08 March 2019

DOJ Files Complaint-in-Intervention in Medicare Advantage Case Against Sutter Health

On March 4, 2019, the Department of Justice filed its Complaint-in-Intervention against Sutter Health (“Sutter”) and its affiliate Palo Alto Medical Foundation (“PAMF”) in a False Claims Act suit alleging that the Defendants knowingly submitted and caused the submission of unsupported diagnosis codes for Medicare Advantage patients in order to increase reimbursements from Medicare.  DOJ had previously announced its decision to intervene on December 11, 2018, as we previously discussed here.

The government’s complaint alleges that Sutter and PAMF violated the FCA by knowingly submitting and causing the submission of “thousands of false claims”, which resulted in “tens of millions of dollars of overpayments from Medicare.”  The government also alleges that Sutter and PAMF “compounded this misconduct by knowingly and improperly avoiding their obligations to repay these overpayments.”  Specifically, the government’s complaint focuses on an alleged “RAF Campaign”, originating at the executive level, to increase reimbursements by “maximizing the number of risk-adjusting diagnosis codes” regardless of whether those codes accurately reflected the patients’ medical conditions.  As part of this “campaign,” Sutter and PAMF also allegedly failed to provide “any meaningful” training to affiliated physicians, maintained an “ineffective” compliance program to identify and prevent coding errors, ignored “red flags” identified during audits and by employees, and “encouraged” physicians to “aggressively” and “improperly” code diagnoses to increase Medicare reimbursements.  As a result, the government alleges that Defendants knew the diagnosis codes submitted to CMS were “rife with errors.”

As we reported in December, DOJ’s intervention reflects its increasingly aggressive enforcement of the Medicare Advantage space under the FCA, despite its losses in the UnitedHealthcare case (discussed here).  While the Relator’s complaint in this case focused primarily on the Defendants’ failure to train physicians, to conduct appropriate auditing, and to “throttle” the return of overpayments, DOJ’s complaint focuses on a systematic effort, at the highest levels, to encourage and facilitate upcoding.  We will continue to monitor and provide updates on this case as it moves forward.

A copy of the government’s complaint can be found here.

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