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Department of Justice Announces Two Medicare Advantage Fraud Matters Involving WLC Attorney

September 8, 2021

This summer, the U.S. Department of Justice (DOJ) took two major steps forward in the longstanding battle against Medicare Advantage fraud.

  • First, the United States intervened in six separate False Claims Act (FCA) whistleblower cases alleging Medicare Advantage fraud.  The lawsuits allege that Kaiser Permanente and several of its medical groups knowingly submitted inaccurate diagnosis codes for their Medicare Advantage Plan enrollees.  The suit alleges that Kaiser did this to receive higher reimbursements from the government.
  • Second, the government announced a $90 million False Claims Act settlement with California-based health care services provider Sutter Health.  The settlement resolves allegations that Sutter knowingly submitted inaccurate diagnosis codes for beneficiaries enrolled in Medicare Advantage Plans.  This inaccurate information led to inflated payments to Medicare Advantage Plans and Sutter Health.

In her prior role at the U.S. Attorney’s Office for the Northern District of California, WLC attorney Erica Blachman Hitchings ran both of these cutting-edge government investigations for several years, partnering with colleagues at DOJ and other U.S. Attorney’s Offices.

Medicare Advantage Fraud

As we have written, the Medicare Advantage program is a hot spot for fraud and abuse.

Medicare Advantage, also known as Medicare Part C, allows Medicare beneficiaries to choose a managed care insurance plan.  These are called Medicare Advantage Plans (MA Plans).  MA Plans are paid a per-person amount by the government to provide coverage to beneficiaries in their plans.  The Centers for Medicare and Medicaid Services (CMS), which oversees the Medicare program, adjusts the payments to MA Plans based on demographic information and the specific medical diagnoses of each plan beneficiary.  In general, a beneficiary with more severe diagnoses will be assigned a higher risk score.  This, in turn, leads CMS to pay the MA Plan more to care for that particular person.

Given this payment system, CMS relies on medical providers and MA Plans to submit truthful and accurate diagnosis information (also known as “encounter data”) for the patients in their care.

In fact, to ensure the integrity of the system, CMS has implemented specific rules regarding the submission of encounter data.  Unfortunately, schemes to inflate a patient’s risk score by submitting inaccurate encounter data are all too common. Thus, as noted above, Medicare Advantage fraud is a focus for the government’s fraud-fighting offices. You can see a list of key government enforcement actions, including resolution of WLC’s WellCare case, here.

Kaiser’s Medicare Advantage Fraud Scheme

Based in California, Kaiser serves as both a provider and insurer to millions of Americans, including over 1.7 million Medicare Advantage patients.

As noted above, Medicare has strict rules regarding the encounter data that MA Plans are allowed to submit.  Specifically, for outpatient appointments, MA Plans can only submit diagnoses that a medical professional actually addressed during an in-person meeting with a patient.  To count, the diagnoses must be documented in a specific medical record from a specific appointment.  And the diagnoses can only be for medical conditions that actually required or affected patient care, treatment or management in a given year.

The United States’ Allegations

Despite these rules, Kaiser allegedly pressured its doctors to go back and edit patient medical records to add risk-adjusting diagnoses that patients did not actually have and/or were not actually considered or addressed during the patient visit.

These edits (called “addenda”) were often done months — or even a year — after the patient’s appointment!  Kaiser allegedly did this in order to (falsely) increase the dollars it received from Medicare.

Deputy Assistant Attorney General Sarah E. Harrington of the Justice Department’s Civil Division noted:

Medicare’s managed care program relies on the accuracy of information submitted by health care providers and plans to ensure that patients receive the appropriate level of care, and that plans receive the appropriate compensation . . . [The United States’ intervention in the six lawsuits]  sends a clear message that we will hold health care providers and plans accountable if they seek to game the system by submitting false information.

Litigation Lies Ahead

The United States’ intervention in these six whistleblower suits against Kaiser is indeed a strong signal.    As we have explained before, the government only intervenes in approximately 20 percent of qui tam cases.

(An update): On October 25, 2021, the United States filed its DOJ Kaiser complaint in intervention.  This 96-page document brings to life the government’s allegations.  The complaint, for example, explains that the annual rush to capture diagnoses through addenda was dubbed the “dash for cash.”  It also reveals intense pressure on physicians to improperly add diagnoses.  Those who complied were praised and received rewards.  Those who did not had to meet with supervisors and face other negative consequences.

The complaint also highlights the lucrative nature of the Medicare Advantage program.  According to the complaint, although Medicare accounted for roughly 10% of Kaiser’s members, Medicare accounted for more than 30% of Kaiser’s total revenue.  That staggering figure is exactly why, as discussed below, fraud in this program will inevitably continue.

The complaint is just the beginning of litigation.  Kaiser will either answer the complaint or file a motion to dismiss in the coming months.  We will keep our eyes on this case!

Sutter Health’s $90 Million Medicare Advantage Fraud Settlement

Like Kaiser, Sutter Health is based in California.  Unlike Kaiser, Sutter Health is not itself an MA Plan, but rather a large health care services provider with locations throughout California.

Sutter Health contracted with multiple MA Plans to provide health care services to the plans’ California members.  In exchange, Sutter Health received a portion of the payments for treating the beneficiaries under its care.  Yet, instead of following the rules, Sutter Health allegedly submitted unsupported diagnosis codes for certain patient visits.  These unsupported diagnosis codes caused inflated payments to be made to the plans and to Sutter Health.  In addition, once Sutter Health became aware of these unsupported diagnosis codes, it allegedly failed to fix the problem.

The United States’ Complaint-in-Intervention

As with Kaiser, this case began with a whistleblower qui tam complaint.  The government intervened in the qui tam suit, and filed its own complaint.  Notably, because the government only intervened as to some of the allegations, the whistleblower carried forward additional claims against Sutter Health, as is contemplated by the False Claims Act.

The government’s complaint is filled with details of Sutter’s “aggressive coding practices that resulted in the systematic submission of false risk-adjusting diagnosis codes.”   The government’s complaint continues:

Sutter and [its affiliate] knowingly ignored numerous red flags regarding false claims, statements, records and overpayments, raised by audits conducted by their own employees, feedback provided by physicians treating MA patients, and audits and warnings by MA Organizations. Instead of reimbursing CMS for the overpayments, conducting further audits, and funding compliance and training programs, Sutter and [its affiliate] turned a blind eye to these red flags and doubled down on their scheme to increase risk-adjusting diagnosis codes. Sutter and [its affiliate] knew that the diagnosis codes being submitted to CMS were rife with errors and knew that the submission of these false risk-adjusting codes would inflate Sutter and [its affiliate’s] share of the Medicare Part C payments.

Sutter Health asked the court to dismiss the government and whistleblower’s cases.  The court, however, denied Sutter’s motion.  Instead, the court allowed the cases to proceed.  This settlement followed that decision.

A Noteworthy Settlement

The $90 million settlement is noteworthy for several reasons.  It is the second largest reported Medicare Advantage fraud settlement ever.  In addition, Sutter Health entered into a five-year corporate integrity agreement (also known as a CIA) with the U.S. Department of Health and Human Services, Office of Inspector General.  Among other things, this CIA requires provide for an annual independent review of a sample of Sutter’s Medicare Advantage patient records and data.

Medicare Advantage Fraud Will Continue

Nearly 40 percent of Medicare beneficiaries are enrolled in Medicare Advantage Plans today.  That equals over 24 million people.  This number is only expected to increase.  With so many beneficiaries enrolled — and so much money at stake — Medicare Advantage fraud is bound to continue for years to come.  Thankfully, however, the Department of Justice and other government agencies are focused on fighting back.

Acting U.S. Attorney Stephanie Hinds for the Northern District of California said it best:

The integrity of government health care programs must be protected. The Medicare Advantage Program maintains the health of millions, and wrongful acts that defraud the program cannot continue and will be pursued.

WLC attorney Erica Blachman Hitchings is honored to have been one of the government prosecutors for the Kaiser and Sutter Health matters.  She and all of WLC salute the government attorneys and staff — as well as the whistleblowers and their counsel — who have worked tirelessly on these and other Medicare Advantage fraud cases.

If you have information about possible Medicare Advantage fraud, please contact us for a free consultation.  We have the expertise and desire to help.