HMOs claim victory in whistleblower case

Health insurers say they've been vindicated by the federal government's decision to not intervene in a whistleblower lawsuit that alleges fraud by four HMOs in the state.

In a court filing last month, U.S. Attorney Andrew Luger did not offer an explanation for the government's decision to not intervene in the case, which questions payments to HMOs for work in the state-federal Medicaid health insurance program.

The lawsuit was filed under seal in 2011 by whistleblowers David Feinwachs, a former lobbyist with the Minnesota Hospital Association, and David Kunz, a lobbyist for several Minnesota health care providers.

It touches on allegations raised three years ago during a pivotal hearing in the state House by Feinwachs, who said Tuesday that he disagrees with the HMOs' interpretation of the government decision.

"This is without merit, and they're not interested in pursuing it," said Geoff Bartsh, vice president and general manager for state public programs at Minnetonka-based Medica, one of four insurers named as defendants. "We're very pleased, but not surprised."

"This decision underscores our long-standing assertion that the case did not accurately or fully reflect the facts and circumstances regarding Blue Plus, our HMO," said Eagan-based Blue Cross and Blue Shield of Minnesota in a statement.

Bloomington-based HealthPartners Inc. and Minneapolis-based UCare also were named as defendants.

Asked about his plans, Feinwachs said Tuesday: "It wouldn't be appropriate to discuss pending litigation."

"Whether there's something wrong — what the nature of that wrong is — remains an open question," Feinwachs said. "If this is, as the plans indicate, nothing … would it really take the government more than four years to reach that conclusion?"

Medicaid is the state-federal health insurance program for poor and disabled residents. In Minnesota, it provides coverage for about 1 million people, with about 700,000 receiving benefits through HMOs.

The lawsuit alleges that the HMOs manipulated the rate certification process to obtain what it calls "unnecessary and unjustified" federal funds over several years.

"The Medicaid fraud of the four defendant HMOs consists of wrongfully inflating what they claim to be necessary reserves or surplus for coverage of Medicaid recipients," the lawsuit states. "This is also tied to a scheme to have the state of Minnesota essentially pay less to the defendant HMOs for state-only financed programs, and the federal government therefore wrongfully paying in unnecessarily inflated amounts for the Medicaid program in Minnesota."

The allegation regarding the rate certification process was raised by Feinwachs during a February 2012 hearing in the state House, when a top state official confirmed a related federal investigation. At the time, a lawmaker said he believed the federal investigation was prompted by a whistleblower lawsuit, where such inquiries are mandatory.

In April 2012, Feinwachs brought his questions to Congress, where members of a House subcommittee questioned why Minneapolis-based UCare agreed to pay $30 million to the state in 2011. UCare officials said they made the contribution to help the state government during a tough budget year, but mentioned different payment rates for HMOs in Medicaid vs. another state-funded health insurance program.

In a statement this month, UCare said: "We are pleased that the government has declined to intervene in this case following a rigorous two-year long investigation. There was no wrongdoing whatsoever by UCare."

In a statement, HealthPartners said: "We are pleased that after a thorough investigation the government found no basis to intervene."

Christopher Snowbeck • 612-673-4744