The Department of Justice announced affiliates of Kaiser Permanente, a healthcare consortium in Oakland, California, have agreed to pay $556 million to resolve allegations False Claims Act violations. The healthcare affiliates allegedly submitted invalid diagnosis codes for their Medicare Advantage Plan enrollees to obtain higher government reimbursements.
The civil settlement resolves claims brought forward by qui tam whistleblowers Ronda Osinek and James M. Taylor, M.D., former employees of Kaiser, who are entitled to an award of $95 million. Under the qui tam or whistleblower provisions of the False Claims Act, private parties are permitted to bring forward a lawsuit on behalf of the United States and receive a portion of the recovery.
“Medicare Advantage is a vital program that must serve patients’ needs, not corporate profits,” said U.S. Attorney Craig H. Missakian for the Northern District of California. “Fraud on Medicare costs the public billions annually, so when a health plan knowingly submits false information to obtain higher payments, everyone — from beneficiaries to taxpayers — loses. We have an obligation to protect the American taxpayer from waste, fraud, and abuse, and we will relentlessly pursue individuals and organizations that compromise the integrity of the Medicare program.”
The alleged scheme took advantage of how the Centers for Medicare & Medicaid Services (CMS) generally pays Medicare Advantage Organizations (MAOs) more for sicker beneficiaries who are expected to incur higher healthcare costs. Kaiser allegedly systematically pressured physicians to alter medical records and inflate diagnoses, resulting in fraudulent payments. According to the DOJ, Kaiser ignored numerous red flags and internal warnings of the CMS rule violations raised by its own physicians and compliance office.
“Deliberately inflating diagnosis codes to boost profits is a serious violation of public trust and undermines the integrity of the Medicare Advantage program,” said Acting Deputy Inspector General for Investigations Scott J. Lampert at the U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG). “This outcome demonstrates HHS-OIG’s commitment to protecting Medicare through a unified approach — leveraging the expertise of our investigators, auditors, and counsel, alongside our law enforcement partners. We will continue to hold accountable any entity that seeks to compromise the integrity of the risk adjustment program.”
The claims resolved by the settlement are allegations only, and there has been no determination of liability.
