United States ex rel. Swoben v. United Healthcare Ins. Co., ___ F.3d ___, 2016 WL 4205941 (9th. Cir. Aug. 10, 2016)
Relator James Swoben filed a qui tam action against several Medicare Advantage organizations alleging that they violated the False Claims Act (FCA) by falsely certifying to the Centers for Medicare & Medicaid Services (CMS) the accuracy of “risk adjustment data,” which was actually biased in order to inflate reimbursements. Specifically, Swoben alleged that the organizations performed biased retrospective medical records reviews designed to identify under-reporting diagnosis codes errors that could be corrected in order to enhance reimbursements, while deliberately avoiding the identification of over-reporting diagnosis coding errors that would have resulted in a reduction in reimbursements if corrected. The organizations allegedly employed coding companies to perform biased reviews, and used medical record review software and a flawed CMS reporting template designed to not reveal over-reporting errors. The defendants moved to dismiss. After permitting several amendments to Swoben’s complaint, the district court finally denied Swoben leave to make further amendments, ruling they would be futile and cause undue delay.
The Ninth Circuit reversed, holding that the district court abused its discretion by denying Swoben leave to amend. First, the Ninth Circuit held that an amendment would not be futile because “when, as alleged here, Medicare Advantage organizations design retrospective reviews of enrollees’ medical records deliberately to avoid identifying erroneously submitted diagnosis codes that might otherwise have been identified with reasonable diligence, they can no longer certify, based on best knowledge, information and belief, the accuracy, completeness and truthfulness of the data submitted to CMS. This is especially true, when, as alleged here, they were on notice that their data included a significant number of erroneously reported diagnosis codes.” The Ninth Circuit acknowledged that “blind coding may help ensure the integrity of a retrospective review” because if medical record “reviewers are told in advance which codes were submitted to CMS, they may have an especially strong incentive to find support for those codes in the records under review.” However, if the “Medicare Advantage organizations acquire the codes identified by retrospective coders, compare them to the codes previously submitted to CMS, identifying both under- and over-reporting errors, but withhold information about the over-reporting errors from CMS, this would result in a false certification.” In addition, if the medical records selected for review fail to support the diagnosis codes submitted to the CMS, then the organizations have “been put on notice that the diagnosis may not be supported” and must investigate further to ensure that the diagnosis codes are in fact supported by other medical records, thereby ensuring the “accuracy, completeness, and truthfulness” of the submitted data. Finally, the Ninth Circuit held that, in this instance, “[u]ndue delay by itself is insufficient to justify denying leave to amend,” and that defendants failed to establish how they would be prejudiced if leave to amend were granted.
Thomas Watson
htwatson@horvitzlevy.com
Horvitz & Levy LLP
Business Arts Plaza
3601 W. Olive Ave., 8th Fl.
Burbank, CA 91505
818.995.0800
horvitzlevy.com
