Provider Alert: District Court Ruling Upholds Government’s Restrictive Construction of ICD Coding Guidelines in False Claims Act Case

A motion to dismiss that has been pending since last year was recently decided in the matter of U.S. ex rel. Teresa Ross v. Independent Health Association, et al.[1] The decision may very well be a bellwether for future Medicare Advantage (“MA”) risk adjustment-related False Claims Act cases, reflecting an increasingly restrictive view by the government of what constitutes fraudulent ICD coding practices under the MA program.

At issue in the decision was the meaning § IV(K)73 of the ICD-9-CM Official Guidelines for Coding and Reporting (“ICD Guidelines”), an excerpt from what is, in effect, a manual for making compliant diagnosis code (“Dx code’) submissions to Medicare Advantage Organizations (“MAOs”) or the Centers for Medicare & Medicaid Services (“CMS”). § IV(K)73 provides:

Code all documented conditions that coexist Code all documented conditions that coexist at the time of the encounter/visit, and require or affect patient care treatment or management. Do not code conditions that were previously treated and no longer exist. However, history codes [as specified] may be used as secondary codes if the historical condition or family history has an impact on current care or influences treatment.

The Defendants, which included a health plan and a “risk adjustment and chart-review” vendor, argued that the above provision permitted them to lawfully code “from past medical history . . . EKGs, and related records[,]” even if the Dx code-associated diagnoses may not have been “require[d] or [may not have] affect[ed] patient care treatment or management” during a face-to-face physician-patient encounter.[2] The government, by contrast, construed § IV(K)73 to mean that diagnoses contained in Dx codes submitted to CMS “must be documented in the medical record as relevant to patient care during an encounter in the D[ate of Service (“DOS”)] year, and not merely mentioned, suggested, or inferred anywhere from records from past years.”[3]

The Court, while conceding that the provision was “no model of clarity[,]”[4] nevertheless broadly found in favor of the government’s interpretation, holding that the “provision is most naturally read as restrictively defining a subset of documented conditions that must be coded. That subset consists of documented conditions that have two attributes: (1) they ‘coexist at the time of the encounter/visit,’ and (2) they ‘require or affect patient care treatment or management.’”[5]

The decision, while not binding precedent, should serve as a wakeup call for provider groups in MA full risk contracts who rely on chart review vendors and/or data analytics consultants who may continue to use retrospective Dx code reviews analogous to those used by the Defendants in this matter, especially since, anecdotally, many such practices are not—or at least were not—particularly uncommon within that vendor/consultant community. Likewise, for those practices which handle Dx code reviews in-house, it is critical that internal standard operating procedures be reevaluated and modified as necessary, ideally with the advice of experienced healthcare counsel.

How Frier Levitt Can Help

Frier Levitt is a national boutique healthcare law firm with extensive experience in MA risk adjustment, both from a compliance and a litigation standpoint. For assistance related to these matters or review of your internal standard operating procedures to maximize your practice’s compliance, contact Frier Levitt for a consult.


[1] A copy of the decision may be found on Westlaw at 2023 WL 24055 (WDNY 2023).

[2] See Defendants’ Reply Brief at 4-5.

[3] See Complaint at ¶77 (emphasis supplied).

[4] See U.S. ex rel. Teresa Ross, 2023 WL 24055, at *7.

[5] Id. (Emphasis supplied).