A Long Beach, California based managed care health plan has paid $319.85 million to resolve allegations that it received overpayments from Medi-Cal.
Earlier this month, SCAN Health Plan paid $129,380,632 to the federal government and $190,470,301 to the State of California to resolve an investigation into overpayments for services provided to long-term-care patients.
Medi-Cal, which is California’s Medicaid program, is jointly funded by the federal government and the State of California.
A federal government’s investigation found that the State of California paid SCAN rates for long-term-care-certified (LTC) patients that were over the legal ceiling set by a California statute and regulations.
The overpayments to SCAN resulted from two actuarial errors made during the State of California’s rate-setting process.
On August 10, 2012, SCAN also paid an additional $3.82 million to the federal government – bringing the total settlement in this matter to $323,670,650 – to settle a whistleblower lawsuit’s allegations that the company unlawfully caused an inflation of some of its patients’ “risk adjustment scores,” which then inflated Medicare payments to the company.
Under Medicare Part C’s managed care system, physicians for patients enrolled in a Medicare Advantage health plan report patients’ diagnosis codes to the plan, which then reports the codes to the federal Centers for Medicare and Medicaid Services (CMS), which then uses the codes to develop risk adjustment scores for the patients.
Risk adjustment scores measure the health of patients and are used by Medicare Part C to determine how much to pay the plan as a monthly capitated rate for each patient.
A former SCAN employee, James M. Swoben, filed a federal whistleblower lawsuit in United States District Court in Los Angeles in July 2009.
Swoben’s complaint alleged that SCAN improperly submitted diagnosis codes to CMS that led to higher risk adjustment scores and, therefore, higher monthly capitated rates to SCAN.
The lawsuit alleged that after SCAN had reported to CMS the diagnosis codes for certain patients with severe illnesses, SCAN used outside companies to review the medical charts for those patients with the hope of finding additional diagnosis codes to report.
While this practice was not illegal, Swoben alleged that in substituting the outside companies’ later judgment on diagnosis codes for the earlier judgment of the patients’ physicians, SCAN should have told CMS that some of the original diagnosis codes might need to be deleted.
According to the lawsuit, SCAN, in order to increase risk adjustment scores, did not tell CMS that any of the original diagnosis codes might need to be deleted.
In settling both the Medi-Cal and Medicare allegations, SCAN did not admit wrongdoing.