The 80% Error Rate Diagnostic Device at the Heart of UnitedHealth's Upcoding Fraud

This faulty device, which the media largely overlooked, should be a crucial piece of evidence in UnitedHealth's latest upcoding fraud investigation, launched by the DOJ on Friday.

Luigi Mangione, in a tragically compelling way, has shone a spotlight on what might be the biggest cartel in the world—the American healthcare cartel—with UnitedHealth sitting squarely at its center.

I’ve been waiting for this moment for over a year, and I wish I had the bandwidth back then to break the story. But with the U.S. Department of Justice ’s new civil probe revealed on Friday—accusing UnitedHealth Group of upcoding and insurer-driven diagnosis (I’ll define both below)—now is as good a time as ever to assist the DOJ and the public in exposing malpractice directly tied to this fraud. And it’s not just UnitedHealth. At least three other insurers— Aetna, a CVS Health Company , Humana , and Blue Cross Blue Shield (BCBS)—are also deeply involved, along with a vast network of companies and individuals servicing the health insurance industry.

For the first time, I show that this cartel extends far beyond UnitedHealth and even beyond the health insurance industry itself. It spans the entire healthcare ecosystem—manufacturers, resellers, and device testers.

When I say “faulty device,” I’m referring to the infamous QuantaFlo—originally designed as a screening test for Peripheral Artery Disease (PAD) but now heavily marketed by Semler Scientific? (Nasdaq: SMLR) as a screening tool for Congestive Heart Failure (CHF) as well.

To any unbiased clinician, it’s “faulty.” But for the key players in this scheme, the device wasn’t faulty at all. It was “just right.” Because maximizing false positives means maximizing the number of “sick” patients. And you guessed it—maximizing cartel profits.

Having a device optimized to game the system with an alarming 80% error rate—8X higher than the industry standard of 10%—is like playing with marked cards or a rigged roulette wheel in a casino.

To be fair, while this particular investigation goes back years, I have to give credit where it’s due—STAT News got there first with its own exposé on QuantaFlo, even estimating that UnitedHealth raked in $4B in illegal profits from upcoding between 2018 and 2021.

That was a solid start. But the web of corruption stretches far beyond Semler (the manufacturer of QuantaFlo) and UnitedHealth. It covers the entire industry.

I lay out the web of lies. I name names in the org chart.

This is just the beginning. I want to point regulators and authorities to where the bodies are buried. Unfortunately, I can’t do everything—I’m a one-man operation.

Last year, The Wall Street Journal exposed a $50B upcoding fraud by UnitedHealth. But here’s what many forget—that figure only covers three years: 2019, 2020, and 2021. Will we ever see that $50B recovered? Of course not. UnitedHealth’s lobbying machine is as powerful as ever, and the largest fine it has ever faced barely reached the tens of millions—a rounding error for a company of its size.

It’s important to distinguish between the closely related concepts of risk adjustment and risk coding on one hand, which are valid practices when coding for medical services, and upcoding, insurer-driven diagnosis, bogus referrals, and hypercoding on the other, which are fraudulent practices used by providers and payers to artificially drive up their revenue.

Risk adjustment is a legitimate method used in healthcare reimbursement to account for differences in patient populations. Insurers and government programs (like Medicare Advantage) use risk adjustment to ensure payments reflect the actual health status of patients. For example, sicker patients require more care, so providers treating them receive higher payments.

Risk coding is the practice of assigning medical diagnosis codes that reflect a patient’s health conditions. These codes feed into risk adjustment models to determine expected healthcare costs. The goal is to ensure all relevant conditions are documented so that reimbursement reflects the true complexity of a patient’s health. For example, patient with diabetes, hypertension, and chronic kidney disease has all three conditions coded so the insurer accounts for the full risk burden.

Upcoding is a fraudulent practice where healthcare providers intentionally use diagnosis codes that make patients appear sicker than they actually are to receive higher reimbursement. Here’s how upcoding works. The treating doctor might say, “No treatment or minimal treatment necessary for this diagnosis.” However, UnitedHealth, without ever seeing the patient, overrides the doctor’s judgment, generates its own diagnosis code, and bills Medicare with this new code. This act alone brought UnitedHealth $50B over three years.

Insurer-driven diagnosis refers to the practice where Medicare Advantage (MA) insurers—not doctors—push for certain diagnoses to be recorded in patient charts. This is done to increase risk scores (RAF) and maximize reimbursements from the federal government under Medicare’s risk adjustment model.

Bogus referrals are unnecessary or inappropriate patient referrals that may be made for various reasons, including financial incentives, misunderstanding of medical conditions, or even pressure from payers or hospital systems. For example, a vascular surgeon is likely receiving many referrals for Peripheral Arterial Disease (PAD) in Medicare Advantage (MA) patients that may not be clinically warranted.

Hypercoding refers to the practice of aggressively documenting every possible diagnosis or comorbidity that a patient might have, even if those conditions are not actively treated or relevant to the visit, in order to maximize risk-adjusted payments, particularly in value-based care models like Medicare Advantage. For example, a patient with controlled diabetes and no complications is documented as having multiple related conditions (such as diabetic neuropathy or kidney issues) to increase their risk score (RAF).

This fraud reported by the WSJ was possible in large part because UnitedHealth owns physician practices through its subsidiary, Optum. When an insurer owns the physician practice, it can configure workflows, technology, and incentives to drive risk coding. UnitedHealth can preferentially schedule Medicare Advantage patients and choose to reach out to health plan enrollees it identifies with its data as having high ‘coding opportunities.’ It can require its doctors to go to risk-code training, and it can prohibit Optum-employed doctors from closing their notes before they address all the ‘suggested’ diagnosis codes.

The Wall Street Journal ran a series of investigations, culminating in yet another DOJ civil probe into UnitedHealth on Friday. (WSJ Investigation 1, WSJ Investigation 2, WSJ Investigation 3.)

UNH took a 7% hit on the day—wiping out $33B in market value—or, as they call it in the UnitedHealth boardroom, a “dinner and a movie.”

Do you know who else dropped about the same (8%) that day? Semler Scientific (ticker: SMLR).

Full disclosure: I own no shares of UNH, SMLR, or any other company mentioned here, nor do I have any financial or other incentive tied to their stock movements.

PSA: If you have information about Semler Scientific? , Matrix Medical Network , Signify Health , QuantaFlo, or any other company or tool potentially involved in fraud, my DMs on Substack, LinkedIn, and X are open. I work independently, report to no one, and treat all information with absolute confidentiality.

Most importantly, if you suspect fraud or any other crime, contact the FBI immediately via the FBI Tip Line. Do not waste your time with the SEC unless you’re prepared to wait years for them to take action. The SEC is useless, in my opinion.

TL;DR:

1. Who the Hell is Semler, and What’s Its Role in UnitedHealth’s Alleged Upcoding Fraud?

2. QuantaFlo Explained: What It Is and How It Works

3. Matrix Medical: Key Player in the Alleged QuantaFlo Medicare Fraud

4. Signify Health’s Role in Gaming Medicare with Bogus PAD Diagnoses

5. What is Peripheral Artery Disease (PAD)?

6. From PAD to CHF: Why the Shift? Just Follow the Money. ??

7. Serious Statistical Flaws in QuantaFlo’s Predictive Model

8. Examining QuantaFlo’s Efficacy: Conflicts, Accuracy, and Skepticism

9. Medicare Advantage and the Risk-Adjustment Goldmine of Semler’s QuantaFlo

10. Conflict of Interest on Semler Board

11. What’s the Deal with Semler’s “?itcoin Treasury Strategy?”

12. QuantaFlo and the Medicare Advantage Fraud: How Flawed PAD Screenings Inflate Federal Payments

13. Who’s Really to Blame for Upcoding Fraud?

14. Why Do Health Insurers Upcode If It’s Against the Law?

15. Semler and Corrupt Wall Street

16. Conclusion: QuantaFlo Is a Fraud at a Multi-Billion Dollar Scale

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