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In a significant development for healthcare industry fraud litigation, a court-appointed special master has recommended dismissing a major False Claims Act case against UnitedHealth Group, potentially ending a 14-year legal battle that sought to recover approximately $2.1 billion from the insurance giant.
Special Master and retired U.S. magistrate judge Suzanne Segal issued her recommendation on March 3, 2025, in the case of “U.S. ex rel. Poehling v. UnitedHealth Group, Inc.” The litigation centers on allegations that UnitedHealth violated the “reverse false claims” provision of the False Claims Act by failing to return Medicare Advantage reimbursements tied to disputed diagnostic codes.
At the heart of the dispute is UnitedHealth’s practice of conducting internal “chart reviews” of patient medical records. The government alleged that when these reviews yielded different diagnostic codes than those originally submitted by healthcare providers, UnitedHealth failed to return the resulting overpayments to Medicare – a violation that allegedly affected approximately two million diagnostic codes worth billions in reimbursements.
Medicare Advantage, also known as Medicare Part C, allows seniors to receive benefits through private insurers rather than traditional Medicare. Unlike traditional fee-for-service Medicare, Medicare Advantage uses a risk-adjustment payment system where insurers receive higher payments for patients with more severe or complex diagnoses, creating potential financial incentives for diagnostic upcoding.
The Special Master’s report represents a significant victory for UnitedHealth, which has consistently maintained that mere discrepancies between provider-submitted codes and those assigned during chart reviews do not constitute evidence of false claims.
In her recommendation, Special Master Segal concluded that the government failed to provide sufficient evidence that the provider-submitted codes were actually incorrect. The government’s case relied primarily on the existence of discrepancies between original provider codes and subsequent reviewer codes, rather than direct examination of medical records.
“A jury would be required to speculate as to whether the diagnostic codes were actually incorrect,” wrote Segal in her report, noting that the government had not reviewed the underlying medical records nor provided evidence of what codes should have been assigned instead.
The Special Master also ruled against the government on a key legal interpretation regarding the False Claims Act itself. The government had argued that the second prong of the “reverse false claims” provision does not require proof that the alleged false claims were “material” to payment decisions, since the term “material” appears explicitly in the first prong but not the second.
Rejecting this interpretation, Segal concluded that materiality is an inherent requirement throughout the False Claims Act, which she characterized as fundamentally “a fraud statute” that “tracks the common law.” This determination aligns with recent Supreme Court decisions that have generally narrowed the scope of False Claims Act liability.
The case represents one of the largest and longest-running False Claims Act matters in the healthcare sector. Originally filed in 2011, the litigation has worked its way through various preliminary motions and appeals before reaching this critical juncture.
The government has not accepted defeat, filing an objection to the Special Master’s report on April 2, 2025. A hearing is scheduled for June 5, 2025, with the U.S. District Court for the Central District of California having suspended all other pretrial deadlines pending resolution of the objection.
The outcome of this case could have far-reaching implications for Medicare Advantage insurers, which collectively provide coverage to more than 30 million American seniors. If the court adopts the Special Master’s recommendation, it may significantly raise the evidentiary bar for similar fraud allegations against healthcare insurers.
The U.S. Department of Justice has increasingly focused on Medicare Advantage fraud in recent years, launching multiple investigations and lawsuits against major insurers over risk-adjustment practices. This case represents one of the government’s most ambitious recovery efforts in the sector to date.
The parties now await the district court’s ruling on whether to adopt, modify, or reject the Special Master’s recommendations.
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8 Comments
It will be interesting to see if the court accepts the special master’s recommendation or decides to take a different approach. This case could set an important benchmark for Medicare Advantage fraud litigation going forward.
The key question seems to be whether UnitedHealth’s internal chart review process and handling of disputed diagnostic codes constitutes a violation of the False Claims Act’s ‘reverse false claims’ provision. The special master’s analysis will be closely watched.
I wonder what the government’s response will be to the special master’s recommendation. They may push back and argue that UnitedHealth’s actions resulted in significant improper Medicare Advantage reimbursements that should be recouped.
Medicare Advantage has been a growing and complex part of the healthcare system. This case underscores the challenges in policing potential fraud and abuse in this program.
The complexity of Medicare Advantage coding and reimbursement rules is clearly an ongoing challenge. This case underscores the need for clear guidelines and enforcement to prevent potential abuse.
Interesting case with significant implications for the healthcare industry. The special master’s recommendation to dismiss the long-running Medicare Advantage fraud case against UnitedHealth could set an important precedent.
The sheer size of the alleged fraud, at $2.1 billion, makes this a high-stakes case for both UnitedHealth and the government. The final ruling could have major financial and precedential implications.
This case highlights the complexities around Medicare Advantage coding practices and overpayment returns. It will be important to follow the final court ruling and understand its impact on future fraud litigation.