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DOJ takes first case involving data mining

On Behalf of | Feb 3, 2022 | Healthcare Fraud, Medicare / Medicaid Fraud

In September of 2021, the Justice Department accused a health insurer in upstate New York and an affiliated medical data analytics company of cheating the federal government out of tens of millions of dollars. The civil complaint of fraud is the first to target a data mining company.

This case alleges that a medical records company based in Buffalo called DxID helped Independent Healthcare Association, which operates two Medicare Advantage programs, to game federal billing regulations to overcharge for treatments. The DOJ also named DxID founder and CEO Betsy Gaffney in the suit. DxID was shut down in August of 2021 but is owned by another subsidiary of Independent Health.

Gaming the system

Medicare Advantage plans pay more for sicker patients. It uses a complex formula called a “risk score” that pays identify sicker patients and then pays a higher rate and less of healthier patients. DxID combed medical records (known as data mining) to find missed diagnoses – pocketing up to 20% as a finder’s fee for generating this new revenue for the health plan.

The problem arose in that DxID then filled in the diagnosis with exaggerations of how ill the patients were or manufactured conditions that the patient did not have. These acts led to tens of millions of dollars in overcharges.

Not for the first time

The DOJ complaint expands upon a whistleblower suit filed in 2012 by a medical coding official at Seattle’s Group Health Cooperative, which also hired DxID in 2011. DxID was also tasked to generate revenue for the ailing group at that time. It submitted $30 million in new disease claims to Medicare on behalf of Group Health. According to the earlier whistleblower, many of these claims were bogus. The parent company of Group Health claimed it did nothing wrong but paid $6.3 million in penalties.

The DOJ is taking over the case against DxID by examining the work at Group Health and Independent Health. The department claims that DxID submitted thousands of claims from 2010 to 2017 using unsupported medical condition codes on behalf of Independent Health.

More to come

DxID may not be the only data mining company in the health care industry to fall under such scrutiny. According to independent analysts, data analytic companies have data mined, scraping data for billing codes, for some time now and marketed it as an easy way to generate more income. As with the allegations against DxID, there could be others acting fraudulently.