MANAGED CARE FRAUD & ENFORCEMENT

MANAGED CARE FRAUD & ENFORCEMENT ABA 27 th ANNUAL INSTITUTE ON HEALTH CARE FRAUD May 19, 2017 Robert T. Rhoad, Partner, Sheppard Mullin Richter & Hampton LLP Kathy Von Hoene, Bureau Chief, MFCU, State of Florida Beong-Soo Kim, VP & Assistant General Counsel, Kaiser Sheppard Mullin Richter & Hampton LLP 2017 1 AGENDA FALSE CLAIMS ACT MEDICAID MANAGED CARE FRAUD & ABUSE / FCA ISSUES MEDICARE MANAGED CARE FRAUD & ABUSE / FCA ISSUES MEDICARE ADVANTAGE RISK ADJUSTMENT MEDICARE ADVANTAGE BIDDING PRO-ACTIVE MEASURES CONCLUSION 2

FALSE CLAIMS ACT 3 FALSE CLAIMS ACT ( FCA ) BACKGROUND AND BASIC OVERVIEW Elements Damages and Penalties Qui Tam Provisions FRAUD ENFORCEMENT RECOVERY ACT OF 2009 ( FERA ) First Major Amendments to FCA Expanded Scope of FCA Relaxed Hurdles for Relators AFFORDABLE CARE ACT OF 2010 ( ACA ) Public Disclosure Bar Report and Return of Overpayments Stark = Automatic Violation 4

MEDICAID MANAGED CARE FRAUD & ABUSE 5 MEDICAID MANAGED CARE NATIONALLY

FEDERAL REQUIREMENTS THAT MFCUS PURSUE MANAGED CARE FRAUD MFCUs MUST PURSUE MANAGED CARE FRAUD 42 U.S.C. 1396b requires MFCUs to investigate and prosecute: any and all aspects of fraud in connection with... any aspect of the provision of medical assistance and the activities of providers of such assistance under the State plan[.] collect overpayments that are made under the State plan...to health care facilities that are discovered by the MFCU in carrying out its activities and all MFCU recoveries must be credited exclusively to the federal health program at issue (MEDICAID!). MFCUs MUST PURSUE MANAGED CARE FRAUD (Cont.) HHS-OIG Performance Standards requires MFCUs to investigate and prosecute: Performance Standard 4 Maintaining Adequate Referrals Performance Standard 6 Case Mix HHS-OIG FY 2017 Work Plan: Aims to describe how States oversee MCOs efforts to identify and address fraud and abuse.

MEDICAID MANAGED CARE Multiple Entities with Oversight Responsibility State Enforcement Perspective Types of Managed Care Fraud Schemes HHS OIG Work Plan 2017 Medicaid Footprint Going Forward (ACA?) MULTIPLE MCOS IN STATE MEDICAID MANAGED CARE PROGRAMS Source: KFF Medicaid Managed Care Market Tracker September 2016

RECENT MANAGED CARE FRAUD SETTLEMENTS United States et al., ex rel. McGuire v. Millennium Laboratories, No. 12-cv-10132-NMG. (D. Mass.): $256 million national settlement October 19, 2015 Medically Unnecessary Urine Drug Testing $34.8 million Medicaid Federal/State Share $17.4 million Medicaid State Share MCO Recoveries $7.9 million Medically Unnecessary Pharmacogenetic Testing $2 million Medicaid Federal/State Share $1 million Medicaid State Share MCO Recoveries $448,800 AKS/Stark Allegations re: free POC Test Cups (12 states) $14.5 million Medicaid Federal/State Share $7.25 million Medicaid State Share RECENT MANAGED CARE FRAUD SETTLEMENTS United States, et. al., ex rel. Porter v. Qualitest Pharma., 13-CV-1506 (SDNY) 39 Million Dollar Medicaid Settlement December 16, 2015 Insufficient fluoride in multi-vitamin tablets Double damages 60/40 Split FFS/MCO Covered Conduct 2007-2013

RECENT MANAGED CARE FRAUD SETTLEMENTS January 21, 2016 Manhattan U.S. Attorney Announces $46.7 Million Settlement Of Civil Fraud Claims Against CenterLight Healthcare For Enrollment Of Ineligible Individuals In Medicaid Managed Long- Term Care Plan CenterLight Healthcare Admits Collecting Medicaid Payments for 1,241 Ineligible Managed Long-Term Care Plan Members Who Attended or Were Referred by Social Adult Day Centers RECENT MANAGED CARE FRAUD SETTLEMENTS August 24, 2016 Manhattan U.S. Attorney Announces $2.95 Million Settlement With Hospital Group For Improperly Delaying Repayment Of Medicaid Funds During the relevant time period, the Hospitals had managed care agreements with Healthfirst, Inc., a managed-care organization ( MCO ), and rendered care to numerous patients who obtained their Medicaid managed-care plans through Healthfirst.pursuant to their contracts with Healthfirst, the Hospitals obtained from Healthfirst contractually fixed managed-care payments for services rendered to the Healthfirst beneficiaries. Pursuant to Medicaid regulations, the Hospitals were entitled to receive as payment for services rendered to Medicaid managed-care patients only the amount paid by the MCO and were not permitted to seek additional payments from Medicaid or, with certain limited exceptions, the patients. Beginning in or around 2009, due to a software compatibility issue, the Healthfirst remittances contained coding that caused the Hospitals and Continuum to mistakenly submit claims on behalf of the Hospitals to the Medicaid program, as a secondary payor, for additional payment for services rendered to enrollees of Healthfirst, above and beyond what they had received from Healthfirst for these services, and Medicaid paid Beth Israel and St. Luke s Roosevelt for such claims. Continuum did not fully reimburse Medicaid for claims erroneously billed to Medicaid for over two years.

RECENT MANAGED CARE FRAUD SETTLEMENTS May 2017 USA ex rel. Miller v. CareCore National, LLC, Case No. 13-CV-1177 (SDNY) $54 Million Settlement (USA and 21 States) $18M Medicaid Managed Care Recovery Fraud by Prior Authorization Sub-Contractor providing utilization management services to Medicare Part C Carriers and Medicaid MCOs USA Intervention Complaint FCA Liability: False Statements/Records which caused submission of false claims by providers to MCOs Relator John Miller was a Clinical Reviewer and Supervisor CARECORE MANAGED CARE FRAUD SETTLEMENT Covered Conduct: from January 1, 2005 through June 13, 2013, CareCore developed and implemented the Process As Directed or PAD Program through which CareCore improperly approved over two hundred thousand prior authorization requests, an action known at CareCore as padding; this practice involved approving prior authorization requests, which CareCore initially determined could not be approved based on the information provided. This practice caused false or fraudulent claims to be submitted to and reimbursed by the State s Medicaid program, including its contracted MCOs, for procedures that were not properly authorized as medically reasonable or necessary in a manner consistent with the policies and procedures set forth by the State s Medicaid program and its contracted MCOs, using federal and State funds provided through Medicaid Managed Care. CareCore allegedly auto-approved the requests in an effort to keep up with the volume of preauthorization requests for diagnostic radiology services and to avoid a contractual monetary penalty per case for untimely reviews.

CARECORE MANAGED CARE FRAUD SETTLEMENT CareCore Admissions: In CareCore s role managing the prior authorization process, it had medical information of the beneficiaries seeking prior authorization. When CareCore approved padded requests, CareCore made a representation that it had appropriately reviewed the requests when it knew it had not. Thus, those padded requests incorporated CareCore s false representation that it had approved a case after completing the required review process. The MCOs thereafter provided coverage based on CareCore s approval of the prior authorizations. MCOs would only pay for procedures that require a prior authorization if the prior authorization was granted in a manner consistent with the MCO s policies and procedures. Thus, the PAD Program resulted in insurance claims related to the padded requests being presented to the MCOs for payment with federal and/or state government funds, and MCOs actually paid insurance claims made in connection with the padded requests. MEDICARE MANAGED CARE FRAUD & ABUSE 18

MEDICARE ADVANTAGE RISK ADJUSTMENT BACKGROUND RECENT ENFORCEMENT ACTIVITIES United States ex rel. Poehling v. United Health Group, Inc., et al. Swoben v. United Healthcare, No. 13-56746 Others: Aetna, Inc. Cigna, Inc. (Bravo Health) Health Net, Inc. (Centene) Humana, Inc. 19 MEDICARE BIDDING INSTRUCTION COMPLIANCE BACKGROUND SAMPLE SCENARIOS IMPACT OF RECENT CASE LAW United States ex rel. Purcell v. MWI Corp., 807 F.3d 281 (D.C. Cir. 2015), reh g en banc denied, cert. denied, 580 U.S. (2017) 137 S.Ct. 625 (Mem) (2017). 20

MEDICAID/MEDICARE COMPLEXITY Here is a glance at what courts have had to say about Medicaid and Medicare complexity over the years: 1976: The Second Circuit commented the absurdity of any law or regulation 7 subsections deep. For example: As program after program has evolved, there has developed a degree of complexity... regulations which makes them almost unintelligible to the uninitiated... [a] draftsman who has gotten himself into a position requiring anything like [ 139a(a)(10)(A)(ii)(VIII)(cc)] should make a fresh start. Friedman v. Berger, 547 F.2d 724 (2 nd Cir. 1976). 21 MEDICAID/MEDICARE COMPLEXITY 1981: The United States Supreme Court has called the Medicaid laws an aggravated assault on the English language, resistant to attempts to understand it. Schweiker v. Gray Panthers, 453 U.S. 34, 43 (1981). 1985: The Second Circuit calls the Medicaid statute one of unparalleled complexity in DeJesus v. Perales, 770 F.2d 316, 321 (2 nd Cir. 1985). 1991: In a case arising out of Maine, the District Court called Section 1396a(a)17) of the Medicaid statute a virtually impenetrable thicket of legalese and gobbledygook. Lamore v. Ives, 1991 WL 193601 (D.Me.) 22

MEDICAID/MEDICARE COMPLEXITY And my favorite from the Fourth Circuit (over 15 years before ACA): There can be no doubt but that the statutes and provisions in question, involving the financing of Medicare and Medicaid, are among the most completely impenetrable texts within human experience. Indeed, one approaches them at the level of specificity herein demanded with dread, for not only are they dense reading of the most tortuous kind, but Congress also revisits the area frequently, generously cutting and pruning in the process and making any solid grasp of the matters addressed merely a passing phase. Rehab. Association of Virginia v. Kozlowski, 42 F.3d 1444, 1450 (4th Cir. 1994). 23 PRO-ACTIVE MEASURES REVIEW AND IMPROVE OPERATIONS USE BALANCED TWO-WAY CODING APPROACH KNOW WHAT IS IN YOUR INTERNAL EMAIL THAT CAN BE ADVERSE RE-SET INTERNAL AUDIT PROCEDURES DON T MAKE IT EASIER FOR GOVERNMENT AND/OR RELATORS 24