The Ninth Circuit recently revived a False Claims Act (FCA) suit against Medicare Advantage Organizations (MAOs) related to risk adjustment payments for Medicare Advantage plans in U.S. ex rel. Silingo v. WellPoint Inc. et al. As previously discussed in this blog post, MAOs provide Medicare benefits under a capitated payment system, whereby government reimbursement is based on an individual’s risk adjustment data. The Centers for Medicare and Medicaid Services (CMS) increase monthly payments to MAOs when an individual’s medical diagnoses support a higher level of risk or cost of care. Recently, both relators and the government in a number of cases have challenged the validity of diagnostic patient information utilized to support risk adjustment data, as discussed here and here.

Relator’s Alleged Unauthorized Practitioners, Inappropriate Testing and Inaccurate Coding

The relator in Silingo was a former Compliance Officer and Director of Provider Relations at Mobile Medical Examination Services, Inc. (MedXM), a company that employs physicians, nurse practitioners (NPs), and physician’s assistants (PAs) to conduct in-home health assessments of Medicare beneficiaries. The relator alleged that MedXM contracted with the defendant MAOs to update diagnosis codes and patient information relevant to risk adjustment data.

The relator cited a variety of alleged misconduct to support her complaint, claiming that MedXM:

  1. Used “inappropriate software” that did not transmit an acceptable electronic signature of each clinician.
  2. Employed NPs and PAs who were not authorized to provide medical diagnoses.
  3. Submitted risk adjustment data for diagnoses that could not have been determined during an in-home assessment, but rather required invasive testing.

The relator further alleged that MedXM selectively edited medical records to state lucrative diagnosis codes, which the defendant MAOs then submitted to CMS. According to the relator, MedXM targeted Medicare Advantage enrollees who would otherwise lack risk adjustment data for a given year in an effort to boost capitated Medicare Advantage payments to the MAOs. The government declined to intervene in the case. MedXM settled the relator’s claims against it while the defendants’ motions to dismiss the third amended complaint were pending before the district court.

Ninth Circuit Ruled That Allegations Were Sufficient

The U.S. District Court for the Central District of California dismissed the relator’s claims against the defendant MAOs, primarily as impermissible “group-pleading,” because the relator failed to allege the specific conduct of each MAO. The Ninth Circuit disagreed, finding that the relator sufficiently “pleaded a wheel conspiracy-like fraud in which MedXM was the ‘hub’ and the defendant MAOs were the ‘spokes.’”

To support that finding, the Ninth Circuit noted commonalities among the allegations against the MAOs stemming from the organizations’ separate contractual agreements with MedXM and the alleged submissions of inflated risk adjustment data. The Ninth Circuit deemed the relator’s factual allegations sufficient to satisfy the pleading requirements under Federal Rules of Civil Procedure 8 and 9(b).

Silingo Decision Reaffirms Group Pleading Standard under Swoben

The Ninth Circuit’s ruling in Silingo cited that court’s prior decision in United States ex rel. Swoben v. United Healthcare Ins. Co. and emphasized that where defendants play “the exact same role” in an alleged fraudulent scheme, the complaint need not differentiate among allegations “that are common to the group.” The court noted that specific factual allegations as to each defendant are required only where “different actors play[] different parts.”

The ruling in Silingo further underscores the Ninth Circuit’s view that group pleading for wholly distinct defendants is permissible where a defendant allegedly reported inflated risk adjustment data in precisely the same way for multiple parties.

In light of this ruling, MAOs are cautioned to be on “notice when its contractor’s work [seems] too good to be true.” In addition, this ruling may suggest that cases alleging Medicare Advantage fraud moving forward may be more likely to survive a motion to dismiss and reach the discovery phase of litigation, at least in jurisdictions such as the Ninth Circuit.