DOJ Intervenes in Medicare Advantage FCA Case Against Provider

On December 11, 2018, the Department of Justice announced that it has intervened in a False Claims Act suit against Sutter Health and its affiliate Palo Alto Medical Foundation.  The suit, originally filed in March 2015 by a former Risk Adjustment Manager at Palo Alto Medical, alleges that Sutter knowingly submitted unsupported diagnosis codes for Medicare Advantage patients in order to increase reimbursements from Medicare.

The Relator’s complaint alleges that Sutter received “hundreds of millions of dollars in inflated capitation payments” based on risk adjustment data that Sutter knew was inaccurate, incomplete, or false, and retained payments from CMS that it knew constituted overpayments.  Specifically, Relator’s complaint focuses on an alleged “system-wide failure” to train Sutter physicians on proper HCC coding and to audit the accuracy of HCCs submitted for payment.  Relator allegedly notified Sutter of overpayments and initiated a return of millions of dollars in refunds to CMS, but Sutter took “steps to throttle Relator’s efforts” by directing her to stop auditing and submitting corrections.

The DOJ’s intervention in this case is the latest example of DOJ’s aggressive enforcement under the FCA in the Medicare Advantage space, despite its loss in the recent UnitedHealthcare case (discussed here), which vacated CMS’s 2014 Final Overpayment Rule applicable to the Medicare Advantage program.  Providers in the industry will be watching to see how DOJ focuses the allegations in this matter when it files its complaint in intervention on or before March 4, 2019.  We will continue to provide updates as this case moves forward.

Copies of the Relator’s complaint and the DOJ’s Notice of Election to Intervene can be found here and here.