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U.S. suffers setback in lawsuit against UnitedHealth

Oct 6 (Reuters) - A federal judge has tossed a lawsuit by the U.S. government claiming UnitedHealth Group Inc obtained inflated payments from the government based on inaccurate information about the health status of patients enrolled in a Medicare Advantage plan.

But Thursday's ruling by U.S. District Judge John Walter in Los Angeles said the Department of Justice (DOJ) could try to amend its allegations to shore up some of the failings contained in a complaint filed in May against the insurer.

Walter said the lawsuit had failed to identify any corporate officers who signed documents stating that data submitted to the Medicare program was accurate or allege any of those individuals knew the information was false.

He also said the lawsuit claimed the alleged violations were material only in a "conclusory" manner and had not shown the government would have refused to make payments to UnitedHealth had it known about the conduct.

UnitedHealth declined to comment on the lawsuit on Friday. The DOJ, which has until Oct. 13 to amend its complaint, had no immediate comment.

The ruling marked a setback for the DOJ after it earlier this year intervened in two separate whistleblower lawsuits against UnitedHealth involving Medicare Advantage filed under the False Claims Act.

Medicare Advantage, an alternative to the standard fee-for-service Medicare in which private insurers manage health benefits, is the fastest growing form of government healthcare, with enrollment of 18 million people last year.

The lawsuit said that since at least 2005, UnitedHealth knew many of the diagnosis codes it submitted to the Medicare program for increased payments based on "risk" factors like health status were not supported by patients' medical records.

But the company turned a blind eye, the lawsuit said, funding and encouraging one-sided chart reviews of patients of HealthCare Partners, which provided services to UnitedHealth beneficiaries in California.

As a result, UnitedHealth was able to wrongfully retain risk adjustment payments it received from the government, the lawsuit said.

The complaint was filed in May after the DOJ partially intervened in a whistleblower lawsuit brought by James Swoben, a former employee of Senior Care Action Network Health Plan and a consultant to the risk adjustment industry.

The DOJ later that month filed a second lawsuit accusing UnitedHealth of obtaining over $1 billion from Medicare to which it was not entitled.

The case is U.S. ex rel Swoben v. Scan Health Plan et al, U.S. District Court, Central District of California, No. 09-cv-05013. (Reporting by Nate Raymond in Boston, editing by G Crosse)