Medicare Advantage Risk Scoring Fraud

The Medicare Advantage program allows Medicare recipients to use their Medicare benefits to enroll in private insurance plans. The idea behind Medicare Advantage is to give beneficiaries more choice in how their healthcare is covered and to reduce costs under the assumption that private plans could possibly provide equivalent coverage at a lower cost. Medicare reimburses private plans based on a risk-scoring system that uses ICD-9 diagnosis codes from medical records to determine which patients are most likely to incur covered medical expenses. Some plans are paid on a per-patient basis (capitation) or using the fee-for-service model.

Upcoding, Coding Creep, and Medicare Fraud

The entire risk-scoring reimbursement system is dependent on correct diagnosis coding by healthcare providers such as hospitals and physicians. However, diagnosis codes are sometimes vague and often multiple codes can be used for a given set of symptoms or conditions. As a result, there is strong incentive for plans to somehow inflate the complexity and severity of beneficiaries’ medical needs to increase their Medicare reimbursement rate.

In fact, the phenomenon of “coding creep” has emerged as a significant problem undermining Medicare Advantage’s risk-scoring system. Intentionally or unintentionally, physicians across the nation have been “upcoding,” using more severe diagnosis codes, making patients in certain Medicare Advantage plans seem less healthy and thereby increasing Medicare payments to those plans. This activity may actually constitute Medicare fraud. Because Medicare Advantage plans have such a clear incentive to pressure or encourage physicians and hospitals to engage in upcoding, it is likely that there are many instances of private plans illegally encouraging upcoding.

Any doctor or hospital who intentionally engages in upcoding is potentially in violation of the False Claims Act because upcoding results in payments being made under Medicare Advantage that are not justified by the patient’s medical status. The practice is equivalent to falsifying Medicare billing. In addition, any Medicare Advantage plan that provides any direct or indirect incentive for physician upcoding is potentially liable under both the False Claims Act and the Anti-Kickback Statute.

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