Spotlight on the False Claims Act June 2017

By John F. Libby, Partner | Jacqueline C. Wolff, Partner | Kenneth B. Julian, Partner

Why it matters: On May 30, 2017, the Department of Justice announced that Medicare Advantage Organization (MAO) Freedom Health Inc. and nine of its related entities, as well as its former chief operating officer, agreed to pay approximately $32.5 million to resolve False Claims Act allegations that they engaged in “illegal schemes to maximize their payment” from Medicare in connection with their Medicare Advantage plans. In addition, Freedom Health and one of its related entities entered into what was called an “innovative” corporate integrity agreement with the Department of Health and Human Services Office of the Inspector General that focused on “compliance issues unique to Medicare Advantage plans.”

Detailed discussion: On May 30, 2017, the DOJ announced that Florida-based MAO Freedom Health Inc. and its many related entities enumerated in the press release (collectively, Freedom Health) agreed to pay approximately $31.7 million to resolve allegations that Freedom Health violated the False Claims Act by “engaging in illegal schemes to maximize their payment from the government in connection with their Medicare Advantage plans.” In addition, the DOJ reported that Freedom Health’s former chief operating officer agreed to separately pay $750,000 for “his alleged role in one of the fraudulent schemes.”

According to the government’s allegations, which were neither admitted nor denied by Freedom Health, from 2008 through 2013 Freedom Health submitted unsupported diagnosis codes to the Centers for Medicare & Medicaid Services, which resulted in inflated reimbursements in connection with two of their Medicare Advantage plans operating in Florida. The DOJ further alleged that, in 2008, Freedom Health made “material misrepresentations to CMS regarding the scope and content of its network of providers (physicians, specialists and hospitals)” in its application to expand in 2009 into new counties in Florida and other states. The DOJ said that its settlement with the former chief operating officer “resolves his alleged role in this latter scheme.”

In addition to the payment obligations discussed above, Freedom Health Inc. and one of its related entities, Optimum Healthcare Inc., entered into a five-year corporate integrity agreement with the Department of Health and Human Services Office of the Inspector General, pursuant to which the companies agreed to enhanced compliance and reporting obligations, including (i) the appointment of a compliance officer who would report directly to the chief executive officer of Freedom Health Inc. and be responsible for putting in place and overseeing a rigorous compliance and reporting program; (ii) the appointment of a compliance committee to be headed by the compliance officer and comprising the chief executive officer and senior management from all “relevant departments” including billing, audit, human resources and operations; and (iii) the adoption of stringent compliance obligations for Freedom Health Inc.’s board of directors. Gregory Demske, chief counsel to the Inspector General of HHS-OIG, said in the press release that “the innovative CIA reduces the risks to patients and taxpayers by focusing on compliance issues unique to Medicare Advantage plans.”

The underlying case against Freedom Health was brought under the qui tam provisions of the federal and Florida False Claims acts. As of the date of the press release, the amount of the whistleblower award had not yet been determined.

The Freedom Health settlement follows on the heels of the DOJ’s recent decision to intervene in two related False Claims Act cases in the Central District of California involving allegations that another large MAO, UnitedHealth Group Inc., similarly defrauded Medicare (see our May 2017 newsletter under “Spotlight on the False Claims Act”). As HHS-OIG Chief Counsel Demske said in connection with the Freedom Health settlement, “Medicare Advantage insurers must play by the rules and provide Medicare with accurate information about their provider networks and their patients’ health,” emphasizing that it is a priority for the government to “investigate and hold managed care organizations accountable for fraud.” Added Acting U.S. Attorney Stephen Muldrow, “Medicare Advantage plans play an increasingly important role in our nation’s health care market. This settlement underscores our Office’s commitment to civil health care fraud enforcement.”

back to top



pursuant to New York DR 2-101(f)

© 2020 Manatt, Phelps & Phillips, LLP.

All rights reserved