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Devin Cohen: Thank you for joining us today. My name is Devin Cohen—I’m a health care partner at Ropes & Gray. With me today is Andrew O’Connor, a partner in Ropes’s litigation & enforcement group. Today, we’ll be discussing the Strategic Plan for Oversight of Managed Care for Medicare and Medicaid issued by the Department of Health & Human Services (“HHS”) Office of Inspector General (“OIG”). We’re going to focus on OIG’s compliance priorities for Medicare Advantage (“MA”) plans and how the Strategic Plan implicates regulatory and enforcement developments in the managed care space more broadly. There’s a lot to discuss on this topic, so this will be a two-part series.
Let’s get into it. In August of this past year, the Office of Inspector General issued the Strategic Plan and identified OIG’s compliance expectations and priorities for Medicare Advantage Organizations (“MAOs”), providers, and related industry stakeholders. Although the OIG and others have previously highlighted many of the same risk areas, the Strategic Plan systematically outlines OIG’s concerns and signals a more proactive and assertive role in policing compliance with Medicare- and Medicaid-managed care standards. Now, the Strategic Plan follows several years of heightened scrutiny by the Department of Justice (“DOJ”) in the Medicare Advantage space, as well.
Andrew O’Connor: Thanks for that introduction, Devin. Specifically, the Strategic Plan identifies the life cycle of a managed care plan and the corresponding risk areas. That life cycle is broken down into four stages in OIG’s guidance corresponding to the MAOs’ performance year to provide a roadmap for understanding the types of issues and the potential oversight areas that may warrant compliant focus. Those four stages in OIG’s view begin with, first, the establishment and contracting phase, second, enrollment, third, the payment phase, and finally, the provision of services.
Now, the first stage we’ll touch on is plan establishment or contracting phase. It’s during this stage of the life cycle that the Centers for Medicare & Medicaid Services (“CMS”) enters into contracts with Medicare Advantage Organizations about providing coverage to Medicare beneficiaries. That process includes setting up the benefit design and the establishment of the planned service area, as well as providing in-depth information as part of plan bids. And OIG here warns both about making sure that accurate information is provided during these plans and also about ensuring in later phases that all the representations made during the establishment phase are actually adhered to. OIG suggests the plans should focus their compliance efforts during this phase on the review of the contracts that are being set up, as well as the benefit designs, and critically, the accuracy and integrity of the information that’s being presented in plan bids.
Devin Cohen: That’s right. And this is advice that, I think, harkens back to a 2020 settlement for over $200 million with Keystone Health Plan, right? There, the government intervened and focused on incorrect financial plan bids submitted to CMS by Keystone—those resultingly alleged in more than $20 million in inflated premiums being paid out to Keystone Health Plan and an affiliate.
Andrew O’Connor: Yes, that’s right, Devin. In that action, I think the government was alleging that Keystone incorrectly calculated its actual prior costs in the financial plan that they submitted to HHS. The plan actually, according to the government at least, inflated prior cost data—and that resulted in a higher base amount for Keystone allegedly, and in CMS’s view, that inflated the reimbursement that Keystone received over time. The government in those cases contended that those statements resulted in false claims under the False Claims Act. This enforcement action, I think, is one of the prime examples of what OIG has in mind when it talks about deterring misconduct in this first phase of the MAO life cycle.
Devin Cohen: I think that’s right, and that brings us right into the second phase with the managed care plan’s life cycle: the beneficiary enrollment phase. Here, Medicare Advantage plans often engage in marketing programs and media campaigns to attract enrollees across the enrollment process, as is pretty standard—but the marketing programs and media campaigns can be where plans run into trouble. The OIG identified concerns consistent with prior reports, with plans either directly engaging in false or misleading advertising or contracting with third parties to boost enrollment at times without sufficient oversight. To ensure beneficiaries are protected against deceptive tactics, the OIG suggests that MAOs focus compliance efforts on monitoring marketing, agent, and broker activities.
Now, this is not the first time OIG has raised concerns about MA marketing tactics. Early in the pandemic, CMS saw a substantial uptick in plans’ use of third-party marketing organizations (“TPMOs”) with just south of 15,500 complaints related to marketing in 2020 to just under 40,000 in 2021. As a result, in April of this past year, CMS finalized a rule adding a new requirement for TPMOs and the Medicare Advantage in Part D plans that engage TPMOs. Now, those plans must institute internal safeguards to directly oversee TPMO activities, including requirements that TPMOs submit marketing materials for approval by the plan, then directly to CMS following such approval, separately ensuring that TPMOs adequately disclose their relationships with the plans, and finally, plan standards regarding call recordings, oversight, and auditing.
Andrew O’Connor: Yes, Devin, I think the final rule is really consistent with what we’ve seen from CMS and DOJ in terms of their focus on compensation arrangements with third-party marketers. And one of the concerns on the government side of things is that these marketers are potentially interacting directly with patients and are in a position to influence them. I do think this is an area where we’ll see continued government scrutiny, both from CMS and the DOJ.
Devin Cohen: That’s right, Andrew. While the new rule focuses largely on compliance with, say, Medicare Marketing Guidelines, it does show where CMS and DOJ may home in on next. In the Medicare Advantage space, DOJ has increasingly scrutinized how First Tier, Downstream, and Related Entities (“FDRs”) identify beneficiaries requiring services, and then, how they’re compensated for facilitating those services. The new final rule really aims at FDRs for purposes of DOJ enforcement, particularly in the area of risk adjustment. And as risk adjustments have the potential to increase payments to plans, this is not uncharted territory for purposes of False Claims Act liability. We can think of DxID, a data analytics vendor that was part of a settlement with DOJ in September of ‘21 for allegedly data mining plan records to identify which should be reviewed for sufficient hierarchical condition category (“HCC”) capture. There, DxID was paid by the plan for a contingency fee of up to 20% of what the plan received based upon the resulting captured diagnosis, really lining up what DOJ focused on as a perverse financial incentive to drive risk scores.
Andrew O’Connor: Yes, Devin. In an even more recent update having to do with CMS’s focus on relationships with third parties, in November 2023, CMS issued a proposed rule that would impose guardrails around compensation paid to agents and brokers. Historically, CMS regulations had capped broker and agent compensation for enrollment-related activities, but it expressly permitted additional compensation for “administrative” services, and it actually said right in the regulation that those administrative fees could be based on a per-enrollment basis. Now, in response to concerns about potential steering, for example, CMS has proposed this new rule that would really try to fix the amount that MAOs can pay agents or brokers for both enrollment and non-enrollment services. In particular, the proposal is looking to ensure that all compensation that brokers and agents are receiving is wrapped up in the definition that the agency seems to want to cap to prevent what it sees as an end run that’s currently allowed, we would argue under the current regulatory language. So, stay tuned for more focus on enforcement around potential relationships between MAOs on the one hand and brokers and agents or the people interacting with the patients on the other.
Devin Cohen: Yes, this won’t be the last we hear of that, but we will be moving on to the remaining stages of the life cycle on our next podcast. Thank you all for joining us today. If you did find our conversation enlightening, please do join us on our next phase for closing out the managed care life cycle with Andrew and me, as well as the rest of Ropes & Gray’s podcasts—they’re a must listen. You can subscribe now to stay informed and listen to other Ropes & Gray podcasts wherever you regularly listen to your podcasts. Thanks again for listening.