The U.S. Department of Justice has joined a lawsuit against Sutter Health and their affiliated medical group the Palo Alto Medical Foundation over charges the health system knowingly submitted false diagnosis codes to inflate its Medicare Advantage payments.
The legal complaint was kickstarted by a whistleblower report from a former employee of the Palo Alto Medical Foundation that alleged Sacramento, California-based Sutter Health submitted unsupported diagnosis codes to inflate the risk scores of its Medicare Advantage beneficiaries.
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What’s more is that federal officials claim that even after Sutter was made aware of he unsupported codes they “failed to take corrective action” to fix the issue.
“The share of Medicare beneficiaries enrolled in Medicare Advantage has steadily grown over the past decade, with 19 million beneficiaries enrolled in 2017,” U.S. Attorney Alex Tse said in a statement. ”
“It is critically important that the data submitted to the Medicare Advantage program is truthful, because the government relies on this information to set payment levels. We will continue to guard government health programs from companies that improperly maximize their bottom line at taxpayer expense.”
Medicare Advantage pays out a capitated rate for each patient which is later risk adjusted by means of a payment from CMS based on demographic information and the health status of the plan beneficiary.
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CMS makes its risk payment calculation through submitted diagnosis codes based on patient medical encounters. The lawsuit claims that Sutter inflated the risk scores of its patients in order to inflate its risk adjustment payments.
“Federal healthcare programs rely on the accuracy of information submitted by healthcare providers to ensure that patients are afforded the appropriate level of care and that managed care plans receive appropriate compensation,” Jody Hunt of the Department of Justice’s Civil Division, said in a statement.
In response to the perennial problem of overcharging in Medicare Advantage, CMS has announced plans to increase audits to ensure correct payments and federal officials have stepped up enforcement efforts.
Earlier this year, HealthCare Partners Holdings agreed to a $270 million settlement with the federal government over allegations that it exaggerated patients’ conditions to boost its risk adjustment payments.
For its part Sutter said in a statement that it takes the matter “seriously” and plans to “vigorously defend ourselves against the allegations in the complaint.”
Sutter Health has come under increasing scrutiny recently over its business practices, which include allegations of anti-competitive conduct.
Earlier this year, California Attorney General Xavier Becerra filed a lawsuit against the organization for overcharging patients and driving out competition in its Northern California market.
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