Lawsuit: Atrio Loses $29 Million, Overbills Medicare $31 Million

A Roseburg-based health insurance company specializing in Medicare coverage in western Oregon has filed a lawsuit against two contractors in a $60 million dollar dispute over lost revenue and overcharges to the federal government.

Atrio Health Plans accuses Performance Health Technology in Salem of providing faulty patient data analysis and says that Optima, a Roseburg company, sold it defective software. The suit claims that as a result, Atrio lost nearly $29 million and, at the same time, overcharged the Centers for Medicare & Medicaid Services nearly $31 million.

Filed in Marion County Circuit Court, the complaint says that the contractors’ errors resulted in Atrio billing the federal agency for patient services that are not covered by Medicare in some instances and in billing too much for other services. At the same time, the lawsuit says the software and analysis tools racked up losses for the insurer.

The lawsuit delves into the soft underbelly of the medical industry: the complex, heavily computerized process of cataloging services provided to patients and billing for and receiving health insurance dollars, in this case, money paid by the federal government for seniors insured under a Medicare Advantage plan, which supplements regular Medicare.

Officials from Performance Health Technology did not respond to requests for comment from The Lund Report. Officials for Optima, which does business as Inteligenz, could not be reached for comment.

Atrio says in the suit it uncovered the overpayments last year, adding that it notified the Centers for Medicare & Medicaid Services and is resolving the matter. Specifics of how Atrio is repaying the federal government were not spelled out in the complaint. Atrio officials did not return telephone messages from The Lund Report.

The two contracting companies have not yet filed responses in court to the $60 million claim.

Founded in 2004, Atrio is primarily owned by groups of western Oregon doctors. The company said the federal overpayments to the insurer and physicians took place from 2009 to 2015.

Medicare Advantage is a Medicare plan that covers a wide range of medical services for seniors. The federal government pays set annual per-patient sum to insurers such as Atrio, which in turn uses that money, plus premiums from members, to pay health care providers to serve members.

Atrio provides Medicare Advantage coverage to nearly 20,000 residents in western Oregon, mainly in Marion, Polk, Douglas, Josephine, Jackson and Klamath counties.

In recent years, Atrio has grown rapidly – and reported some sizeable losses to state regulators.

For 2018, the company reported a profit of $5.2 million on revenues of $203 million.

The previous year it lost $9 million on revenues of $258 million. And in 2016, it lost $3.5 million on revenues of $203 million.

The lawsuit comes as Atrio’s owners are trying to sell the business to a Chicago-based investment group, Chicago Pacific Founders, for $25 million plus a possible additional $6.6 million, according to the sale plan filed in February with the Oregon Department of Consumer and Business Services.

The Chicago group has identified the administration of Medicare Advantage plans as “an attractive investment area,” the plan states.

Atrio is expected to hold a public hearing on the sale in coming weeks, with a final state decision to follow, said Brad Hilliard, a spokesman for the state agency.

The sale proceeds would be divided among Atrio’s owners: a physician-owned Salem entity, WVP Health Authority; a physician-owned Klamath Falls-based group, Cascade Comprehensive Care; and Umpqua Health LLC, a Roseburg company owned by physicians and Mercy Medical Center in Roseburg.

In its lawsuit, Atrio said the nearly $31 million in overpayments from the federal government had been paid out to providers.

Atrio said it asked Performance Health Technology and Optima to cover the $60 million in losses, but the two firms declined.

The complaint says Atrio became aware of the patient data problems only when it brought in a new health care and claims data handling company, Inovalon, which uncovered the problems in 2018.

Performance Health Technology oversaw a wide range of patient- and claims-related services and data for Atrio. Performance Health evaluated patient data for Medicare eligibility, submitted the federal Medicare agency the claims of Atrio and the physician networks affiliated with Atrio, distributed the federal payments to Atrio and to physicians providing services and determined what coverage patients were eligible for, Atrio said.

In the lawsuit, Atrio says the $31 million in overpayments were due in part to Performance Health incorrectly categorizing some patient services as being covered by Medicare when in fact they were not, and categorizing some patients as qualifying for higher levels of care, and thus entitling Atrio to higher so-called “risk adjustment payments” from Medicare, when the patients, in fact, did not meet the criteria for such payments. The complaint says Performance Health also failed to follow diagnosis codes required by the federal government and failed to ensure there was required documentation on diagnoses.

The lawsuit does not say how many cases or patients the overpayments involved.

Optima’s software failed to catch the numerous errors by Performance Health, the suit alleges.

Atrio’s recent disclosure to the federal Medicare agency of the overpayments “will result in lower revenue paid to (Atrio) and lower (Atrio’s) margins and reduce or eliminate (Atrio’s) profit,” the lawsuit says.

The errors by Performance Health and Inteligenz have caused Atrio damages of nearly $29 million between 2013 and 2017, in the form of reduced revenue, the suit asserts.

Each year, Atrio submits a “bid” or application to the Medicare agency proposing how much Medicare funding Atrio should receive the following year. Atrio based its bids in part on the previous year’s volume of business, the suit says. But because the data assembled by Performance Health were defective, Atrio’s bids were defective, the company claims. Atrio’s complaint doesn’t clearly explain how it arrived at the figure of $29 million in damages.

You can reach Christian Wihtol at [email protected].

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