On October 13, 2017, the U.S. Department of Justice (DOJ) decided to abandon its lawsuit accusing UnitedHealth Group and affiliated health plans1 (UnitedHealth) of exaggerating how sick its patients were to procure millions of dollars in inflated Medicare Advantage payments. The case is United States of America et al. v. Scan Health Plan et al., CV 09-5013-JFW (JEMx) (Cal. Cen. Dist., July 13, 2009).

A whistleblower first sued UnitedHealth for violation of the False Claims Act (FCA) over allegedly inflated Medicare Advantage payments in 2009. The DOJ did not decide to intervene, however, until May 2017, despite joining another, similar lawsuit against UnitedHealth in February 2017. This is the government’s first FCA complaint in a whistleblower-led suit alleging Medicare Advantage fraud.

In this case, the DOJ accused UnitedHealth, the nation’s largest Medicare Advantage insurer, of “systematically ignoring information that would have led to decreased payments” from the Centers for Medicare & Medicaid Services (CMS). The DOJ’s complaint-in-intervention alleges that UnitedHealth had audited a large provider group called HealthCare Partners and found records indicating overlooked diagnoses that would legitimately increase its Medicare Advantage payments, as well as questionable diagnoses that would decrease the payments.

According to the DOJ, United Health investigated the overlooked diagnoses but not the suspicious ones. As a result, the DOJ claims that UnitedHealth failed to repay overpayments for upcoded claims, thereby improperly boosting United Health’s “risk adjustment” payments from CMS for covering purportedly sicker Medicare Advantage patients. “By failing to look both ways, the DOJ complaint claims that UnitedHealth improperly generated and reported skewed data artificially inflating beneficiaries’ risk scores, avoided negative payment adjustments and retained payments to which it was not entitled.”

UnitedHealth Wins Argument to Dismiss

On October 5, 2017, U.S. District Judge John F. Walter dismissed the entire complaint-in-intervention. UnitedHealth’s motion to dismiss made several arguments, each of which the court found persuasive.

First, UnitedHealth argued that the complaint-in-intervention failed to allege that the individuals who signed the relevant attestations on behalf of UnitedHealth had the requisite “knowledge” that those attestations were false. The complaint-in-intervention failed to identify the corporate officers who signed the attestations or allege that those individuals knew or should have known that the attestations were false. Although the DOJ argued that a company may be liable under the FCA, if that company acts to “ensur[e] that signers of attestations are kept in the dark about company fraud,” the court held that the complaint-in-intervention failed to allege that anyone from UnitedHealth undertook any action to shield the signatories of the attestations from gaining the necessary knowledge that would have demonstrated that they were false, nor did the complaint-in-intervention identify anyone at UnitedHealth who possessed the requisite knowledge. Therefore, the court found that the complaint-in-intervention did not allege that UnitedHealth “knowingly” made false statements.

Second, UnitedHealth argued that the complaint-in-intervention failed to allege that UnitedHealth’s attestations were “material” to the DOJ’s decision to pay. The DOJ’s complaint-in-intervention only included conclusory allegations that UnitedHealth’s conduct was material, failing to allege that CMS would have refused to make risk adjustment payments to the UnitedHealth Defendants if it had known the facts about the defendants’ alleged involvement with the Healthcare Partners chart review process. The court found these allegations were insufficient to allege materiality under the FCA in light of the recently heightened materiality standard espoused by Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989, 2003 (2016), which “look[s] to the effect on the likely or actual behavior of the recipient of the alleged misrepresentations,” and held that a misrepresentation cannot be deemed material merely because the government designates compliance with a particular statutory, regulatory or contractual requirement as a condition of payment.

Third, UnitedHealth argued that the complaint-in-intervention failed to identify with particularity the acts of each of the seven distinct corporate entities that comprised the UnitedHealth Defendants and, instead, simply referred to those entities collectively as “UnitedHealth” throughout the complaint-in-intervention The court found that the DOJ did not “identify the role of each defendant in the alleged fraudulent scheme,” thereby failing to satisfy Rule 9(b).

UnitedHealth also made arguments that the complaint-in-intervention attempted to revive a “reverse false claims” theory that had been waived and that some of the DOJ’s claims were untimely under the statute of repose. Those arguments were likewise successful, causing Judge Walter to dismiss the entirety of the complaint-in-intervention on October 5.

Although Judge Walter permitted the DOJ to file an amended complaint with beefed-up allegations, the DOJ decided to dismiss its suit against UnitedHealth on October 12, 2017. The dismissal validates the argument that it is not a Medicare Advantage plan’s responsibility to check whether healthcare providers are giving correct information when they submit claims.

Other Actions Pending

This case does not mark the end of possible legal action against UnitedHealth for allegations against its Medicare Advantage business. A separate lawsuit filed by former UnitedHealth executive Benjamin Poehling, which the DOJ had also joined, is still pending. Poehling has claimed he monitored data mining projects to find conditions to increase payments to UnitedHealth, calling it a “perfect scheme” that may have netted more than $1 billion for the company since 2005.

UnitedHealth has attempted to undermine the entire basis of the DOJ’s theory by filing its own complaint accusing the government of improperly holding Medicare Advantage insurers to higher antifraud standards than traditional Medicare.