A healthcare fraud whistleblower lawsuit has recently concluded in a $32.5 million Medicare False Claims Act deal with Freedom Health Inc. and its related affiliates.

The whistleblower alleged that the managed care providers from Freedom Health entered fraudulent diagnosis codes in its paperwork in an effort to receive increased reimbursements on Medicare Advantage plans in Florida.

The healthcare fraud whistleblower lawsuit was filed by Florida doctor Darren D. Sewell in 2009. Sewell held a position as senior vice president of health services for Freedom Health and Optimum Healthcare Inc., a related corporate entity. Sewell alleged that Freedom Health defrauded the federal government by submitting false diagnosis codes for Medicare patients, allowing the company to receive higher reimbursement for patients.

In the Medicare Advantage program, the health coverage mimics managed care programs currently operated by private insurers. The program assigns a “capitation” payment to each patient in a fixed monthly amount instead of charging for individual services rendered to patients. These government risk adjustment payments were then falsely inflated for patients enrolled under Freedom Health Inc., the healthcare fraud whistleblower lawsuit claims.

The False Claims Act lawsuit also alleges that Freedom Health the Centers for Medicare & Medicaid Services about the number of providers in its provider pool when it submitted an application in 2008 designed to expand the regional geographical territory of its health plans. The COO of Freedom Health, Siddhartha Pagidipati, was named as the party behind the misrepresented information, and has agreed to $750,000 in damages to resolve claims raised against him personally.

Edward Arens of Phillips & Cohen LLP, attorney for Sewell, told Law360 that the settlement amount in this False Claims Act case is the largest yet with respect to other Medicare Advantage program lawsuits, and it was one of the first lawsuits to bring forth allegations of fraudulent risk adjustment codes.

“There have only been a few to settle in the past,” Arens told Law 360. “I think we will see in coming years more cases involving Medicare Advantage as it’s become a larger component of the overall Medicare program.”

Chad A. Readler, acting Assistant Attorney General, stated that he hoped that the healthcare fraud whistleblower lawsuit settlement would serve to deter others from engaging in fraud. “Today’s results in the clear message to the managed care industry that the United States will hold managed care plan providers responsible when they fail to provide truthful information,” a statement by Readler reads.

It has not yet been determined how much Sewell will receive for his compensation and helping the government to fight against fraud. Whistleblowers typically receive between 15 and 30% of the settlement deal.

The Healthcare Fraud Whistleblower Lawsuit is Sewell v. Freedom Health Inc. et al., Case No. 8:09-cv-01625, in the U.S. District Court for the Middle District of Florida.