Sutter Health, the largest hospital system in Northern California, agreed last week to pay $90 million to settle recent allegations of Medicare Advantage fraud. This is the second largest Medicare Advantage fraud settlement ever reported and the largest such settlement brought under the False Claims Act. Between 15-30% of this amount will go to the whistleblower who reported the allegations.
According to U.S. Justice Department officials, the Sacramento-based medical group received inflated payments from the government by making its patients appear sicker than they actually were.
The lawsuit was originally filed by a San Francisco law firm on behalf of whistleblower Kathy Ormsby, a former employee of a Sutter Health affiliate. It was filed under the False Claims Act, which allows private citizens to sue on behalf of the government for false claims for government funds. Upon investigating the case, the Department of Justice decided to intervene in part of Ormsby’s case, and Ormsby continued to pursue the non-intervened portion separately.
Understanding the Case
The case was docketed as United States ex rel. Ormsby v. Sutter Health, et al., No. 15-CV-01062-LB (N.D. Cal.).
Sutter Health provides a variety of medical care. For its patients that are Medicare beneficiaries, Sutter Health receives reimbursement for its services from the Centers for Medicare & Medicaid Services. Generally, medical providers receive higher reimbursements for patients with more severe diagnoses. In this case, the whistleblower discovered that Sutter Health was intentionally submitting false diagnosis codes for some of its Medicare Advantage patients. In doing so, Sutter Health received inflated payments.
The whistleblower exposed Sutter Health’s scheme to fraudulently overbill Medicare by misrepresenting patient diagnoses. Ultimately, Sutter Health agreed to pay the Government $90 million, the most ever in a Medicare Advantage fraud settlement under the False Claims Act.
In settling the case, however, there was no determination of liability.
Understanding Medicare Advantage Fraud
Medicare Advantage, commonly known as Medicare Part C, is a growing area of health care. Two out of five Medicare beneficiaries are enrolled in Medicare Advantage plans, twice the number from a decade ago, and it has grown into a $350 billion market.
Under Medicare Advantage, beneficiaries can elect to use private insurance to pay for care. In return, Medicare pays the private insurer a fixed, monthly amount. These private insurers, commonly called “Medicare Advantage Organizations,” routinely contract with physician groups and other healthcare providers to provide medical care to the Medicare beneficiaries they enroll. The amount Medicare pays the Medicare Advantage Organizations varies based on the health of the beneficiary.
The opportunity to receive inflated reimbursements from Medicare incentivizes some Medicare Advantage Organizations to falsely diagnose their patients. This fraud costs the United States government billions of dollars per year. In 2017 alone, improper payments for Medicare were estimated at about $52 billion.
The Solution: The False Claims Act
Protecting against Medicare fraud, the False Claims Act (FCA) provides for triple damages and additional penalties whenever false claims are knowingly submitted to the government. Such lawsuits may be brought by private citizens on behalf of the government, typically “whistleblowers” with insider knowledge of the fraud. As an incentive for whistleblowers, the FCA allows the whistleblower to receive a portion of the total amount paid by the defendant.
The Department of Justice has signaled its intention to reign in Medicare Advantage fraud through the use of whistleblowers and the FCA, stating that “The government relies on health care providers, including those furnishing services to Medicare Part C beneficiaries, to submit accurate information to ensure proper payment. Today’s result sends a clear message that we will hold health care providers responsible if they knowingly provide or fail to correct information that is untruthful.”
Contact our Medicare Fraud Attorneys Today
At Price Armstrong, we have successfully represented whistleblowers in numerous Medicare Advantage Organization fraud cases under the False Claims Act. We believe in holding unscrupulous physicians and medical groups accountable for their actions. We protect whistleblowers throughout the legal process and help maximize recovery for everyone involved. Contact us today for a free confidential case evaluation.
