How did UnitedHealth let so many questionable claims slip past?

Written By kolimtiga on Sabtu, 27 September 2014 | 23.50

Here's how the nation's largest health insurance company aided and abetted what it says was a $43-million healthcare fraud.

In a lawsuit filed recently in federal court in Los Angeles, UnitedHealth Group says it paid out the $43 million to an interconnected group of doctors and medical clinics, mostly associated with the notorious 1-800-GET-THIN advertising campaign, for weight-loss surgeries and procedures. The company alleges that the providers submitted charges for procedures that were unnecessary or never performed, and inflated bills threefold or more. United is demanding refunds.

The company says it got rooked because it placed "justifiable reliance upon ... this false billing." It implies it had no choice but to "rely on the veracity" of the bills, and woke up belatedly.

But is it plausible that a leading health insurance company — if it were on its game — would allow $43 million to go out the door without realizing that it was being systematically cheated? Or is it more likely that United took the easy way out — not scrutinizing the medical claims until too late?

Either way, United utterly failed in its role, fundamental to the entire commercial health insurance business, of ferreting out and blocking improper charges. When fraud happens, the costs get footed by customers through higher premiums.

United's apparent dereliction raises an important question relevant to the future of healthcare reform: What use are health insurance companies?

The health insurance industry, which is cemented into a central role in our healthcare system via the Affordable Care Act, brags about its indispensable role in fighting fraud. But let's contrast its PR pitch with UnitedHealth's lawsuit.

America's Health Insurance Plans, or AHIP, the industry's lobbying arm, says this: "Health plans have prioritized reducing healthcare fraud and use cutting edge technology and sophisticated data analysis to prevent fraud from occurring in the first place rather than 'paying and chasing' after the fact."

UnitedHealth, in its lawsuit, says this: "By practical necessity, United reasonably relies in good faith on the claims submitted to it by providers....United receives nearly 2 million healthcare claims per day and must comply with various laws and regulations mandating that such claims be paid within a short period of time.... United reasonably relied on the misrepresentations contained on the claim forms."

Either the insurers truly have "prioritized" fighting fraud or they've prioritized meeting a deadline. Either they use "cutting edge technology" to combat fraud or they rely "in good faith" on submitted claims. Either they nip fraud in the bud or they file lawsuits to chase down money they've already paid "after the fact."

Paying suspect claims merely to meet the deadline? That's not required by law.

If resources were the problem, the company certainly had the money to spare: From 2010 through 2013, it collected nearly $387 billion in premiums and recorded profits of nearly $21 billion. In that period its chief executive, Stephen J. Hemsley, collected more than $50 million in compensation. United spent $3.2 billion to repurchase its own shares in 2013 alone.

United doesn't look like a company so overwhelmed by 2 million claims a day that it had to outsource the oversight process to "good faith." It looks like one that "prioritized" outlays to its shareholders and CEO ahead of "reducing healthcare fraud."

United had ample warning about 1-800-GET-THIN and its weight-loss business.

We started raising questions in early 2010 about the people behind the campaign. They were brothers Julian and Michael Omidi, both of whom had disciplinary records with the Medical Board of California — Julian's license has been revoked, and Michael's was under probation for the three years that ended Oct. 3, 2011. Michael Omidi is currently facing an accusation of negligence by the state medical board, according to information on the board's website.

United alleges in the lawsuit that much of the billing at issue arose from Lap-Band procedures, in which a flexible silicone collar is placed around the stomach to suppress appetite. The Lap-Band, which was GET-THIN's stock in trade, is indicated only for morbidly obese patients who have failed to lose weight by conventional means. United further contends it rejected many of the defendants' requests for authorization for the procedure, only to learn later that they concealed the operation within bills for other procedures, such as repairs of esophageal hernias.

United asserts that what it identifies as "the Omidi network" waived the patients' co-pays and then surreptitiously added them back into the insurance claims. Under the terms of its coverage, United says, waiving co-pays can invalidate the entire claim. United declined to answer my questions about why it wasn't more vigilant about billings from the Lap-Band clinics. The company also wouldn't say whether it had referred its allegations to law enforcement agencies or government regulators.

As my colleague Stuart Pfeifer reported last week, United's allegations come two years after several law enforcement agencies opened an investigation of the Omidis for "potential violations of federal law, including conspiracy, healthcare fraud, wire fraud, mail fraud, tax violations, identity theft [and] money laundering," according to a statement by a Food and Drug Administration criminal agent in a court filing in an unrelated criminal case. No charges have been filed.

The 1-800-GET-THIN campaign was pulled in 2012 after the FDA warned the companies that the advertisements failed to include adequate warnings about the potential risks of Lap-Band surgery.

Five patients died between 2009 and 2011 after Lap-Band surgeries at clinics affiliated with the ad campaign, according to lawsuits, autopsy reports and other public records.

United's lawsuit is a response to a case filed by several of the surgery centers, alleging that United had stopped paying their claims. "Nothing [United's] alleged is illegal or improper," says the clinics' attorney, Daron Tooch. "There's nothing illegal about charging a lot for a service."

At least through the beginning of 2011, United kept paying claims from "the Omidi network."

The core of United's business as a health insurer is to make judgments about bills submitted by doctors, hospitals and clinics — whether the charges are reasonable, the procedures necessary and proper, the providers competent. According to its own lawsuit, United failed to do that with respect to some $43 million in billings.

United's lawsuit against "the Omidi network" resembles a lawsuit it filed in Northern California in 2012, accusing a group of surgical centers of fleecing it out of $39 million through kickbacks and inflated claims, such as a bill for kidney stone treatment on which the insurer paid $97,000, though the average regional price for the procedure was $6,851. In that lawsuit, too, United pleaded that because of its volume of claims, it was "not in a position to specifically investigate the veracity of each claim." The case has been scheduled for trial in October 2015.

That's the reality of the health insurance business in a nutshell. The consequences of letting fraud go unaddressed can be laid on the premium payers. The shareholders and CEO, meanwhile, will do just fine.

Michael Hiltzik's column appears Sundays and Wednesdays. Read his blog, the Economy Hub, at latimes.com/business/hiltzik, reach him at mhiltzik@latimes.com, check out facebook.com/hiltzik and follow @hiltzikm on Twitter.

Copyright © 2014, Los Angeles Times

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