Medicare Advantage: Enforcement Activity & Broker Arrangements

On this Ropes & Gray podcast, health care partner Michael Lampert and counsel Sam Perrone are joined by litigation & enforcement partner Andrew O’Connor for a two-part discussion, with this first episode focused on recent enforcement activity and broker arrangements in the Medicare Advantage (“MA”) space. They delve into the Oak Street settlement, the Office of Inspector General’s (“OIG”) Special Fraud Alert, and a recent Department of Justice (“DOJ”) False Claims Act (“FCA”) suit against major Medicare Advantage plans and brokers. The conversation covers the complex regulatory framework governing broker arrangements, the implications of recent enforcement actions, and practical takeaways for providers. Listen in for an insightful analysis of these critical issues affecting the health care industry, and stay tuned for part two, where the focus will shift to enforcement in the patient assistance program space.

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Transcript:

Sam Perrone: Hello, and welcome to today’s podcast. My name’s Sam Perrone, and I’m a counsel in Ropes & Gray’s health care group. In my practice, I advise a range of health care clients on enforcement, regulatory, and compliance issues. With me today are Michael Lampert and Andrew O’Connor. Michael is a partner in our health care group whose work centers around providing strategic, regulatory, and transactional advice to clients at all sectors of the health care industry, and co-heads our Chambers Band 1-Ranked False Claims Act (“FCA”) practice. Andrew helps lead the health care and life sciences industry group, co-heads our False Claims Act practice with Michael, and focuses on high-stakes litigation and investigations in the health care and life sciences space. Today, will be the first part of a two-part podcast. Part one will focus on recent enforcement activity and broker arrangements in the Medicare Advantage (“MA”) space. I’m excited to discuss these topics with you, Michael and Andrew.

Michael Lampert: Likewise. Thank you, Sam.

Andrew O’Connor: Good to be here.

Sam Perrone: As I mentioned in the intro, in part one we’ll be focusing on notable enforcement activity and broker arrangements in the Medicare Advantage space. First, we’ll cover the Oak Street settlement and the Office of Inspector General (“OIG”) Special Fraud Alert. Then, we’ll be talking about the recent Department of Justice (“DOJ”) False Claims Act suit against three major Medicare Advantage plans and brokers.

Michael Lampert: Let’s begin with a little bit of background. Broker arrangements in the MA space are at the heart, frankly, of what one might expect the law to care about. Brokers’ very job is to get Medicare beneficiaries to elect to enroll in, or essentially to buy, Medicare Advantage coverage. So, the arrangements are subject to a complex regulatory framework that’s designed to protect beneficiaries, and to ensure marketing practices, and generally to keep things on the up and up. These arrangements typically involve contracts between health plans on the one hand—Medicare Advantage Organization (“MAOs”)—and independent agents or brokers, on the other, who market and enroll beneficiaries into these MA plans.

Sam Perrone: Centers for Medicare & Medicaid Services (“CMS”) also imposes strict rules on the marketing and sale of MA plans. Brokers must be licensed by the state and certified by the Medicare Advantage plans and CMS to market Medicare Advantage products. CMS also sets annual limits on broker compensation to prevent steering and ensure that recommendations are made in the best interests of beneficiaries.

Michael Lampert: The limits aren’t just on payment, they’re on conduct, too. CMS has detailed requirements about how MA plans can be marketed. Brokers must use only CMS-approved marketing materials, and they’re prohibited from engaging in some kinds of activities. They can’t do unsolicited door-to-door marketing; they can’t provide misleading information. All marketing events and materials need to be reported to CMS, and in some cases approved by CMS. MAOs also have to monitor their brokers’ activities and ensure their brokers’ compliance. So, non-compliance can result in sanctions, which can involve some monetary penalties, suspension of marketing activities, or in the worst case—and this being the big penalty—termination of an MAO’s contract with CMS.

Sam Perrone: All great points. With that background, let’s get into it. Let’s start with the OIG’s recent December 2024 Special Fraud Alert and the Oak Street settlement. The Special Fraud Alert focused on MA marketing practices, and it seemed to have arisen, at least in part, from one recent government investigation and settlement concerning Oak Street Health. The Oak Street settlement was announced in September 2024, and the OIG’s Special Fraud Alert was issued just a few months later.

Andrew O’Connor: There’s no question that the issues addressed in that Special Fraud Alert overlapped significantly with what we saw discussed in the Oak Street settlement. In that case, the government had alleged that Oak Street developed a program called the Client Awareness Program, and through that, allegedly worked with third-party insurance agents who then contacted eligible seniors and seniors who were already enrolled in MA plans, and allegedly engaged in marketing to them to try to generate interest in Oak Street Health as a provider. Through that program, agents allegedly received a fee for doing “warm transfers,” which were calls in which they would introduce the beneficiary to Oak Street, and for each of those transfers, Oak Street was allegedly paid around $200 per beneficiary. In the government’s view, they considered those $200 payments to be kickbacks in exchange for recruiting seniors to these primary care clinics. As a result of those allegations, and to address any potential False Claims Act liability, Oak Street ultimately agreed to pay $60 million in settlement to the federal government.

Sam Perrone: Thanks for that background, Andrew. Turning back to the OIG’s Special Fraud Alert, the alert zeros in on two main types of remuneration: one from Medicare Advantage plans and the other from health care providers (“HCPs”). The first involves payments from Medicare Advantage plans to health care providers or their staff related to marketing and enrolling individuals in Medicare Advantage plans. For example, some Medicare Advantage plans have been known to give gift cards or other in-kind payments to health care providers or their office staff in exchange for referring or recommending individuals for enrollment in a specific MA plan.

Michael Lampert: The second type of remuneration on which the alert focuses involves payments from HCPs, on the one hand, to agents and brokers on the other. So, these payments, based on the alert, are made to recommend a particular HCP—that’s, again, a health care provider, a physician practice, for example—to an MA enrollee, or to refer the enrollee to the health care provider. And that could result in the health care providers becoming the primary care provider for the enrollee, which could be, certainly under risk deals, very financially beneficial, perhaps critical, for the health care provider’s business.

Sam Perrone: Let’s say you’re a fully at-risk provider and you generate revenue if patients are in a particular plan with which you participate. That plan, the MA plan, can pay an agent to enroll people in the plan, subject to some of the requirements we previewed earlier. But the OIG’s view, as expressed through the Special Fraud Alert, is apparently that the provider can’t. What OIG’s Special Fraud Alert seems to fail to acknowledge are situations in which a provider’s ability to serve the patient rests entirely on the patient’s enrollment in a particular plan.

Michael Lampert: That’s right. The Special Fraud Alert presents the negative implications but doesn’t appreciate the fact that, really fundamentally, providers are standing in the same shoes as the plan, in that point, in a full-risk deal. Frankly, the Special Fraud Alert seems to empower, to a degree, plans over providers who arguably have a closer relationship with members or patients and a better view of patient needs, and who in a risk environment can serve a patient only if the patient has enrolled in that particular plan—otherwise, due to the exclusive nature risk arrangements, a provider/patient relationship would just be unavailable to that patient.

Sam Perrone: And there’s tension reflected in the Medicare Advantage marketing guidelines too. Plans and providers are treated differently when it comes to enrollment, even though operationally there is certainly some unification of the two. That raises questions like: How can providers coordinate with a plan? We know the government’s view on brokers, so how can a provider have relationships with brokers that are based on effort and not on enrollment or results?

Michael Lampert: HHS-OIG has identified a couple in the alert—several suspect characteristics to watch out for. Now, these generally won’t be surprising, certainly many of them—they include offering or paying HCPs or their staff things like bonuses or gift cards in exchange for referrals or recommendations. Another suspect characteristic is remuneration designed as payment for legitimate services but intended for referrals, so, essentially fraud—saying that you are paying for one thing and in fact paying for another. That’s not surprising. One could perhaps, though, quibble with the next: payments that are contingent on or vary on the demographics or health status of individuals who are enrolled or referred for enrollment may also be suspect. I say one may quibble because certainly some different categories of enrollee, categories of beneficiary, might involve more effort—they might require different levels of organization, or coordination, of education than many others.

Sam Perrone: Just to add one more: payments that vary with or are tied to the number of individuals referred are particularly concerning to the OIG.

Andrew O’Connor: From an enforcement perspective, it certainly seems that we’re going to continue to see regulators focusing on these issues. There’s, of course, the activity at OIG, but also at DOJ we’re hearing from the new administration that there will be a continued focus on alleged health care fraud. The complaint that we’re going to talk about in a few minutes from the U.S. Attorney’s Office in the District of Massachusetts, I think, illustrates that continued focus, not just in health care, but on Medicare Advantage specifically.

Sam Perrone: It seems clear, both from the Special Fraud Alert, from the latest DOJ complaint, Andrew, that you just mentioned, that the government is concentrating on these issues. Let’s focus for a moment on the practical takeaways for providers, particularly those providers who are participating in full-risk payor arrangements, that, from a business perspective, require large patient panels to distribute risk. Traditionally, insurance brokers have been an important mechanism for helping these providers grow their patient panels. Can that remain the case after Oak Street and the Special Fraud Alert, or is the risk just too high?

Michael Lampert: There’s certainly a level of scrutiny, and obviously some practices that some organizations, at least allegedly, found to be comfortable and commonplace would probably be ones in which they wouldn’t engage now. But I do think it would be an overstatement to say that providers in the space can no longer have any relationships with MA brokers. The Special Fraud Alert makes clear what HHS-OIG cares about is, to a large degree, preserving patient choice or beneficiary choice. There is this understanding that plan selection and enrollment processes can be hard to navigate—we are dealing with seniors—and what creates a need for intermediaries to assist these beneficiaries in selecting a plan or a provider, that dependence on intermediaries only works if the intermediaries are acting in the beneficiaries’ best interest. So, a common theme among all those so-called “suspect characteristics” that the alert lists is that there are arrangements that would create financial incentives for an intermediary—whether a provider acting on behalf of or in coordination of an MAO, or a broker working with a provider—to drive beneficiaries based on the financial interest of the intermediary rather than the needs of the beneficiary, and those don’t stand as well in a framework built around protecting beneficiary interests. It’s also the case that some of the more “hands-on” approaches—like paying brokers not just for “leads,” but specifically for “warm transfers”—could escalate that risk more, because when a broker transfers a beneficiary in real time, one could argue that there could be more pressure on that beneficiary. But I would hesitate to draw too strict a message and to steer too far away from any interactions that legitimately help patients, as Medicare beneficiaries, to access care that they want by enrollment in a particular plan. As we’ve seen in other marketing settings, and here I’m thinking of the lab sweep of around 15 years ago, the message that I’d draw is one really more of moderation.

To switch gears a little bit away from that Special Fraud Alert, Sam, I thought it might be helpful to talk a little bit about the latest complaint that the government did file, and that Andrew referenced earlier, against Aetna, Elevance, and Humana, along with some other broker organizations.

Sam Perrone: Zooming in there, the government has filed a complaint—including both the civil division of the Department of Justice and the U.S. Attorney’s Office for the District of Massachusetts—against three large health insurance companies and three brokers. The allegations are that, from at least 2016 until 2021, the insurers paid hundreds of millions of dollars in kickbacks to, again, three brokers, all to drive enrollments to these particular insurers’ MA plans.

Michael Lampert: Right, and the brokers allegedly, based on these allegations, steered those beneficiaries toward the plans that paid the most. The complaint says that the brokers set up teams that could sell only those high-paying plans, and sometimes refused to offer plans from insurers who didn’t pay enough or as much as some of their competitors.

Sam Perrone: The government also alleges that a couple of the plans conspired with the brokers to discriminate against disabled Medicare beneficiaries. Apparently, the allegation is that they threatened to withhold payments if brokers enrolled too many disabled individuals, who were seen as less profitable. And just to pause on that point for a moment, tying this back to our earlier conversation, that is one of the risk areas that the OIG’s flagged on the Special Fraud Alert: payments that incentivize or disincentivize recommending or referring a beneficiary with a particular type of condition.

Michael Lampert: Certainly, one could see why those facts, as alleged—and obviously, I’m emphasizing these are allegations—could draw ire. If plans could screen costlier beneficiaries, there’s obviously harm, potentially to the program, potentially to where those other beneficiaries may go, including staying on traditional Medicare, and obviously to the beneficiaries themselves who are screened out.

Andrew O’Connor: I’d offer a few observations. The first is that this is, of course, the government’s version of the facts—we’ll need to wait and see as the litigation plays out which aspects of that narrative hold up. Second, this certainly does re-enforce, as we’ve been discussing, the government’s focus in this space, and in particular, on the kind of arrangements that involve Medicare Advantage plans, or providers and brokers. I also think this particular suit highlights some of the plus factors that you often hear about from folks on the government side when they’re considering whether to pursue a case. They’re looking not just at whether you have an arrangement that results in a technical violation, but at least here, as alleged, they’re talking about steering patients in a way that affects choice, or in disadvantaging certain groups of patients. Whether or not that’s true in this instance is an open question, but I think what is clear is those are the kind of factors that often are going to increase the government’s scrutiny on particular arrangements.

Michael Lampert: And they may be the factors that could animate a whistleblower. I say this without knowing, in this case, about the whistleblower at all, and so, maybe as a broader comment. But this case was brought under the False Claims Act, which for background, is a federal law that allows the government to recover damages and penalties from individuals or companies that defraud the government. Most critically, it involves a provision that allows private whistleblowers (private citizens) to sue on behalf of the government and get a portion of that recovery. In this case, it did at least start as a whistleblower action—now, the government has intervened. If there is an ultimate resolution, a financial resolution, a portion of that resolution would go to the whistleblower. One could imagine—and again, without pre-judging what the facts were on the basis of the allegations—how whistleblowers or individuals might feel incentivized to file a claim. It’s important to note, too, that they’d be filing that sort of a claim, or potentially blowing a whistle, and certainly this case is occurring not in a vacuum. We talked about the Special Fraud Alert, which certainly anyone would have read, and CMS, too, has tried to address related issues with new rules that are aimed at broker commissions. Those rules have been challenged in court—a federal judge in Texas has put them on hold, but they have certainly elevated attention in this space.

Sam Perrone: We’re really seeing a real tug of war between regulators trying to clamp down on certain practices and industry groups pushing back. DOJ’s lawsuit shows just how broad the Anti-kickback Statute can be. Clearly, here the government is pursuing the full spectrum of actors here: providers, insurers, and brokers.

Michael Lampert: That breadth of the case, and the breadth of the industry that’s represented in it is certainly going to make it fascinating to watch.

Sam Perrone: Michael, Andrew, thanks for the great discussion and for taking the time to sit down and discuss with me.

Michael Lampert: You bet. Thank you.

Andrew O’Connor: Any time.

Sam Perrone: Thanks so much for tuning in to part one of this two-part podcast. Tune in to part two, where we will be discussing enforcement in the patient assistance program space. For those of you listening who would like more information on the topics discussed today, or our health care group more broadly, please don’t hesitate to contact us. You can also subscribe and listen to other Ropes & Gray podcasts wherever you regularly listen to your podcasts, including on Apple and Spotify. Thanks again for listening.