Medicare Advantage Fraud Alert Highlights Suspect Payments in Marketing Arrangements

The U.S. Department of Health and Human Services, Office of Inspector General (HHS OIG) recently issued a special fraud alert: “Suspect Payments in Marketing Arrangements Related to Medicare Advantage and Providers.” The alert addresses suspect marketing practices by Medicare Advantage Organizations (MAOs). These practices often involve questionable financial arrangements and referrals between MAOs, healthcare providers, and third-party marketers (like agents and brokers). These arrangements prioritize profits over patient needs. Moreover, improperly incentivized individuals could steer beneficiaries toward MA plans or providers that are not the best fit for them.

Medicare Advantage Organizations: An Overview

Private insurance companies (MAOs) offer Medicare Advantage (MA), or Part C, plans, as an alternative to original Medicare. The Centers for Medicare & Medicaid Services (CMS) contracts with MAOs to provide Medicare Part A and Part B benefits to individuals who original Medicare would otherwise cover. In addition, MA plans often include supplemental benefits such as prescription drug, vision, and dental coverage.

The Anti-Kickback Statute and the False Claims Act 

The Federal Anti-Kickback Statute (AKS) is a critical safeguard against fraudulent activities within federal healthcare programs, including Medicare. This statute prohibits the payment or receipt of remuneration to induce or reward referrals of items or services reimbursable by a Federal health care program. This prohibition extends to the referral of patients to a specific MA plan. 

When an MAO makes payments to a healthcare provider in violation of the AKS, it can trigger False Claims Act (FCA) liability. The government can consider any claims submitted for reimbursement under these circumstances false or fraudulent. Essentially, when someone incentivizes a provider to refer patients to a specific MA plan, that illegal inducement taints any subsequent claims the provider submits to CMS for those patients. The government can then pursue legal action against both the plan and the provider for violating the FCA. 

Examples of Suspect Arrangements in the Medicare Advantage Fraud Alert 

HHS OIG’s Medicare Advantage Fraud Alert identified several concerning trends that may violate the Anti-Kickback Statute. Specifically, the Alert cautions about the risks associated with marketing arrangements between MAOs and health care providers.  The Alert also covers improper arrangements between health care providers and agents and brokers selling MA plans. These include:

• Remuneration to Healthcare Providers: MAOs may not offer any form of compensation to healthcare providers or their staff in exchange for recommending or referring patients to a particular MA plan. This includes gifts, bonuses, or any other incentives that could unduly influence a provider’s recommendation.
• Disguised Remuneration: The OIG is particularly vigilant about attempts to disguise remuneration as legitimate business expenses. Payments to healthcare providers couched as “consulting services” or other seemingly legitimate purposes but intended as rewards for referrals are strictly prohibited.
• Exchange of Patient Information: MAOs cannot offer or provide remuneration to healthcare providers in exchange for patient information that the MAO could use for marketing purposes. Such practices violate HIPAA and raise serious ethical concerns.
• Referral-Based Fees: Similarly, the law prohibits healthcare providers from offering or providing remuneration to agents or brokers in exchange for patient referrals. Such arrangements create conflicts of interest. They may lead to agents and brokers steering patients towards providers based on financial incentives rather than their medical needs.

Consequences of Non-Compliance

Violations of the Anti-Kickback Statute can result in severe consequences, including:

• False Claims Act liability:   Whistleblowers may bring lawsuits under the qui tam provisions of the False Claims Act for violations of the AKS by MAOs and healthcare providers. One such case initially brought by our clients is being litigated in the Southern District of Florida, United States ex rel. Butler et al. v. Mazin Shikara et al., Civil Case No. 20-cv-80483.  A recent settlement in a similar matter illustrates the significance of this misconduct.
• Criminal Penalties: Individuals and entities found guilty of violating the statute may face criminal charges, including fines and imprisonment.
• Civil Monetary Penalties:   The law imposes substantial civil monetary penalties for violations of the False Claims Act. As of February 2024, False Claims Act penalties range from $13,946 to $27,894 per violation.
• Exclusion from Federal Healthcare Programs: Providers and entities may be excluded from participating in federal healthcare programs, like Medicare.

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