Close eye on SEC filings uncovers DOJ targeting of another Medicare Advantage insurer

Bob Herman

We reported last month that the U.S. Department of Justice was investigating the risk-adjustment practices of UnitedHealth Group and WellMed Medical Management. At the time, a question remained about whether the DOJ would look into the risk-adjustment or claims-coding activities of other health insurers.

Turns out that Bob Herman, the health care business reporter for Axios, already had the answer. DOJ in December had quietly sent a civil investigative demand (CID) to St. Louis-based Centene Corp., which had acquired Woodland Hills, California-based Health Net Inc. last year, Herman reported in a Feb. 22 story. The department’s demand was related to the Health Net’s risk-adjustment claims for its Medicare Advantage and Part D prescription drug plans, he wrote.

How Herman uncovered this story is instructive for journalists who cover publicly traded health insurers because he used public documents filed with the federal Securities and Exchange Commission. Centene’s most recent 10-K annual report disclosed that the DOJ was investigating the medical coding practices of the Medicare Advantage plans that Centene acquired in the Health Net deal. Centene said the DOJ had made the demand on December 15, adding that it was complying with the DOJ’s request and would vigorously defend any lawsuits.

The Securities and Exchange Commission requires such disclosures because shareholders have a right to know about any legal or regulatory action that may affect the company’s shares. Every quarter, publicly traded companies file reports on their business operations with the SEC. A quarterly report is a 10-Q, and each annual report is a 10-K. “Companies just finished filing annual finances, so the 10-Ks were the ones that were released,” Herman wrote in an email. “These documents are a treasure trove of information because companies love to bury information when they can. SEC filings are a good way to find the stuff that companies have to report – if you know where to look.”

The SEC posts these filings on its EDGAR site, which is searchable by company name or stock symbol. These reports often include a section explaining the company’s legal challenges. Herman checks these sections to see what’s new.

“In the Centene filing, I noticed that the company laid out the new DOJ civil investigative demand,” he said, “So I immediately reported on that.”

Reporters should read every financial filing of the companies they cover to detect changes over time. “In these cases, it’s always valuable to at least look for new legal cases that have popped up in the past quarter,” he wrote.

“To parse through the crap, I look for dates. The CID from the DOJ has a date of Dec. 15, 2016, meaning it was new since the last quarterly filing at the end of September. Anything from the latest quarter is potentially newsworthy, and when you see ‘CID’ and ‘DOJ’ your eyes should light up,” he added.

In his Axios article, Herman noted that the 10-K did not say what the DOJ was seeking, “But Centene admitted the probe likely stems from an unsealed whistleblower lawsuit against UnitedHealth Group.”

When the DOJ announced its investigation into UnitedHealth Group and WellMed, it joined a whistleblower’s lawsuit that was sealed after being filed in 2011. It finally was unsealed in February. In the lawsuit, a whistleblower who was a former UnitedHealth employee made allegations against UnitedHealth, WellMed and 13 other health insurers. In a statement, UnitedHealth has denied the allegations.

The DOJ announcement about UnitedHealth didn’t disclose investigations into the practices of the other 13 insurers. In addition to Health Net, they are Aetna Inc., Arcadian Management Services Inc., Blue Cross and Blue Shield of Florida Inc., Blue Cross Blue Shield of Michigan, Bravo Health Inc., Emblemhealth Inc., Humana Inc., Managed Health Inc. ( D/B/A Healthfirst New York), Medassurant Inc., Medica Holding Company, Tufts Associated Health Plans Inc. and Wellcare Health Plans Inc.

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