Dive Brief:
- Independence Blue Cross, an insurer based in Philadelphia, has agreed to pay $22.5 million to resolve claims of Medicare fraud. This settlement was announced by the Department of Justice.
- The DOJ alleges that the insurer inflated diagnosis codes, a tactic known as upcoding, which led to it receiving higher payments from Medicare than warranted.
- Although IBX opted to settle to prevent extended litigation, it maintains that it did not admit to any wrongdoing. The company stated, “This matter was not about the quality of care our members received. It involved differing views regarding certain documentation and reporting requirements under the Medicare Advantage risk adjustment program.”
Dive Insight:
This settlement arose from a whistleblower complaint lodged by a former IBX employee in 2020, who claimed the insurer gained “tens of millions of dollars in payments” through upcoding practices.
The Centers for Medicare & Medicaid Services (CMS) compensates organizations like IBX on a per-member basis. Payments are then adjusted based on the severity of health conditions and other risk factors of the enrollees through a process called risk adjustment. Essentially, patients with more serious health issues result in higher payments.
However, since the CMS relies on insurers to provide accurate diagnosis codes, the precision of those codes is essential for calculating appropriate payment amounts.
The DOJ revealed that IBX conducted a retrospective review program from 2016 to 2020 aimed at identifying additional diagnosis codes for submission to Medicare.
Nurses were employed to assess medical charts, yet it is claimed that the insurer failed to investigate or retract any inaccurate or unverified codes that were uncovered, which it is legally required to do.
IBX reportedly informed the CMS that its submitted data was “accurate, complete, and truthful,” but the DOJ contested that the findings were selectively reported.
The DOJ charged that IBX breached the False Claims Act, which is the primary government regulation addressing fraud aimed at federal programs.
Brett Shumate, assistant attorney general of the Justice Department’s civil division, stated, “The government pays private insurers over $530 billion each year to care for Americans enrolled in Medicare Advantage. When insurers knowingly and improperly retain inflated payments based on inaccurate and untruthful diagnoses, we will hold them accountable whether they are a small regional plan or a large nationwide organization.”
Independence Blue Cross serves over 2.2 million members in southeastern Pennsylvania, southern New Jersey, and Delaware, positioning itself as one of the largest regional insurers. Additionally, it covers another 3.1 million individuals across the U.S. through third-party plan administration and other offerings.
This civil settlement is not an isolated incident; healthcare fraud represented more than $5.7 billion of the $6.8 billion in False Claims Act settlements during fiscal year 2025, according to DOJ data.
For instance, Kaiser Permanente’s health plan affiliates settled for $556 million in January over similar upcoding allegations in Medicare Advantage. UnitedHealth and Humana have also been under scrutiny for supposed exaggeration of the health requirements of their members in Medicare Advantage.
The HHS Office of Inspector General, a federal oversight agency, has issued various reports highlighting concerns about improper payments, upcoding, and fraud in Medicare Advantage.
Moreover, the Medicare Payment Advisory Commission estimates that this year, the federal government will spend 14% more—about $76 billion—on seniors in Medicare Advantage compared to if these individuals were enrolled in traditional Medicare, partly due to upcoding practices.
