The latest settlement involving Medicare Advantage (MA) organizations highlights not only the government’s continuing enforcement focus on Medicare Part C but also the vulnerabilities inherent in that program. In United States ex rel. Sewell v. Freedom Health, Inc. et al., two Florida-based MA organizations – Freedom Health and Optimum HealthCare – agreed to pay $32.5 million to resolve allegations that they had fraudulently exaggerated diagnosis codes and misrepresented the adequacy of their provider networks.

According to the complaint, internal coding auditors were instructed by Freedom Health and Optimum to review member medical records for “missing” medical conditions that corresponded to high-value diagnosis codes, regardless of whether the condition or treatment had actually occurred. To circumvent the requirement by the Centers for Medicare & Medicaid Services (CMS) that diagnosis codes must be justified by a face-to-face encounter with a physician each year, the physician whistleblower alleged that the defendants directed doctors to schedule unnecessary office visits for the sole purpose of documenting lucrative diagnosis codes for conditions that had been previously suffered by members but were not treated in the past year.