A federal judge in Indiana has thrown out most claims in a whistleblower lawsuit accusing four insurers and six health systems of improperly billing the state’s Medicaid program, but left the door open for the case to continue.
The lawsuit, filed by former Indiana Medicaid officials John McCullough and James Holden, alleged that Elevance, McClaren Health Care’s MDwise, CareSource and Centene’s Coordinated Care, along with hospital systems IU Health, Ascension, Community Health Network, Eskenazi Health, Lutheran Health Network and Parkview Health, routinely violated billing rules that resulted in Medicaid overpayments. The case was brought under both the federal and state False Claims Acts, which allow whistleblowers to sue on behalf of the government over alleged fraud.
The whistleblowers claimed the managed care plans paid hospitals for inpatient stays that should have been denied or reduced, such as readmissions within 72 hours, transfers that lacked required billing codes, and short stays under 24 hours. They also alleged the insurers failed to return Medicaid funds tied to deceased patients, citing internal data that identified millions in potential overpayments tied to these issues between 2015 and 2018.
The health systems were accused of submitting thousands of improper claims for readmissions, transfers, and short stays. The complaint cited data showing hundreds of inpatient claims where patients were admitted and discharged the same day, and other examples of alleged overbilling across multiple systems.
In a Sept. 30 ruling, the U.S. District Court for the Southern District of Indiana dismissed the case, finding the whistleblowers had not adequately shown the alleged violations were material to the state’s payment decisions. The judge noted that the Indiana Medicaid program continued paying the disputed claims despite being aware of the alleged issues, which the judge said was strong evidence that the alleged violations were not serious enough to affect payment decisions.
The court did reject several arguments from the defendants, including claims that the case was barred by prior public disclosures or lacked sufficient detail. It also found that the whistleblowers had adequately alleged the defendants acted knowingly.
While two of six counts were dismissed permanently, the others were dismissed without prejudice, giving the whistleblowers 45 days to try again with a new amended complaint.
