Kusserow’s Corner: Six Individuals in Florida Indicted for Roles in $63 Million Fraud

On July 16, 2013, the DOJ announced the that the former medical director at defunct Florida health provider Health Care Solutions Network (HCSN) and six therapists were arrested, accused of conspiring to fraudulently bill Medicare and Florida Medicaid more than $63 million. The arrests were made after the indictment was unsealed. The former HCSN medical director was indicted on charges of conspiracy to commit health care fraud and two counts of health care fraud.  The indicted six therapists from Miami were also charged in the same indictment with conspiracy to commit health care fraud. Additional charges included with health care fraud, and making false statements related to health care matters. The indictment also seeks forfeiture of proceeds from the alleged healthcare fraud offenses.

According to the indictment, HCSN purported to provide intensive mental health treatment to Medicare and Medicaid beneficiaries in Miami and Hendersonville, N.C., from approximately 2004 through 2011 for purported mental health services that were not medically necessary and often never provided; and paid kickbacks to assisted living facility owners and operators who, in exchange, referred beneficiaries to HCSN. In total, HCSN is alleged to have fraudulently billed Medicare and Medicaid approximately $63.7 million, from which HCSN allegedly received payments totaling approximately $28 million.  The HCSN medical director in Florida is alleged to have routinely signed what he knew to be fabricated and altered medical records without ever reviewing the materials, and, in most instances, without ever meeting with the patient. The indictment also alleges that HCSN staff falsified medical records to support false and fraudulent claims for partial hospitalization program services that were not medically necessary and were not provided.

 

Richard P. Kusserow served as DHHS Inspector General for 11 years.  He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters.  The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

Connect with Richard Kusserow on Google+ or LinkedIn.

Copyright © 2013 Strategic Management Services, LLC.  Published with permission.

Thirteen States, Including IL, FL, CA, See Opportunity to Make Medicaid Cuts

Amid the Obama Administration’s encouragement for states to expand their Medicaid rolls per the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148), 13 states have implemented cuts to the program or are preparing to implement reductions in provider payments and benefits offered to Medicaid recipients. Some states may have seen June’s Supreme Court decision, requiring that states be allowed to opt-out of PPACA’s Medicaid expansion scheme, as an opportunity to scale back their Medicaid programs.

Eligibility Requirements

While the decision did not specifically state so, some state level officials have interpreted the lifting of the Medicaid expansion requirement as the lifting of the PPACA-imposed prohibition from altering their Medicaid eligibility requirements. Wisconsin has already changed its policy to deny Medicaid coverage to non-pregnant adults who are both offered affordable employer-sponsored coverage and have an income that exceeds 133 percent of the federal poverty level (FPL). Some adult recipients must also be responsible for paying new or increased monthly premiums. Wisconsin officials estimate these changes will save the state around $28.1 million.

Other states that have made changes to their eligibility requirements since the PPACA decision or are preparing to do so include the following:

  • Hawaii–Non-pregnant adults will no longer be eligible for Medicaid if their income exceeds 133 percent of the FPL (the limit was formerly 200 percent of FPL).
  • Illinois–Parents’ income must not exceed 133 percent of FPL (formerly 185 percent of FPL).
  • Connecticut–Plans to limit adult coverage to those with less than $10,000 in assets, not including one car and a home, and to calculate income for adult children aged 19 – 25 living at home by including their parents’ assets and income.
  • Maine–Plans to reduce parental eligibility to 100 percent of the FPL (currently 200 percent of FPL) and to do away with coverage for 19 and 20-year olds.

Drug Benefits

Currently, 16 states limit the monthly amount of drugs that recipients can obtain through their Medicaid programs. Four states have increased prescription drug copays and/or imposed monthly caps since the PPACA decision was issued:

  • Alabama–With the exception of long-term care patients and HIV and psychiatric drugs, Medicaid beneficiaries were limited to one brand name drug through July 31. Now, beneficiaries are limited to four brand-name drugs monthly.
  • California–Implemented $1 and $3 copays for specific drugs.
  • Illinois–Program recipients are now limited to four prescriptions monthly, in addition to being subject to increased copays. Recipients may seek state approval to receive more than four drugs.
  • South Dakota–Beneficiaries must now pay copays of $1 for generic drugs and $3.30 for brand name drugs.

Other Cuts

In addition to budget-saving measures surrounding prescription drug benefits and program eligibility, states have implemented a variety of other cost reductions since the June decision, including provider payment cuts, emergency room copays, and reductions in coverage. Among those cuts are the following:

    • Alabama–Physician and dentist reimbursement has been reduced by 10 percent. The frequency of routine eye exams has been reduced to one every three years, and eyeglass coverage has been completely eliminated.
    • California–Payment rates have been frozen for nursing facilities while private hospital reimbursement has been reduced by $150 million. Clinical laboratory reimbursement has been lowered by 10 percent.
    • Colorado–Copays and enrollment fees, to be determined by family income, have been added to the Children’s Health Insurance Program. Nursing home reimbursement rates have been reduced by 1.5 percent, and orthodontics coverage has been limited.
    • Florida–Reimbursement rates have been lowered by 1.3 percent for nursing facilities and 5.6 percent for hospitals. Florida is planning to reduce the allowable number of home health visits for non-pregnant adults to three per day maximum, emergency room visits to six per year maximum, and primary care visits to a maximum of two monthly, pending federal approval.
    • Illinois–Reduced reimbursement to non-safety net hospitals by 3.5 percent and to non-physician, non-dentist providers by 2.7 percent. Routine dental care and chiropractic services are no longer covered. Beneficiaries who visit an emergency room for non-emergency purposes now incur a $3.65 copay.
    • Louisiana–Payments have been reduced by 3.7 percent to dialysis centers and dentists, 3.4 percent to non-primary care physicians, and 1.9 percent to mental health providers.
    • Maine–Services obtained at ambulatory surgery centers and sexually transmitted disease clinics will no longer be covered. With the exception of pregnant women, smoking cessation products will also not be covered.
    • Maryland–Payments to hospitals have been lowered by 1 percent and by 2 percent for nursing facilities.
    • New Hampshire–Hospital reimbursement has been reduced by $160 million.
    • South Dakota–Coverage for non-emergency adult dental services has been limited to $1,000 per year.

 

State Governors Elect Not to Implement Parts of PPACA

After the United States Supreme Court’s ruling last week that states cannot be forced to expand their Medicaid programs to receive federal funding, states are given the tough decision to make whether they will indeed expand their Medicaid rolls as suggested by the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148).

Thus far, five states have made it clear that as a result of last week’s decision, they do not plan to expand their Medicaid programs: Florida, South Carolina, Louisiana, Mississippi and Wisconsin.

All of those five states, which have Republican governors, participated in the lawsuit against the bill, which was the subject of last week’s ruling. In addition, six states have publicly raised doubt as to whether they will participate: Iowa, Missouri, Nebraska, Nevada, New Jersey and Texas. Currently, only ten states have affirmatively pledged to participate in Medicaid expansion, which leaves nearly two-thirds of the states in question.

Wisconsin Governor, Scott Walker issued a statement on the same day the Supreme Court released their decision on PPACA, indicating, “Wisconsin will not take any action to implement ObamaCare.” (Obama Care is a casual term commonly used to refer to PPACA and its provisions.) Walker emphasized his concerns that the bill would cost his state’s tax payers to “pay more money for less healthcare” and that both quality of and access to care would be reduced under the bill. He expressed his hope that this year’s elections would ultimately result in the repeal of the bill at a federal level.

Governor Bobby Jindall of Louisiana announced that his state will not be expanding its Medicaid program in response to PPACA; nor will it be setting up private health insurance exchanges called for by the bill. Under the provisions of PPACA, if Louisiana or any other state fails to establish a fully operable exchange by January 1, 2014, the federal government will implement an exchange for that state. Jindall agreed that reform of the health care system is necessary, but that an “expensive, unsustainable entitlement program is not the solution to our problems.”

In Florida, Governor Rick Scott similarly announced that his state will neither set up exchanges nor expand its Medicaid rolls to comply with PPACA. Approximately 20 percent of Florida residents are uninsured, however, Scott pointed out that it would cost Florida taxpayers $1.9 billion to add those residents to the Medicaid program. He raised concern over the rapidly increasing Medicaid program in the state, which he said is growing “three and a half times as fast as Florida’s general revenue.”

South Carolina Governor Nikki Haley declared that her state will opt out of expanding its Medicaid program and that block grants, which offer flexibility to states as to how they will use the money, offer the best solution to state-specific problems. She referred to PPACA’s changes as a “broken system that further ties our hands.”

Lt. Governor Tate Reeves of Mississippi “is not inclined to drastically expand Medicaid” as called for by PPACA. He explained that such an expansion, which would add nearly 400,000 residents to the program, would cost the state nearly $1.7 billion over ten years. He maintained that “(t)rue health care reform should look at reducing costs for services not increasing the burden on taxpayers.”

Medicaid Whistleblower Leads to $137.5 Million Settlement

Tampa-based managed care company WellCare Health Plans, Inc. recently agreed to pay $137.5 million to settle allegations of fraud and other abuses, the Justice Department announced. The federal government will share the proceeds of the settlement with nine states: Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Missouri, New York and Ohio. The for-profit company served about 2.6 million Medicaid beneficiaries as of August 2011. The four relators who brought whistleblower suits against the company will receive about $25 million.

The alleged fraud, which the company has not admitted, included:

  • inflated reports of the amounts spent on medical care to avoid returning funds to state agencies
  • retention of overpayments
  • operation of a sham special investigation unit
  • cooperating with providers who overbilled for services
  • falsification of records of patients’ medical condition and treatments provided and
  • manipulation of grades of service in reports on the performance of its call center

The company also allegedly violated federal marketing requirements for Medicaid managed care organizations by “cherrypicking” potential members to keep costs down. It was reported that WellCare performed a study of its costs for certain patients and then encouraged patients to disenroll to shift the cost of their care to state Medicaid agencies. A relator who worked undercover to assist in the federal investigation alleged that the company dropped premature infants and terminally ill patients. Arguing that the company’s actions cost the government between $400 and $600 million, the relator initially objected to the settlement; he disbelieved the company’s claim that it could not possibly afford more than $137.5 million.

In 2009, the company paid $80 million—$40 million in restitution and forfeiture of another $40 million—and entered into a Deferred Prosecution Agreement for fraud against the Florida Medicaid program. Thus, according to DOJ, its total recovery against WellCare will exceed $200 million. And if the company is acquired or there is a change of control in the next three years, the company will have to pay an additional $35 million. In April, 2011, the company entered into a corporate integrity agreement with the HHS Office of Inspector General to come into compliance with the law.

In 2009, in a related enforcement action by the Securities and Exchange Commission (SEC), WellCare agreed to pay $10 million to the SEC and return another $1 million in profits. Top-level executives, including the former general counsel, were prosecuted for fraud. One pleaded guilty in 2007; three others are scheduled for trial in 2013. SEC brought a civil suit against the three in January 2012.

In 2011, the company also settled a class action brought by investors alleging misrepresentations in violation of federal securities laws. The $200 million settlement is to be paid with $87.5 million in cash and $112.5 million in bonds. As with the DOJ settlement, if the company is acquired or experiences a change in control within three years of the agreement, it must pay another $25 million.

Florida Health News reports that resolution of its legal difficulties makes WellCare an attractive target for a buyout. Because many states are moving toward mandatory managed care, there are many opportunities to grow its business. One analyst says that the company’s revenue could double. If the Supreme Court upholds the Affordable Care Act, the expansion of Medicaid eligibility will make contracts with Medicaid agencies even more valuable.

Even while the settlement was on hold, the company picked up a contract with the Kentucky Medicaid agency, which began in the fall of 2011. Problems with the roll-out of Kentucky’s managed care program were discussed in an earlier post.

Competition for those Medicaid managed care contracts is fierce. States usually must use competitive bidding. Bidders and their affiliates make large campaign contributions to state officials. In Missouri, Centene donated $50,000 to the governor’s campaign in the two years preceding the contract award and $175,000 to the Democratic governors Association. Centene is based in Missouri but did not have a Medicaid contract previously; Molina, which lost despite 16 years of managed care contracts with the state, sued and asked the court to enjoin the state’s open enrollment, set for April 19, 2012. The case is being litigated at this writing.

According to the Chicago Tribune, in November, 2005, WellCare and its affiliates contributed a total of $100,000 to the reelection campaign of then-Governor Rod Blagojevich. The local affiliate had given him $25,000 earlier in the year.

 According to the Orlando Sentinel, three Medicaid HMOs— Humana, United and WellCare—were among the top 100 spenders for lobbying the Florida legislature in 2011. Humana spent more than $300,000. United and WellCare each spent an amount in the mid-210’s. In addition, the Florida Association of Health Plans, which seeks to influence Medicaid policy, among other issues, spent more than $300,000 on lobbying. Blue Cross Blue Shield, which isn’t a Florida Medicaid contractor but plans to bid, spent just under $300,000.

All the money that any plan spends on fines, unlawful remuneration, campaign contributions or lobbying isn’t going to pay for health care. It’s not paying for quality review, patient education, or even upgrading electronic health record systems. Could these facts be related to the findings of the study described in an earlier post, showing poorer health outcomes for beneficiaries in publicly traded Medicaid managed care organizations?