HHS-OIG). “HHS-OIG will continue to work with our law enforcement partners to root out fraud, waste and abuse in federal health care programs.”

Under the terms of the settlement, Independent Health will make guaranteed payments of $34,500,000 and contingent payments of up to $63,500,000 on behalf it itself and DxID, which ceased operations in 2021. The settlement is based on Independent Health’s ability to pay. Gaffney will separately pay $2,000,000.

In connection with the settlement, Independent Health entered into a five-year corporate integrity agreement (CIA) with HHS-OIG. The CIA requires, among other things, that Independent Health hire an Independent Review Organization to annually review a sample of Independent Health’s Medicare Advantage patients’ medical records and associated internal controls to help ensure appropriate risk adjustment payments.

The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act by Teresa Ross, a former employee of Group Health Cooperative, now Kaiser Foundation Health Plan of Washington (Kaiser). Under the qui tam provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery. The Act permits the government to intervene in such lawsuits as it has done in this case. Ms. Ross will receive at least $8,212,500 of the settlement announced today. Ms. Ross also alleged that Kaiser employed DxID to identify additional diagnoses to be submitted to Medicare for risk adjustment, and the United States previously settled those claims with Kaiser.

The United States’ intervention in this matter illustrates the government’s emphasis on combating health care fraud. One of the most powerful tools in this effort is the False Claims Act. Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement, can be reported to HHS, at 800-HHS-TIPS (800-447-8477).

Attorneys Samson Asiyanbi and David Wiseman of the Civil Division’s Fraud Section and Assistant U.S. Attorney David Coriell and investigator Peggy McFarland for the Western District of New York handled the matter, with assistance from the HHS-OIG Buffalo Regional Office.

The case is captioned United States ex rel. Ross v. Independent Health Association et al., No. 12-CV-0299(S) (WDNY).

The claims resolved by the settlement are allegations only. There has been no determination of liability.