DOJ takes Anthem to court over refusal to comply with Medicare Advantage fraud investigation

The Department of Justice is asking a court to force Anthem to turn over information related to an ongoing fraud investigation involving the insurer's Medicare Advantage plans that brought in nearly $215 million using retrospective chart reviews over a two-year period. 

Anthem, meanwhile, argues investigators are overstepping their authority by asking for information that is protected by attorney-client privilege and falls outside the scope of the DOJ’s probe.

The legal spat may be a precursor to more substantial litigation as new court filings also reveal federal prosecutors may be close to filing a complaint against the insurer.

The two sides have reached an impasse following several letters exchanged between the DOJ and Anthem’s attorneys. The legal squabble revolves around a civil investigative demand (CID) issued (PDF) to Anthem March 22 by the U.S. Attorney for the Southern District of New York. Prosecutors requested depositions from Anthem’s corporate representatives about how the company calculated risk adjustment data, particularly around Medicare Advantage beneficiary diagnosis codes.

This week, New York prosecutors filed a petition of summary enforcement with the U.S. District Court for the Southern District of New York requesting that Anthem comply with the demand. That same day, a federal judge ordered (PDF) Anthem to explain why a court order should not be issued. 

RELATED: DOJ investigating Anthem’s Medicare Advantage, Part D plans

Under the MA program, insurers are reimbursed by the federal government based the overall health of each beneficiary. Diagnosis codes are used to determine how much is necessary to care for each patient.

Prosecutors say their investigation is focused on whether Anthem violated the False Claims Act by failing to ensure diagnosis codes were valid while taking hundreds of millions of dollars in federal reimbursement.

Court documents show Anthem obtained more than $102 million in additional risk adjustment payments in 2014 from the Centers for Medicare & Medicaid Services following a retrospective chart review using a third-party vendor known as Verscend while incurring just $18.1 million in "program expense." In 2015, a retrospective review brought in more than $112 million on an $18.8 million cost. 

"Each dollar Anthem spent on its retrospective chart review program generated more than $5 in additional risk-adjustment payments," the DOJ said in its petition (PDF). 

The DOJ said one reason for the high profitability may be because Anthem "chose to disregard" whether Verscend's results identified certain codes already sent to CMS were invalid. 

Anthem has resisted turning over information about the retrospective reviews. After receiving the March demand, Anthem challenged the U.S. Attorney’s Office request for testimony involving internal auditing procedures Anthem used to determine which diagnosis codes to submit to CMS, the company’s policies and training to ensure codes submitted were valid, and any personnel Anthem relied on to ensure compliance with those policies. Anthem argued the requests were overly burdensome, vague and ambiguous.

Prosecutors later agreed to limit the scope of the testimony. In a letter (PDF) to Anthem’s attorneys on Aug. 1, U.S. Attorney Geoffrey Berman said the investigation is focused on conduct related to the DOJ’s prior case against UnitedHealthcare in prosecutors claimed the insurer submitted erroneous diagnosis codes without conducting reasonable diligence.

The DOJ abandoned that whistleblower lawsuit in October and abandoned most of a second case against UnitedHealthcare that included similar allegations. Several other insurers, including Humana, Cigna, Health Net and Aetna have been swept up in the DOJ's probe. 

RELATED: DOJ abandons Medicare fraud suit against UnitedHealth

In its response, Anthem’s attorney Jim Bowman, a partner at O'Melveny & Myers, maintained the government’s request would “require dozens of witnesses and several months to provide accurate and complete testimony.” He also argued Anthem has “cooperated fully with the government’s investigation from the outset,” but the company ended an agreement to waive its right to dismiss litigation after prosecutors indicated they intended to file a complaint.

“In early 2018 … DOJ informed Anthem that a ‘decision to move forward has been made’ and that SDNY would move forward with ‘drafting the complaint and filing the case’ against Anthem related to its chart review practices,” Bowman wrote (PDF).

In a subsequent letter (PDF), Bowman said Anthem is "baffled" by the DOJ's "repeated refusal to explain how the testimony you seek relates to the subject matter of your investigation." He added that prosecutors have declined "no fewer than ten separate requests" to meet with Anthem's legal team. 

"There is no basis for Anthem to refuse to provide testimony on an issue directly relevant to this investigation," Berman wrote in an Aug. 10 letter (PDF). 

An Anthem spokesperson declined to comment.