Founded locally, it has grown into a broader company backed by a major Silicon Valley investor. Essence now boasts Medicare Advantage plans for seniors with some 60,000 members in Missouri and across the Mississippi River in Illinois. It ranks among the city’s top 35 privately held companies, according to the St. Louis Business Journal. Market research firm PitchBook Data values the company at over $1.64 billion.
But a recent audit by the federal Health and Human Services inspector general, along with a whistleblower lawsuit, have put the St. Louis health care standout under scrutiny. Medicare officials also are conducting a separate audit of Essence.
The same growth and use of big data that attracted venture capital cash are getting a renewed look from government officials who estimate that Medicare Advantage plans nationwide overcharge taxpayers nearly $10 billion annually.
The April audit of Essence — the first in a series of upcoming audits scrutinizing some Medicare Advantage plans across the United States — revealed that the Maryland Heights-based company could not substantiate fees for dozens of patients diagnosed with stroke or depression.
The government pays privately run insurance plans like Essence using a formula called a “risk score” that is designed to pay higher rates for sicker clients and less for patients who are in good health.
“There’s great temptation to push the envelope on risk scores without the supporting documentation in the medical files, especially for depressive disorders,” said former Sen. Claire McCaskill, a Missouri Democrat who now works as a political analyst. While in office, McCaskill in 2015 called for an investigation into overbilling practices by insurers running Medicare Advantage plans.
In the Essence audit of 218 cases, HHS found dozens of instances in which the health plan reported patients had an acute stroke — meaning the patients had strokes that year — when they actually had suffered strokes only in past years. HHS also discovered that Essence had charged Medicare for major depressive disorder diagnoses for several enrollees, but that the doctors had not recommended a treatment plan, indicating the patients likely had a less severe form of depression. In five cases, HHS couldn’t find any medical records to support payments for a diagnosis of acute stroke or major depressive disorder diagnoses.
Essence denied wrongdoing but agreed to refund $158,904 that Medicare paid for those patients who were reviewed in the audit and committed to correcting any other errors.
Essence is part of the Medicare Advantage boom — such plans now treat more than 22.6 million U.S. seniors, about 1 in 3 people on Medicare. And with that growth, the money has followed — top investors, including Google, have poured more than $1 billion into health care companies that have Medicare Advantage aspirations.
Essence’s medical technology arm, Lumeris, which helps power its Medicare Advantage plans, is key to those ambitions. And last year Lumeris received a commitment of $266 million over the next 10 years from Cerner, a leading electronic medical records firm based in Kansas City, Missouri. Cerner declined to comment for this story on its investment.
But Essence now finds itself in the middle of a national reckoning with the government, which is attempting to reduce overbilling by the Medicare Advantage industry that it says costs taxpayers up to $10 billion a year. Previous efforts to claw back such overpayments have been delayed by an onslaught of lobbying efforts by private insurers.
The Missouri whistleblower suit alleges Essence, Lumeris and its local partner, Lester E. Cox Medical Centers, used data-mining software to identify patients for an “enhanced encounter” that jacked up the patients’ risk scores to boost Medicare payments. The suit was unsealed in January after being filed in 2017 by Branson, Missouri, family doctor Charles Rasmussen.
In his lawsuit, Rasmussen said he worked for Cox from 2013 through August 2017 and treated more than 2,000 patients there. He and his lawyers declined to comment on the case.
After a training session on “enhanced” coding practices, one doctor wrote to Cox officials in an email that was quoted in the suit. The doctor said the Essence team had used the case of an 86-year-old patient that the doctor described as “pretty healthy for looking sick on paper” as an example of a potential coding “opportunity.” The doctor wrote that the man’s care likely cost less than $2,000 a year, but Essence’s “enhanced” coding techniques could “capture around $11,000 from Medicare.”
Essence and Lumeris denied the whistleblower’s allegations in a statement to Kaiser Health News. Lumeris spokesman Marcus Gordon said the allegations were “wholly without merit.” In the emailed statement, he said the companies would “continue to vigorously defend against these baseless claims,” adding that its programs “result in higher quality care and better health outcomes for our members.”
Good national press followed, much of it noting the company’s commitment to developing innovative medical software to improve patient care and cut costs. Neither of the Doerr brothers would comment for this article.
That helped make the plans popular for customers in Missouri, said Stacey Childs, the regional liaison for CLAIM, the state’s health insurance assistance program. She credited its A+ ranking with the Better Business Bureau and high star rankings year after year for helping create a swell of excitement when Essence expanded to the Springfield area of Missouri in 2015.
And its Lumeris-powered technology is growing nationally, including partnerships with Stanford Health Care in California and medical groups in Florida and Louisiana. It also has been deployed to other regions, bolstered by Cerner’s investment for a joint program managing Medicare Advantage plans called the “Maestro Advantage,” according to the partnership’s website.
In a statement to Kaiser Health News, Taylor Griffin, a spokesman for Essence, said: “We compensate physicians for the substantial extra time and effort to meet with our members and gather information essential to delivering better care. It is a program designed around capturing the health status of the member and not on capturing codes.”
At least one Essence-affiliated doctor has questioned the ethics of the initiative, according to court documents. “All I have heard about since we signed on with Essence is about coding to get paid more,” the unidentified doctor alleged in an email to Cox officials. “This is doing little to enhance these patients’ care.”
Kaiser Health News is a nonprofit news service covering health issues. It is an editorially independent program of the Kaiser Family Foundation, which is not affiliated with Kaiser Permanente.