The diagnosis by doctors at PacifiCare sounded serious and expensive: “malignant neoplasm of the prostate.” Cancer. And that’s the way it was billed to Medicare.

However, when the U.S. Department of Health and Human Services’ Office of Inspector General asked the giant health care provider later on for documentation, it got paperwork for suture removal and left shoulder bursitis/tendonitis.

That was one of 100 cases that the department investigated and used to generalize that Medicare overpaid PacifiCare $424 million via California’s Medicare Advantage Plan. Parent company United Health Care disputes the allegation and says the methodology, analysis and projection were flawed.

A second example of misbilling in the department’s report concerned non-existent septicemia (blood poisoning) that was actually a “left total knee revision arthroplasty,” if the patient documentation at PacifiCare is to be believed. A third case was described as cerebellar ataxia, a complex motor disturbance originating in the brain, but upon review appeared to be a fever and cough evaluation. There was no mention of the more serious disorder.  

A 2007 contract between Medicare and PacifiCare paid the health care provider $2.3 billion to treat 188,829 patients in California. Diagnoses are translated into diagnostic codes and risk scores that determine the size of reimbursements. The more serious the case, the bigger the payoff.

The department’s inspector general claimed that 45 of the 100 scores were not justified by patient information on file at PacifiCare, and the federal government asked for $224,388 to cover those. It came up with $424 million by projecting the failure rate over the entire patient clientele.

A similar investigation in Texas by the inspector general determined that Medicare overpaid PacifiCare $115.4 million there and requested $183,247 up front as reimbursement for the 43 “invalid” scores found in 100 cases.

PacifiCare disagreed with those findings, too. 

–Ken Broder

To Learn More:

Report Estimates Health Plan Overbilled Medicare $424M (by Christina Jewett, California Watch)

Risk Adjustment Data Validation of Payments Made to PacifiCare of California for Calendar Year 2007 (Office of Inspector General, Department of Health and Human Services) (pdf)