The United States government has reached a settlement with Independent Health Association (Independent Health) and its affiliate, Independent Health Corporation, resolving allegations that the company knowingly submitted false diagnosis codes to Medicare, inflating payments for its Medicare Advantage Plans (MA Plans). The settlement requires Independent Health to pay up to $98 million, including guaranteed and contingent payments, to resolve claims that the company violated the False Claims Act by submitting unsupported diagnoses to boost payments from the federal program.
Independent Health, based in Buffalo, New York, operates Medicare Advantage Plans in Western New York. These plans are part of the Medicare Part C program, which offers an alternative to traditional Medicare and pays private insurance companies a per-person fee to cover the health care needs of beneficiaries.
The Centers for Medicare and Medicaid Services (CMS), which oversees Medicare, adjusts the payments to MA Plans based on the health conditions of beneficiaries, using “risk scores” that are higher for individuals with more complex or costly health needs. The government alleges that Independent Health, with the assistance of its subsidiary DxID LLC, intentionally submitted inaccurate diagnoses to inflate these risk scores, resulting in higher payments from Medicare.
According to the complaint, from 2011 to 2017, Independent Health and DxID retroactively searched medical records and queried physicians to find additional diagnoses that could increase the risk scores of beneficiaries. However, many of these diagnoses were not supported by the beneficiaries’ medical records. The scheme allegedly inflated Medicare payments, and Independent Health received millions in processing fees as a result.
The settlement also includes a five-year corporate integrity agreement (CIA) between Independent Health and the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). The agreement mandates that Independent Health hire an independent review organization to annually examine its Medicare Advantage records and internal controls to ensure that risk adjustment payments are appropriate and accurate.
Under the terms of the settlement, Independent Health will pay a guaranteed payment of $34.5 million and contingent payments of up to $63.5 million. These payments are based on the company’s ability to pay. Additionally, Betsy Gaffney, the founder and former CEO of DxID, will separately pay $2 million as part of the settlement.
Government’s Response
The government’s intervention in this case highlights its commitment to combating fraud in federal health care programs, particularly the Medicare Advantage program, which serves millions of seniors and disabled beneficiaries. Deputy Assistant Attorney General Michael Granston, of the Justice Department’s Civil Division, emphasized the importance of accuracy in reporting to Medicare, stating, “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.”
U.S. Attorney Trini E. Ross for the Western District of New York echoed these sentiments, pledging to continue pursuing those who defraud government programs. “This settlement makes clear that we will diligently pursue those who defraud government programs,” Ross said.
Christian J. Schrank, Deputy Inspector General of the HHS-OIG, also underscored the government’s commitment to maintaining the integrity of federal health care programs, noting that Medicare Advantage Plans must be held accountable for any attempt to exploit the system for profit.
The settlement also resolves claims brought under the qui tam or whistleblower provisions of the False Claims Act. Teresa Ross, a former employee of Group Health Cooperative (now part of Kaiser Foundation Health Plan of Washington), filed the initial lawsuit against Independent Health. Under the False Claims Act, private individuals can file suits on behalf of the government and receive a portion of any recovery. Ross will receive at least $8.2 million from the settlement. Ross had previously alleged that Kaiser Health, which also used DxID’s services to identify additional diagnoses for risk adjustment, had engaged in similar fraudulent activities. The U.S. government previously settled those claims with Kaiser.
Focus In Health Care Fraud
This case is a part of the broader efforts by the Justice Department and its partners to combat fraud, waste, and abuse in federal health care programs. The COVID-19 Fraud Enforcement Task Force, established in 2021, has also played a key role in enhancing enforcement efforts and investigating fraudulent practices within health programs. The government encourages anyone with knowledge of potential fraud, waste, or abuse within Medicare or other health care programs to report it to the HHS-OIG at 800-HHS-TIPS (800-447-8477).
As part of the settlement, Independent Health and DxID did not admit to any liability. The claims resolved by this settlement are allegations only, and there has been no determination of liability in the case. The civil case is captioned United States ex rel. Ross v. Independent Health Association et al., No. 12-CV-0299(S) (WDNY).
The settlement is a significant step in the government’s efforts to address health care fraud, particularly in the Medicare Advantage program. As health care fraud continues to be a priority for federal law enforcement, this case demonstrates the government’s commitment to protecting the integrity of Medicare and holding accountable those who seek to profit at the expense of taxpayers and beneficiaries.
