Obama’s Top Health Care Nominee Was Once Embroiled in Medical Fraud Case

Andy Slavitt — President Obama’s choice to manage Obamacare, Medicare and Medicaid — was linked seven years ago to a massive medical data fraud scheme that resulted in what was then the largest settlement ever by an insurance company.

If he is confirmed by the Senate, Slavitt will head the Centers for Medicare and Medicaid, which manages the federal government’s three biggest health care programs. He will manage an estimated $1 trillion in benefits that are paid to millions of doctors, patients and hospitals.

Slavitt was CEO of Ingenix, a health data analytics firm at the center of a $50 million settlement in 2009 with then-New York Attorney General Andrew Cuomo and a $350 million settlement with the American Medical Association.

Cuomo and the AMA charged that Ingenix supplied databases to insurance companies that fraudulently calculated reimbursements for out-of-network medical services provided to policyholders, according to a Daily Caller News Foundation investigation.

Ingenix was owned by UnitedHealth Group, which did not admit to any criminal wrong-doing in the settlements.

The Ingenix scandal became public in February 2008 when Cuomo filed a “notice of intent to sue” Ingenix and UnitedHealth Group for “rigged” reimbursement rates that forced patients to overpay up to 30 percent for out-of-network doctors and hospitals.

Cuomo charged that Ingenix was running a “scheme” that sought “to defraud consumers by manipulating reimbursement rates.”

The AG told reporters, “This involves fraud in the hundreds of millions of dollars, affecting thousands and thousands of families. Too many people have been hurt. It has to stop.”

It was estimated that years of data manipulation by Ingenix affected as many as 110 million Americans — about one in three patients — who used doctors, labs or hospitals that were out of their insurance network.

Cuomo, who is now New York’s Democratic governor, estimated that patients who used out-of-network providers received between 10 to 28 percent less than they were entitled to because of Ingenix’s flawed data.

The $350 million was to reimburse doctors and patients shortchanged by Slavitt’s company. The $50 million went to establish a database of physician charges to be administered independently by a university. Ingenix also agreed to shutter its entire medical data analytics department.

The case was first raised in 2000 by the New York and Missouri chapters of American Medical Society, but languished in the courts until Cuomo stepped in. Slavitt was the Ingenix CEO from 2006 to 2011. His first position at the firm was as COO in 2005.

In 2011, following the settlement, UnitedHealth eliminated the name Ingenix and rebranded it as OptumInsight, where Slavitt remained as an executive until he joined CMS last year. Obama nominated him earlier this month to replace Marilyn Tavenner. She stepped down last January in part over the troubled launch of Obamacare.

Sen. Jay Rockefeller, D-WV, who chaired two days of public hearings on the scandal for the Senate Commerce Committee in March 2009, said Slavitt’s company used a “downward skew” in reimbursements to cheat patients.

“Everywhere experts have looked at this data, they have found what statisticians called a ‘downward skew’ in the numbers. For 10 years or even longer, this skewed data was used to stick consumers with billions of dollars that the insurance industry should have been paying,” Rockefeller said.

Ingenix officials publicly claimed the company was “independent” even thought it was a wholly owned subsidiary of health insurer UnitedHealth Group. Critics said that relationship represented built-in conflicts.

Linda Lacewell, who lead Cuomo’s investigation, told Rockefeller’s committee that between Ingenix and UnitedHealth, “there are conflicts of interest here, a picture of conflicts of interest from top to bottom.”

Rockefeller agreed. “Now, Ingenix is a wholly owned subsidiary of UnitedHealth Group. UnitedHealth not only owns Ingenix, but it also used the skewed Ingenix data to under-reimburse its own policyholders. A direct connection. Total ownership,” he said.

Rockefeller quoted Mitch Zamoff, UnitedHealth’s general counsel, who admitted the conflicts.

“He [Zamoff] said on January 13, interestingly, of this year, ‘We regret that conflict of interests were inherent in these Ingenix database products,’” Rockefeller said.

Chuck Bell, a program director at Consumers Union, also slammed the UnitedHealth-Ingenix arrangement during the Rockefeller hearings.

“Ingenix has a serious financial conflict of interest in owning and operating the Ingenix databases in connection with determining reimbursement rates. Ingenix is not an independent database — it is wholly-owned by UnitedHealth Group,” he said. “Our review of these materials revealed a shocking lack of transparency and accuracy.”

Lacewell, flatly asserted that for years Ingenix ran a fraudulent operation. “Our investigation revealed that Ingenix is nothing more than a conduit for rigged information that is defrauding consumers of their right to fair reimbursements for their out-of-network health care costs,” she said during the Rockefeller hearing.

Slavitt’s company, Lacewell added, “left working families across the country wrongly stuck with at least hundreds of millions of dollars in un-reimbursed medical expenses, a scheme that ran for at least 10 years.”

Slavitt was unrepentant about the scandal, claiming his company welcomed the “opportunity” to transfer Ingenix data services to a nonprofit party.

Slavitt said he was “happy to shine a brighter light for consumers both on what physicians’ charge and on how they will be reimbursed by their insurance companies before they receive treatment. This is the kind of consumer advancement that deserves broad support.”

But Lacewell said Ingenix and UnitedHealth resisted any change until Cuomo threatened consumer fraud litigation.

“We gave them the option of litigating and defending against a fraud lawsuit or signing onto the reform practice and stepping away from this deceptive system and moving toward a new system of reform,” Lacewell recalled.

Senate Republicans allege that the Obama administration awarded Slavitt a rare “ethics waiver” when he joined CMS. The waiver exempted him from the ethics pledge Obama made in 2009 that barred presidential appointees for two years from participating in any official activities that could benefit their former employers.

The waiver allowed Slavitt to act immediately on matters favorably affecting UnitedHealth Group, which is now the nation’s largest insurance company.