A Maryland-based company overseeing the nation’s most extensive independent network of primary care medical practices is under legal scrutiny for allegedly defrauding Medicare of millions of dollars through manipulated billing software. The lawsuit accuses Aledade Inc. of employing billing applications and software that artificially inflated patients’ medical conditions, thereby inflating Medicare payments. 

The suit, filed by Khushwinder Singh in federal court in Seattle in 2021, claims that Aledade’s practices, including conflating anxiety with depression and labeling moderate alcohol consumption as substance abuse, led to increased payments per patient.

Singh, who served as a senior medical director at Aledade, alleges he was terminated after objecting to the company’s fraudulent practices. Aledade, which helps manage primary care clinics in over 40 states, denied the allegations, asserting that the lawsuit is without merit. Founded in 2014 by Farzad Mostashari, a former health official in the Obama administration, Aledade has expanded rapidly, attracting significant venture capital and achieving a valuation of $3.5 billion by 2023.

The lawsuit also implicates 19 independent physician practices for allegedly participating in illegal billing practices facilitated by Aledade’s software. Upcoding, the practice of billing for more severe conditions than documented, has been the subject of numerous whistleblower cases against Medicare health plans, resulting in substantial penalties. However, the suit against Aledade is notable for being the first to allege upcoding within accountable care organizations, which aim to reduce healthcare costs.

Aledade’s alleged tactics include encouraging physicians to add unsupported diagnoses to patient records, particularly during annual wellness visits, without resulting in additional medical care. The company purportedly fostered a culture where doctors discussed financial incentives for coding higher-paying diagnostic categories, monitored coding practices closely, and operated under a mantra of “no diagnosis left behind.”

While Aledade denies the allegations, the company acknowledges the legal challenge and asserts its commitment to delivering high-quality care. Despite the Justice Department’s decision not to intervene in the case at present, Singh and the lawsuit continue independently. The lawsuit’s unsealing has drawn attention to Aledade’s coding practices, raising concerns about the integrity of Medicare billing and the role of accountable care organizations in healthcare cost management.

In response to the lawsuit, Aledade emphasizes its software’s role in providing data and guidance to physicians, maintaining that doctors retain full responsibility for medical decision-making. The company expresses support for changes in Medicare’s risk adjustment process to enhance accuracy and reduce administrative burdens, while also defending its practices as lawful.

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