Freedom Health, Optimum Healthcare and Sidd Pagidipati Pay $32.5 Million Over Allegations of Medicare and Medicaid Fraud

By a News Reporter-Staff News Editor at Insurance Weekly News -- Constantine Cannon LLP announced that its whistleblower client, the

late Dr. Darren D. Sewell, M.D., aided the United States government and the State of Florida in recovering $32.5 million over allegations of systemic Medicare and Medicaid fraud by Freedom Health and Optimum Healthcare, two large health insurers and operators of Medicare managed healthcare insurance plans based in Tampa, Florida and controlled by Dr. Kiranbhai "Kiran" C. Patel, and Siddhartha "Sidd" Pagidipati, Freedom's former chief operating officer.

The whistleblower complaint, which was unsealed today, alleges that Freedom and Optimum improperly gamed a feature of the Medicare Advantage program known as risk adjustment, or risk scoring, which allows Medicare to make additional payments to managed-care plans based on the plan members' health-risk scores, which are calculated using patients' medical diagnoses.

Higher risk scores are supposed to reflect treatment of sicker patients, and risk-adjustment reimbursement is designed to offset increased costs associated with treating these patients. Freedom and Optimum fraudulently inflated their members' risk scores and the corresponding risk adjustment payments they received from CMS, the complaint alleges, by claiming their members were treated for conditions they either did not have or were not treated for.

The complaint also alleges that Freedom and Optimum, with the help of Mr. Pagidipati, fraudulently induced the Centers for Medicare & Medicaid Services (CMS), which administers the programs, to allow them to expand their health insurance offerings into new counties in Florida and the Carolinas by falsely representing that they had a sufficient network of doctors, clinics, and hospitals available to serve their enrollees in the expanded service area when they had no such networks in place.

Under the settlement agreements, announced by the government today, Freedom Health and Optimum Healthcare will pay the government $16.7 million to resolve the allegations of risk adjustment fraud and $15 million for the allegedly fraudulent expansion of their service areas, for a total settlement amount of $31.7 million. The whistleblower settlement over risk adjustment fraud is the nation's largest.

Siddhartha "Sidd" Pagidipati, Freedom's former chief operating officer, will pay the United States $750,000 to resolve allegations regarding his role in the allegedly fraudulent expansion of Freedom's and Optimum's service areas.

The whistleblower, Dr. Sewell, worked at Freedom and Optimum from 2007 to 2012 and rose through the ranks to become chief medical officer before transferring to the Medicare Revenue Management Department and assuming the role of vice president of special projects. Through his various roles, Dr. Sewell became familiar with the defendants' various schemes to bilk money from Medicare and Medicaid. He filed his whistleblower lawsuit in 2009, leading the government to investigate and successfully resolve the case, and played an important part in the FBI's undercover investigation.

The estate of Dr. Sewell, who died in 2014, is represented by Constantine Cannon and its whistleblower attorneys Mary Inman and Timothy McCormack and co-counsel Ned Arens and Stephen Hasegawa at Phillips & Cohen LLP.

"This is the largest whistleblower settlement involving health insurers' manipulation of their members' risk scores," Inman said. "A $16.7 million recovery sends an important signal to health insurers that the government is serious about risk adjustment fraud. I wish my client were here to see it."

"Dr. Sewell bravely stepped forward to expose practices that were harming the Medicare program and jeopardizing patient care," McCormack said. "He did this at great personal risk to his career and his family's livelihood."

The current chairman of Freedom and Optimum, Dr. Kiranbhai "Kiran" C. Patel, had previously founded another Medicare Advantage Organization, WellCare HMO, Inc., in 1992 and sold it in 2002 for $200 million. In 2007, Dr. Kiran Patel purchased Freedom and Optimum and assumed the role of president and CEO for both companies. Dr. Kiran Patel has now named his brother-in-law and former WellCare executive, Rupesh Shah, as the acting CEO of Freedom Health and Optimum Healthcare. Dr. Kiran Patel and Rupesh Shah were both named as defendants in the whistleblower complaint alleging Medicare fraud.

Dr. Sewell is survived by his daughter Lauren Anthony, his parents, and his brothers, Douglas Sewell, DMD, and David Sewell. David Sewell took on the mantle of whistleblower after Dr. Sewell's death and continued to pursue his brother's whistleblower case on behalf of Dr. Sewell's estate. As the whistleblower, the estate is entitled to 15 percent to 25 percent of the $32.5 million recovered by the government.

On behalf of Dr. Darren Sewell, David Sewell and his attorneys want to recognize the government attorneys and investigators for their work on the case, in particular Jennifer Koh, in the Justice Department's Civil Division, Assistant U.S. Attorneys Randy Harwell and Katherine Ho, Auditor Kevin Codol of the U.S. Attorney's Office in Tampa and Special Agents Eduardo Ortega of the FBI and Raquel Garrido of the Department of Health and Human Services Office of the Inspector General. The Estate of Dr. Darren Sewell also wants to recognize Debra Katz of Katz, Marshall & Banks, employment lawyer first for Dr. Sewell and later for the Estate, for the fine representation she provided during this very difficult time.

The case is captioned: United States & State of Florida ex rel. Dr. Darren D. Sewell v. Freedom Health Inc., Optimum Heathcare, Inc. et al., United States District Court for the Middle District of Florida, Case No. 8:09-cv-1625-T-35TGW.

Keywords for this news article include: Medicaid, Medicare, Legal Issues, Health Policy, Constantine Cannon Llp.

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