Independent Health and DxID: Medicare Advantage Risk-Adjustment Fraud Trumps a Sunny Disposition

In the Independent Health DxID settlement, Independent Health agreed to pay up to $98 million to resolve allegations of Medicare Advantage fraud through unsupported risk-adjustment diagnoses. The plan owned the company finding those diagnoses. The whistleblower’s complaint describes the vendor’s work for another plan: a doctor evaluated a patient’s depression, found it resolved and removed it from the problem list. The whistleblower alleged that DxID submitted the depression diagnosis anyway.

The Doctor Resolved the Depression but the Code Survived

The patient behind the headline was a Group Health Cooperative member, according to the whistleblower’s complaint. It alleged that DxID submitted the risk-adjustment claim on Group Health’s behalf and with its permission.

The complaint describes a routine examination on September 2, 2010, when the doctor copied the patient’s problem list into the visit note. That list included a major-depression diagnosis dating to May 2004.

The complaint says the doctor also evaluated the patient’s mood during that visit and quotes the assessment:

According to the complaint, the physician concluded that the major depressive disorder was resolved and removed it from the problem list. The whistleblower alleged that DxID nevertheless coded the patient for major depressive disorder and submitted a false claim for risk-adjustment payment. In the whistleblower’s account, the doctor removed the diagnosis, but DxID kept it in the claim.

The whistleblower worked at Group Health and had run its risk-adjustment department. She brought the qui tam case in 2012, and the government later joined it. Her view into the vendor’s work at one health plan helped expose allegations reaching the plan that owned the vendor. The Justice Department previously settled the Group Health claims with Kaiser Foundation Health Plan of Washington, as Group Health became known.

The Plan Owned the Business Finding More Diagnoses

Independent Health, headquartered in Buffalo, operated Medicare Advantage plans in western New York. The government alleged that it created DxID to search medical records retrospectively and query physicians for additional diagnoses. DxID served both Independent Health and other health plans.

The settlement agreement describes the ownership: Independent Health Association controlled its for-profit subsidiary, Independent Health Corporation, which owned DxID. The health plan and the chart-review business sat inside the same corporate family.

That structure matters because a diagnosis can change the plan’s payment. Medicare pays a monthly amount for each enrollee, adjusted for expected healthcare costs. Eligible diagnoses map to hierarchical condition categories, which contribute to the enrollee’s risk score. Medicare multiplies the plan’s base payment by that score. A higher score can mean more money for the same enrollee.

Chart review reaches back through existing medical records for diagnosis codes that were not submitted at the time of care. The commercial opportunity is the additional payment those codes can produce. The government’s complaint describes DxID selling its review on a contingency-fee basis, with its pitch promising no upfront fee and a percentage of the resulting recoveries. At Group Health, the government’s complaint says the contract paid DxID 20% of the additional revenue. Independent Health had the further connection of owning the vendor itself.

The government’s allegation was that, from 2011 through at least 2017, Independent Health used DxID’s work to submit diagnoses unsupported by the medical records. Taxpayers were allegedly paying for a sicker patient population than the documentation supported.

Independent Health’s Old Records Became New Codes

The government’s complaint alleged that DxID searched problem lists, past medical histories, laboratory and radiology results, and orders for equipment such as oxygen. For chronic kidney disease, it allegedly treated the availability of lab results during a visit as grounds to assume the doctor had considered the condition.

The government’s Independent Health examples follow the code beyond the chart. In one, it alleged that DxID captured a pulmonary-hypertension diagnosis for care in 2016 based solely on a problem list dated June 14, 2004. The government alleged that the medical record did not document the condition’s relevance to the patient’s health care that year, yet Independent Health submitted the code and did not later delete it.

In another example, the government alleged that DxID captured an old-heart-attack code for 2013 from a history recording a heart attack in 1984, without documentation that it was relevant to care that year. Again, the government said Independent Health submitted the code and left it in place.

The government said Medicare made an additional payment in both examples.

The repeated sequence matters: an old entry supplied a new payment input, and the plan allegedly retained the code.

The Addendum Fee and the Late Signature

DxID’s medical-record addendum process sought new documentation after the encounter. According to the government, DxID sent leading forms suggesting diagnoses the provider had supposedly assessed but failed to record. The government alleged that DxID paid providers $25 for each form they reviewed, signed and returned.

The complaint alleged that suggested conditions could come from a problem list, lab results or predictions about what a patient should have. Its account of kidney-disease coding was particularly blunt: DxID’s chief executive promoted putting renal failure on forms because it could bring substantial money to Independent Health.

When forms did not come back, the government alleged, DxID staff went to providers’ offices with Independent Health’s permission, checked diagnoses on the forms and presented them for signature. The complaint quoted an Independent Health account of what happened in the offices:

Some forms were signed long after the visit. For service years 2010 through 2017, the government alleged that Independent Health submitted codes from at least 31,265 forms completed between 300 and 360 days after the encounter, and 5,080 completed more than 360 days afterward.

Across the broader review program, the government alleged that Independent Health submitted hundreds of thousands of new diagnosis codes, including over 125,000 from the addendum process alone. It attributed tens of millions of dollars in Medicare payments to the review services. The scale was in codes and forms, with signatures supplying the documentation for payment long after the visit.

A Refund Followed by More of the Same

According to the government, Independent Health had already received warnings about chart-review practices before the later DxID allegations. The government’s complaint described an employee objecting to instructions from the predecessor vendor, Cognisight, to code conditions from problem lists without documentation that they had been evaluated or treated. The government alleged that an independent audit found errors in 68% of the charts Cognisight reviewed.

The government alleged that Independent Health refunded nearly $700,000 to the Centers for Medicare & Medicaid Services in 2013 for some of the same practices. Its account specifically says the plan withdrew chronic-kidney-disease codes for the 2010 service year after learning that lab values alone did not support them.

The response to those warnings is the consequential part. According to the complaint, Independent Health did not withdraw the kidney-disease codes submitted for the following two service years, and it and DxID continued coding from lab values alone from 2013 onward. The government’s account includes a correction, followed by a failure to carry that correction through the later submissions.

The same pattern appeared in the plan’s response to concerns about the addendum process. The government alleged that Independent Health paused DxID’s work for a few months in 2015, then restarted the chart-review program, including the forms, in 2016.

For someone inside coding or compliance, those decisions are as revealing as the original code. A refund records that a problem reached the organization. The later submission files show whether the organization changed what it sent Medicare.

Why the Direction of a Review Matters

The 2015 working paper Upcoding or Selection? Evidence from Medicare on Squishy Risk Adjustment, held in Duke Economics’ seminar archive, estimated how the same enrollees’ risk scores would differ under Medicare Advantage and traditional fee-for-service Medicare, and found that Medicare Advantage plans generated risk scores averaging 6.4% higher than the same enrollees would have produced under fee-for-service.

The study’s point is that the insurer’s coding practices can change the measured risk of the same person. Its explanation connects physician coding to insurer payment and describes the incentive to pay physicians according to the codes they assign. That gives the form-and-fee allegations here their commercial context: a signature can increase a payment without a new episode of care.

The related one-way chart-review problem is visible in the government’s separate case against Anthem. Its complaint alleged that a review failed to substantiate a previously submitted active-lung-cancer diagnosis, but Anthem retained it while adding three other codes from the same visit. A review looking for more diagnoses and a review acting on contrary evidence can produce very different payment files.

Independent Health’s alleged correction history makes that distinction concrete. The useful question inside the business is what happened to the existing codes when the reviewers or clinicians found something that should change them.

What the Independent Health DxID Settlement Requires

The Justice Department announced the resolution on December 20, 2024. Independent Health agreed to fixed payments of $34.5 million and up to $63.5 million in contingent payments on behalf of itself and DxID. DxID’s founder and chief executive separately agreed to pay $2 million. The department said the company’s settlement rested on its ability to pay.

The agreement puts the combined settlement payments at up to $100 million. The plan’s contingent payments depend on its finances, with payments scheduled through 2029.

The resolution also put the review process under outside scrutiny. Independent Health entered a five-year corporate integrity agreement with the Department of Health and Human Services’ Office of Inspector General requiring an independent review organization to examine a sample of Medicare Advantage patients’ medical records and associated internal controls annually. Independent Health had shut down DxID in June 2021. The review obligation remained with the plan receiving Medicare’s payments.

The Justice Department said the Group Health whistleblower would receive at least $8.2 million from the announced settlement. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know What Happened After the Review

If you saw diagnoses survive a doctor’s correction, or watched signed forms replace what the visit actually documented, speak with our whistleblower experts about the review process you know. We work beside you to build the case from the clinical record through the coding decisions and Medicare payments, and bring in Medicare Advantage fraud whistleblower lawyers who understand risk adjustment and chart-review vendors. Your knowledge of what happened inside the plan or vendor is where that work begins.