Health Plan Allegedly Cheated Risk Adjustment

An industry shake-up may be coming. The FBI is investigating an innovative Portland-based health organization for allegedly falsifying medical claims. According to a former employee, Zoom+care changed records to avoid paying around $3 million to the Affordable Care Act’s risk adjustment program.

“Zoom’s alleged tampering of medical claims may have damaged other insurers that played by the rules – and it’s sure to raise questions about whether other companies have done the same thing,” warns the Axios news and information website. Oregon has taken Zoom’s insurance arm into receivership, and the company is dissolving its insurance operations.

Portland M.D. Dave Sanders co-founded Zoom as a local network of walk-in clinics in 2006. The goal was to provide care that was inexpensive, consistent, and convenient.

Receiving care under Zoom was intended to be more like “visiting an Apple Store.” It is among many healthcare companies which promised to disrupt the industry. Inadvertently, Zoom may now be doing that.

Two Sides of the Story

After expansion to Seattle and Vancouver, the company rebranded itself. Then, in August of 2015, Zoom began offering its own health insurance. The Portland Business Journal reports that CEO Sanders was unhappy to learn last year that the insurance plan would have to pay into the federal government’s risk adjustment program, since Zoom hadn’t spent a high enough proportion of its revenue on medical claims.

A former employee made the allegation, speaking on the condition of anonymity. Other former employees “describe a culture of cutting corners that has now attracted the FBI’s attention,” according to Axios. Zoom “is on the brink of a meltdown,” and “numerous people have either quit or been laid off.”

In mid-June Zoom spokesperson Len Bergstein confirmed that FBI investigators have interviewed staff. He said they were looking into practices related to “calculation of risk adjustment information.” In addition, he warned, however, that “readers should not believe everything they read, especially when it is an anonymous quote by some person not under oath.”

Bergstein confirms the subpoenas to Zoom to provide information and/or files. No subpoenas have so far been issued to individual members, staff, or leadership, he said, and Zoom clinics continue to operate.

Zoom “Adjusts” Risk Adjustment

Health plans on the Affordable Care Act exchange must spend at least 80 percent of their premium revenue on medical services. If they don’t, they pay into a risk adjustment program. The program transfers funds from plans with healthier-than-average customers to plans with sicker-than-average customers. This risk adjustment deters the cherry-picking of healthy enrollees and protects plans from adverse outcomes.

Zoom’s clinical “medical loss ratio” was around 30 percent. However, the company allegedly altered claims to make them retroactively appear higher than the actuals. If true, the transfer of more revenue to the delivery side of Zoom kept the plan side from not appearing as profitable, therefore reducing the amount owed to the government’s risk adjustment program. Zoom owes an estimated $3 million to the program.

According to Axios, venture firm Endeavour Capital backs Zoom. The FBI does not comment on ongoing investigations. Bergstein did not respond to our requests for comment.