The U.S. Department of Justice (DOJ) announced a settlement of up to $100 million with Independent Health, a Medicare Advantage (MA) plan serving upstate New York, and Betsy Gaffney, the former Founder and CEO of DxID, a now-defunct vendor that provided chart review services to MA plans, including Independent Health.
As with so many False Claims Act lawsuits, the case was launched by a whistleblower named Teresa Ross, a former Director of Risk Adjustment at Group Health Cooperative, an MA plan in Seattle who also retained the services of vendor DxID and Ms. Gaffney.
The case is remarkable in several ways. It’s the largest-ever Part C settlement with a health plan purely based on a whistleblower case. It is also one of the first, if not the first, settlement with a vendor for allegations of risk adjustment fraud — and notably includes an individual executive at the vendor, Gaffney, who agreed to pay $2 million to resolve the allegations against her. Such DOJ resolutions with individual executives are key for deterrence. The case also lasted 12 years, an unusually long time – and a fact I know intimately, having had the great pleasure of representing Ms. Ross. Ms. Ross, who wore a wire to support the Government’s investigation, will receive 22.5 percent of the settlement amount, or up to $22.5 million, as her whistleblower share.
Around eight years into the case, DOJ settled with Ms. Ross’s former employer, Group Health Cooperative, for $6.4 million. The thread connecting the Group Health Cooperative and Independent Health settlements is that both MA plans had hired vendor DxID and Ms. Gaffney, who notably was compensated on a contingency fee basis, to maximize the risk scores of their Medicare insureds and thereby significantly increase their Medicare reimbursement, according to the complaints.
In Medicare Advantage, a managed care alternative system to traditional Medicare, the government partners with private insurers and pays them a premium to cover Medicare beneficiaries. The premium payment is generally higher if the beneficiaries have more documented health conditions. As a result, there is an incentive to make patients appear sicker than they are, in order to increase their Risk Adjustment Factor or RAF score, a practice known as risk adjustment fraud. To combat this issue, Medicare sets specific rules for medical record documentation and sourcing, and Independent Health, DxID, and Ms. Gaffney are now joining Group Health Cooperative in resolving allegations that they flaunted those rules.
The allegations against Independent Health are more serious than those against Group Health, given that Independent Health owned DxID and Group Health stopped the scheme after two years, whereas Independent Health let it go on for at least eight, from 2010 through at least 2017. Unlike Group Health, Independent Health was accused of engaging in DxID’s practice of asking doctors to sign forms adding diagnoses that risk-adjust up to a year after patient visits.
As the New York Times has reported, allegations of risk adjustment fraud have touched all of the major players in the Medicare Advantage space. For our law firm alone, this is the fifth case successfully resolving allegations of risk adjustment fraud. Our prior whistleblower cases that have settled involved Freedom Health, its COO Sidd Pagidipati, Sutter Health, and Group Health Cooperative, and we continue to co-counsel with the Government in ongoing cases against UnitedHealth Group and Kaiser Permanente for alleged risk adjustment fraud. For individuals interested in learning more about this case, you can catch us in San Antonio on March 13 at the RISE National Conference, where my law partner Max Voldman and I will be joined by our client Teresa Ross to provide “An Anatomy of a Whistleblower Case: An examination of a Successful False Claims Act case from initial sealed Whistleblower Complaint alleging Risk Adjustment Fraud to DOJ Investigation, Intervention and Ultimate Settlement.”
The 2026 Medicare Physician Schedule Final Rule includes several distinct policy changes in which the Centers for Medicare & Medicaid Services (CMS) modifies how it
As discussed in my prior articles, Medicare Advantage (MA) organization payments incorporate a beneficiary’s health risk, as determined by diagnoses that map to Centers for
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