Humana's Medicare Advantage clawback lawsuit to move forward, judge rules

Humana's challenge to a CMS rule implementing stricter auditing standards on Medicare Advantage plans can continue, a federal judge ruled. 

In a June 7 order, U.S. District Judge Reed O'Connor denied a motion from HHS to throw out the case. Attorneys for the agency had previously argued that Humana did not have standing to challenge the law because CMS has not implemented or completed any audits based on the new risk-adjustment rules. 

"The court finds that Humana's compliance costs constitute substantial hardship, and, with the issues fit for review, the case is ripe," Mr. O'Connor wrote in the order. 

Mr. O'Connor also rejected HHS' request to move the case to the Dallas division of the Northern District of Texas court. HHS said because Humana's Texas subsidiary is headquartered in Dallas, the case should be argued there. 

Humana filed its challenge in the Fort Worth district, which Mr. O'Connor presides over. He has ruled in several high-profile healthcare cases, including ruling the Affordable Care Act unconstitutional in 2018. In 2022, Mr. O'Connor struck down the preventive care requirement of the law, though the case is still being appealed. 

In January 2023, CMS said it would strike the fee-for-service adjuster from risk adjustment data validation audits. The change would allow the agency to collect more in overpayments from MA plans when it finds payments not supported by patients' medical records. Nearly every major insurer has been accused of, or settled allegations of upcoding, or inflating patients medical diagnoses to make them appear sicker than they are, thereby receiving more payments from CMS. 

CMS estimates it could recover $4.7 billion in overpayments to MA plans in the next decade using the new audit methodology.

Humana filed a challenge to the rule in September. In its original complaint, Humana argued the rule would have "unpredictable consequences" on MA plans. 

CMS "failed to meet its legal obligations in the federal rulemaking process to give a reasoned justification for the rule or provide a meaningful opportunity for public comment," a Humana spokesperson previously told Becker's. 

In January 2023, Bloomberg reported Humana may have the largest risk of clawbacks among major insurers, with as much as 17 percent of its 2023 earnings facing scrutiny, before interest, taxes, depreciation and amortization — or $900 million. 

Humana, the second largest Medicare Advantage insurer, has 6.1 million MA members

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