Major Indiana managed care organizations and health systems are blamed for defrauding the state Medicaid system by tens, if not hundreds, of millions of dollars, says a newly unsealed whistleblower lawsuit.
Implicated in the lawsuit is Anthem, the largest managed care company in Blue Cross Blue Shield Association; CareSource, one of the country’s largest managed health plans; and Coordinated Care, a subsidiary of Centene; and MDwise.
Health systems named are Indiana University Health, Ascension Health, Lutheran Health Network and other regional hospitals.
“This misconduct … has contributed to the nearly $1 billion budget shortfall for Indiana Medicaid that emerged in December 2023, which has led to significant cuts to services for the elderly and disabled children in Indiana,” the lawsuit said, citing reporting from the IndyStar.
The insurers are accused of misusing Medicaid funds by violating standard hospital billing rules, paying for services after patients already died, improperly paying chiropractic office visits and improperly bundling dental and opioid treatment claims. Insurers knew reporting higher expenditures in the encounter data would result in greater capitated payments in the future, the lawsuit said.
Hospitals, like the insurers, are said to have violated similar rules under the federal and state False Claims Act.
Plaintiffs alleges the accused parties should have been aware of federal and state regulations and were repeatedly informed by state officials of their responsibility. They were also told of the importance for utilizing payment claim analysis algorithms.
Two former officials—John McCullough, director of program integrity for Indiana Medicaid, and James Holden, chief deputy and general counsel for the Indiana state treasurer—sued the insurers and hospitals after obtaining reports from IBM Watson indicating widespread fraud after the two had already left their jobs with the government.
IBM Watson was the Indiana Medicaid fraud detection contractor from 2011 to 2021. The lawsuit says less than 1% of fraud identified by IBM was overturned on appeal during the company’s time as contractor, indicating the accuracy and success of its fraud detection.
Plaintiffs said McCullough’s replacement at Indiana Medicaid complicated IBM’s efforts at recovering false claims and overpayments in late 2017. The lawsuit states that the insurers and hospitals had spent “hundreds of thousands of dollars” on state elections, and a former healthcare lobbyist was appointed as Indiana Medicaid administrator before taking a job with Ascension in 2023.
Among the alleged violations was Anthem's misuse of $105 million in payments for two-day inpatient claims by saying the beneficiaries may have had a length of stay under 24 hours. Likewise for MDwise ($72 million), Centene ($51 million) and CareSource ($15 million), according to the lawsuit.
For duplicate claims for identical inpatient hospital treatments, Anthem allegedly misused $151 million and MDwise $115.6 million.
Hospitals were also found to misuse Medicaid funds to pay duplicate claims for identical inpatient hospital treatments by more than $100 million, led by the Indiana University Health network, which received more than $35 million, according to the lawsuit's allegations.
"Ascension cannot comment on ongoing litigation but is committed to vigorously defending the organization and our associates against the untrue allegations in the complaint," said Sean Fitzpatrick, an Ascension spokesperson.
The other insurers, health systems and Indiana's Medicaid division did not immediately respond to a request for comment or declined to comment due to ongoing litigation.