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Legal experts expect 'more scrutiny' of Medicare prior authorization from feds

As the federal government's attention to improper Medicare Advantage prior authorization denials intensifies, insurers should consider examining their policies if they want to avoid trouble.

Hospitals have called on the Justice Department to use the False Claims Act against Medicare Advantage carriers that improperly deny coverage. Health insurance companies ought to take a closer look at their policies and how employees are trained to implement them, said Scott Stein, a partner at Sidley Austin and editor of the law firm's False Claims Act blog.

"I do suspect that there's going to be a lot more scrutiny in this area," Stein said.

The False Claims Act is generally enforced against providers that knowingly submit fraudulent claims to Medicare or Medicaid. Whether the statute also governs prior authorization denials is up for debate.

Even for situations in which it could apply, evidence that the denials and the appeals processes were so egregious that they go beyond contract violations would have to be strong, said Jason Christ, a healthcare fraud and abuse attorney at Epstein Becker Green.

But federal interest in Medicare Advantage enforcement follows a familiar pattern that often ends with the Justice Department getting involved.

"There's a lot of ingredients here that you see before what I'll call a 'sweep,'" Christ said. "You always sort of look at: How interesting would something like this be to a finder-fact jury or a judge?"

The federal government has already voiced concerns about Medicare Advantage insurers upcoding diagnoses to inflate risk adjustment scores. The Justice Department intervened in a False Claims Act case against a health insurer last year.

When the government closely focuses on one component of an industry, it often eventually expands oversight to other parts of that sector, Stein said.

The Justice Department also tends to follow the work done by the Health and Human Services Department's Office of Inspector General, said Wayne Gibson, senior managing director at FTI Consulting. The OIG released a report in April detailing some Medicare Advantage carriers' use of prior authorization to restrict access to medically necessary care.

"Once it reaches the level of an OIG report, then plans need to take it seriously," Gibson said.

Significant federal money and patient care are at stake. These two factors often play into the government's decisions about whether to intervene in False Claims Act cases, Stein said.

But whistleblowers could raise False Claims Act complaints against insurers over improper denials even without Justice Department participation. People with inside knowledge of companies' business practices initiate a significant portion of False Claims Act cases. Whistleblowers raised nearly 600 out of 801 new False Claims Act matters in fiscal 2021, according to analysis from the law firm Winston & Strawn.

"When things like this get a lot of publicity…we are likely to see more significant activity in this area from a whistleblower perspective, which is why we always tell people it's kind of pointless to just ask the question, 'Will the government find out about this?'" Stein said.

The Centers for Medicare and Medicaid Services may also increase its oversight of health insurance companies' prior authorization patterns, Gibson said. CMS agreed with OIG that it should revise audit protocols for Medicare Advantage carriers and take other actions to stop improper denials.

Insurers can mitigate their vulnerability to False Claims Act cases and other federal oversight by conducting internal investigations of their policies.

The OIG report can serve as guidelines, Gibson said. Insurers may want to look at the services the inspector general highlight and examine how their own processes align with those, he said.

Christ recommended Medicare Advantage carriers pay attention to whether they have repeated conflicts over improper denials with particular health systems.

Even if a health insurance company's general policy comports with regulations, it should review how it trains the employees responsible for carrying out the policy, Stein said.

"These are all compliance steps that you would imagine some plans will have, but this renewed government focus on this area, and the [American Hospital Association's] vocal advocacy here, suggests that this area of prior authorization and utilization management is one that should get elevated attention in an audit cycle," Stein said.


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