Medicare Advantage, also known as Medicare Part C, allows Medicare beneficiaries to enroll in managed care insurance plans called Medicare Advantage Plans (MA Plans). These plans receive a per-person payment to provide Medicare-covered benefits to their enrollees. The Centers for Medicare and Medicaid Services (CMS), which administers the Medicare program, adjusts these payments based on demographic data and the medical diagnoses of each enrollee. These adjustments, referred to as “risk scores,” ensure that beneficiaries with more costly medical needs receive higher risk-adjusted payments to their MA Plan.

Independent Health operates MA plans for beneficiaries living in western New York. As alleged by the United States, Independent Health created a wholly owned subsidiary, DxID LLC, to retrospectively search medical records and query physicians for information that would support additional diagnoses that could be used to generate higher risk scores, and DxID provided these services to Independent Health and other MA Plans.

The United States filed a complaint alleging that, from 2011 through at least 2017, Independent Health, with the help of DxID and its founder and chief executive, Betsy Gaffney, knowingly submitted diagnoses to CMS that were not supported by the beneficiaries’ medical records in order to inflate Medicare’s payments to Independent Health.

“The government expects those who participate in Medicare Advantage to provide accurate information to ensure that proper payments are made for the care received by enrolled beneficiaries,” said Deputy Assistant Attorney General Michael Granston of the Justice Department’s Civil Division. “Today’s result sends a clear message to the Medicare Advantage community that the United States will take appropriate action against those who knowingly submit inflated claims for reimbursement.”

“Medicare Advantage Plans that attempt to game federal programs for profit must be held accountable through rigorous oversight and enforcement,” said Deputy Inspector General Christian Schrank of the Department of Health and Human Services Office of Inspector General (HHS-OIG). “HHS-OIG will continue to work with our law enforcement partners to root out fraud, waste and abuse in federal health care programs.”

As part of the settlement agreement, Independent Health will pay $34,500,000 upfront, along with contingent payments of up to $63,500,000 on behalf of itself and DxID, which ceased to exist in 2021. The settlement amount was determined based on Independent Health’s financial capacity. Additionally, Gaffney will make a separate payment of $2,000,000.

In connection with the settlement, Independent Health entered into a five-year corporate integrity agreement (CIA) with HHS-OIG. The CIA requires, among other things, that Independent Health hire an Independent Review Organization to annually review a sample of Independent Health’s Medicare Advantage patients’ medical records and internal controls to verify the accuracy of risk adjustment payments.

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lobal consulting firm McKinsey & Co. has agreed to pay $650 million to settle a Department of Justice investigation into the firm’s consulting work with opioids manufacturer Purdue Pharma. The DoJ had accused McKinsey of fueling the opioid epidemic with its aggressive sales and marketing advice to Purdue, including a 2013 engagement in which McKinsey advised on steps to “turbocharge” sales of OxyContin.

McKinsey has agreed to pay a penalty of over $231 million, a forfeiture amount of over $93 million and a payment of $2 million to the Virginia Medicaid Fraud Control Unit to resolve the criminal allegations.

The settlement marks the first time a management consulting firm has been held criminally responsible for advice resulting in the commission of a crime by a client and reflects the Justice Department’s ongoing efforts to hold those responsible for their roles in the opioid crisis to account. The resolution is also the largest civil recovery for such conduct.

“For the first time in history, the Justice Department is holding a management consulting firm and one of its senior executives criminally responsible for the sales and marketing advice it gave resulting in the commission of crime by a client,” said Attorney Christopher Kavanaugh for the Western District of Virginia. “This ground-breaking resolution demonstrates the Justice Department’s ongoing commitment to hold accountable those companies and individuals who profited from our Nation’s opioid crisis.”

McKinsey also has entered into a civil settlement agreement in which it will pay over $323 million to resolve its liability under the False Claims Act for allegedly providing advice to Purdue that caused the submission of false and fraudulent claims to federal healthcare programs for medically unnecessary prescriptions of OxyContin, as well as allegedly failing to disclose to the U.S. Food and Drug Administration conflicts of interest arising from McKinsey’s concurrent work for Purdue and the FDA. This brings the total payments under the global resolution to $650 million.

McKinsey’s Criminal Liability for Misbranding

The criminal misbranding charge was based on McKinsey’s advice to the titan opioids manufacturer. Between 2004 and 2019, McKinsey contracted with Purdue on 75 different occasions in the United States. In 2007, a Purdue affiliate pleaded guilty to misbranding OxyContin, from 1996 through 2001, by falsely marketing it as less addictive, less subject to abuse and diversion, and less likely to cause dependence and withdrawal than other pain medications, and Purdue entered into a five-year corporate integrity agreement with the Department of Health and Human Services Office of Inspector General. After the 2007 guilty plea, McKinsey partners maintained close contact with Purdue, and in 2009, worked with Purdue to enhance “brand loyalty” for OxyContin and protect market share.

In 2010 McKinsey worked with Purdue to obtain FDA approval for a version of OxyContin that was reformulated with abuse-deterrent properties. Following the introduction of reformulated OxyContin in August 2010, OxyContin sales immediately began to decline. Purdue studied the drivers for this decline and attributed it, in large part, to a drop in prescriptions for individuals abusing OxyContin and increases in regulatory safeguards intended to hinder medically unnecessary prescribing of OxyContin.

In May 2013, Purdue retained McKinsey to conduct a rapid assessment of the underlying drivers of OxyContin performance, identify key opportunities to increase near-term OxyContin revenue and develop plans to capture priority opportunities. This 2013 effort was called Evolve to Excellence, or “E2E,” and included McKinsey advising Purdue on how to “turbocharge” the sales pipeline for OxyContin by, among other strategies, intensifying marketing to High Value Prescribers, included prescribers who were writing opioid prescriptions for uses that were unsafe, ineffective, and medically unnecessary.

McKinsey consultants spoke with Purdue about the concerns and increasing reluctance of pharmacists and pharmacy chains to fill prescriptions for OxyContin as abuse of the drug rose. McKinsey consultants also went on several “ride-alongs” with Purdue sales representatives in the field, as these sales representatives called on prescribers and pharmacists. In notes about one of these ride-alongs, a McKinsey consultant wrote, in part, “Pharmacist; [had] a gun and was shaking; abuse is definitely a huge issue[.]”

In August 2013, McKinsey partners met with certain members of the Purdue Board of Directors to present McKinsey’s findings and proposal; as one McKinsey partner reported afterwards, “[b]y the end of the meeting the findings were crystal clear to everyone and they gave a ringing endorsement of ‘moving forward fast.’” McKinsey also described for Purdue the financial value at stake: “hundreds of millions, not tens of millions.”

For Purdue and McKinsey, E2E was a financial success. Their targeting of High Value Prescribers slowed OxyContin’s declining sales and kept Purdue’s profits flowing at the expense of public health. After the conclusion of McKinsey’s work for Purdue on E2E, McKinsey performed additional work with Purdue that also sought to maximize OxyContin sales by further targeting sales efforts to High Value Prescribers.

False Claims to Federal Healthcare Programs and the FDA

The department’s civil False Claims Act settlement relates to allegations that, from 2013 to 2014, McKinsey, by advising Purdue to turbocharge OxyContin marketing to High Value Prescribers as a means to increase OxyContin sales, and despite its awareness of the opioid crises, knowingly caused false and fraudulent claims for OxyContin to be submitted to Medicare, Medicaid, TRICARE, the Federal Employees Health Benefit Program and the Veterans Health Administration.

The large $650 million fine also settles allegations that, from 2014 to 2017, McKinsey knowingly misled the FDA by assigning consultants to concurrently work on both FDA projects and competitively sensitive Purdue projects, contrary to McKinsey US’ conflict of interest policy. While soliciting a contract from the FDA, McKinsey US represented to the FDA that it had a conflict-of-interest policy in which its consultants serving the FDA would not be assigned to a competitively sensitive project for a significant period of time following an assignment for FDA.

The FDA then awarded McKinsey US the first in a series of contracts on a project relating to the monitoring of the safety of FDA-regulated products. McKinsey US admitted that it did not inform the FDA that its consultants worked on the Purdue projects around the same time those consultants also worked on the FDA project.

McKinsey’s Remedial Measures

As part of the resolution, McKinsey has agreed to implement a significant compliance program, including a system of policies and procedures designed to identify and assess high-risk client engagements. As part of this compliance program, McKinsey will implement new document retention procedures and training for all partners, officers and employees who provide or implement advice to clients. This compliance program is in addition to the provisions negotiated between McKinsey and the DoJ in a concurrent resolution with McKinsey & Company Africa that was announced on December 5^th.

McKinsey has also agreed that it will not do any work related to the marketing, sale, promotion or distribution of controlled substances during the five-year term of the DPA. The settlement requires McKinsey’s Managing Partner to certify, on an annual basis, the firm’s compliance with its obligations under the DPA and federal law.  

Jacob Horowitz is a contributing editor at Compliance Chief 360°

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The DoJ said that H. Lee Moffitt Cancer Center & Research Institute Hospital will pay $19 million to settle the charges and that the hospital received credit for cooperating with the agency’s investigation, including self-disclosing its alleged misconduct, remediating the issues, and upgrading compliance measures around billing.

This settlement resolves Moffitt’s liability for claims that it submitted to Medicare and other federal healthcare programs during the period from 2014 to 2020 for services that were not legally reimbursable. Specifically, Moffitt billed federal healthcare programs for items and services provided as part of clinical trial research that should have been billed to non-government trial sponsors.

After learning of these issues, Moffitt began its own investigation and compliance review and voluntarily provided the government with a written disclosure of its discoveries. Moffitt cooperated fully with the government’s investigation of the conduct and implemented quick and significant corrective measures.

Improved Compliance Measures

According to the settlement, Moffit took the following steps to correct the issues with its billing system:

• Establishing a new unit within its finance department responsible for ensuring compliant billing of services provided in clinical trials;
• Updating its policies and procedures relating to the billing of services provided in clinical trials;
• Hiring additional staff to implement these new policies and procedures; and
• Placing a blanket hold on all charges associated with clinical trials until it could ensure the new policies and procedures were working effectively.

“Healthcare providers participating in federal healthcare programs must ensure that they comply with applicable rules and regulations, including those relating to the submission of claims in connection with clinical research,” said Attorney General Brian Boynton, head of the Justice Department’s Civil Division. “As today’s settlement reflects, when providers run afoul of their obligations, they can mitigate the consequences by making timely self-disclosures, cooperating with investigations and taking appropriate remedial measures.”

Roger Handberg, an attorney for the Middle District of Florida, stresses how crucial it is to protect the nation’s healthcare programs. He highlights the encouragement for those receiving funds from government healthcare to quickly disclose and cooperate when they find improper claims. “Protecting the nation’s healthcare programs is a top priority of our office,” said Handberg. “When those who receive funds from government healthcare programs discover that they have submitted improper claims, we encourage them to promptly disclose the issues and cooperate fully with investigators to reach an appropriate and swift settlement. That’s what Moffitt did here: self-reported its improper claims, cooperated with government investigators and took action to remediate its billing systems.”

“Providers participating in clinical trials funded by federal health care programs must abide by specific guidelines that safeguard these programs,” said Special Agent Fernando Porras of the Department of Health and Human Services Office of Inspector General. “Providers will be held accountable if they bill for services outside the rules governing reimbursement. Together, with our law enforcement partners, we will continue to maintain the fiscal integrity of federal healthcare programs.”  

Jacob Horowitz is a contributing editor at Compliance Chief 360°

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