Feds probe whether Sentara Health unfairly pocketed millions

Its latest target in its yearslong investigation is a Sentara subsidiary known as Optima Health, which the Department of Justice has said may have unfairly pocketed $665 million by exploiting the health care provider's monopoly it held statewide for two years.

"The United States seeks to ascertain whether Sentara and its subsidiary Optima (or others) knowingly made material false statements in health insurance rate filings for plan years 2018 and 2019 for the [Affordable Care Act] individual health insurance marketplace in Virginia, thereby causing the submission of false claims for payment to the United States," the government asserts in a recent petition.

Under what's known as the False Claims Act, the government is trying to determine whether Sentara and Optima misled regulators when the company submitted its 2018 insurance rates under the Affordable Care Act, also known as Obamacare. That year, Optima spiked its Charlottesville premiums 266%, according to the government filing.

"Optima's rates were the highest in the country, with the least expensive insurance option costing more than twice the national average," according to the government.

For people in the Charlottesville area not covered by a group policy, the situation reportedly caused some to go without insurance and forced others who were self-employed to leave their small businesses behind.

The human toll may have been the risk Optima was willing to make for financial reward, according to investigators. The investigators noted that under Obamacare the federal government was required to subsidize many people's premiums and that Optima received more than $534 million in subsidies from Virginia customers in 2018 and more than $131 million in 2019.

"The higher Optima's premiums were, the more money the government paid to Optima in the form of subsidies," the government notes.

Sentara, a nonprofit company based in Norfolk which owns the 84-acre Martha Jefferson Hospital complex just outside Charlottesville, has denied any suggestion of price gouging or fraud. Sentara spokesman Mike Kafka said that after Anthem and other insurance carriers quit the Charlottesville market, the state asked Optima to remain. The company, he said, won approval for its rates from both the Virginia Bureau of Insurance and the Centers for Medicaid and Medicare Services.

"We have been transparent and cooperative with DOJ throughout this more than two-year process," Kafka told The Daily Progress.

In a court filing, Sentara bristles that the investigation had become public, something that happened via the government's Nov. 13 petition for additional information, a petition that accused Sentara of stonewalling the federal probe.

"There should be restraints on the United States' ability to unilaterally and publicly disclose information about its investigations," wrote Sentara's lawyers. "All that has been accomplished by the Petition is the public outing of the factually incorrect and unfounded allegations the United States has been investigating as well as some of the sealed and confidential information the United States collected pursuant to that investigation."

That tussle came to the federal courthouse in downtown Charlottesville on Dec. 19, when a pair of government lawyers, including Laura Day Taylor, argued that Sentara hadn't been forthcoming with the information she was seeking.

"Sentara steadfastly, repeatedly refuses to provide it," Taylor told the court.

"The only reason we're here is because Sentara has refused to comply," added Taylor's colleague, Justin Lugar.

The two are seeking documents and sworn testimony from former Sentara CEO Howard Kern as well as additional testimony from former Optima CEO Michael Dudley and from Optima Chief Actuary James Juillerat, depositions that the government says were "necessitated by Sentara's belated production of nearly 7,000 pages of new responsive documents after the government took the sworn testimony of these key witnesses."

A Sentara lawyer fired back at the notion that the belated documents were anything other than an oversight.

"Despite what you just heard from the government, Sentara has been fully cooperative," said Sentara attorney Robert J. Higdon Jr. "There has been absolutely no willful withholding of materials."

Noting that the investigation has gone on for 31 months and already produced "tens of thousands of documents," Higdon scoffed at the prospect of making the executives endure another round of questioning.

"Some of these people have sat for nine or ten hours," said Higdon. "They've provided the government with more than 40 hours of testimony."

U.S. District Court Judge Elizabeth K. Dillon declined to make an immediate ruling on the petition, which could force Sentara to comply with the government demands.