A victory was earned in the long-term nursing care industry this past week. Health consortium, Kaiser Permanente, agreed to pay $556 million in a settlement for violations of the False Claims Act. They were accused of submitting invalid medical codes for residents enrolled in the Medicare Advantage Plan, resulting in larger payouts to the facilities.

The case involved five different facilities and organizations under the Kaiser Permanente umbrella, including branches in California and Colorado. The organization is headquartered in Oakland, California.

Medicare Advantage and False Claims Act

Known as Medicare Part C, the Medicare Advantage Plan (MA) allows participants to enroll in private health plans from companies known as Medicare Advantage Organizations (MAO). The MAOs then collect funds from the Centers for Medicare & Medicaid Services (CMS) which are adjusted depending on the needs and diagnoses of residents. CMS relies on reporting from doctors in order to make adjustments to the amount, known as “risk adjustments”.

“The Centers for Medicare & Medicaid Services (CMS) pays the MAOs a fixed monthly amount for each Medicare beneficiary enrolled in their plans. CMS adjusts these monthly payments to account for various “risk” factors that affect expected health expenditures for the beneficiary.” – U.S. Department of Justice press release

Essentially, this system means CMS pays larger amounts of money to facilities where residents have more health and medication needs based on diagnoses. These diagnoses are communicated by submitted medical codes and money is provided to care for these residents. 

“Specifically, the United States alleged that Kaiser systematically pressured its physicians to alter medical records after patient visits to add diagnoses that the physicians had not considered or addressed at those visits, in violation of CMS rules.” – U.S. Department of Justice press release

Enacted in 1863, the False Claims Act “provides that any person who knowingly submits, or causes to submit, false claims to the government is liable for three times the government’s damages plus a penalty.” This act protects against fraud and holds those submitting fraudulent documents and records to the government accountable.

Kaiser Settlement for False Claims

In this case, U.S. attorneys felt a special obligation to protect taxpayers from waste and fraud. Attorney Craig H. Missakian for the Northern District of California stated, “…when a health plan knowingly submits false information to obtain higher payments, everyone — from beneficiaries to taxpayers — loses.” 

The Medicare system relies on accurate reporting and information from healthcare facilities in order to properly disperse funds – millions of dollars every year. The violation of that system means the trust between government and the Medicare beneficiaries is broken. Additionally, it undermines trust in, and the legitimacy of, the organizations responsible for the health and quality care of some of the most vulnerable American citizens. 

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) utilized investigators, auditors, counsel, and law enforcement to uncover Kaiser’s 9-year scheme.

This settlement resolves allegations that Kaiser fraudulently increased their Medicare reimbursements between 2009 and 2018 by pressuring physicians to add diagnoses to patient records.

“The United States alleged that Kaiser developed various mechanisms to mine a patient’s past medical history to identify potential diagnoses that had not been submitted to CMS for risk adjustment. Kaiser then sent “queries” to its providers urging them to add these diagnoses to medical records via addenda.” 

Findings and Resolution

The U.S. also alleged that Kaiser “set aggressive physician- and facility-specific goals for adding risk adjustment diagnoses.” Moreover, they allegedly targeted underperforming doctors and care facilities, and gave incentives based on their ability to meet risk adjustment diagnosis goals. It is also alleged that Kaiser was aware of the widespread issue and ignored red flags, internal warnings, and audit findings. 

The settlement also benefits whistleblowers from Kaiser. The qui tam cases are captioned United States ex rel. Osinek v. Kaiser Permanente, et al., No. 3:13-cv-03891 (N.D. Cal.) and United States ex rel. Taylor v. Kaiser Permanente, et al., No. 3:21-cv-03894 (N.D. Cal.).

“Today’s resolution sends the clear message that the United States holds healthcare providers and plans accountable when they knowingly submit or cause to be submitted false information to CMS to obtain inflated Medicare payments.” – Assistant Attorney General Brett A. Shumate of the Justice Department’s Civil Division

This victory makes it clear that the U.S. government takes fraud claims seriously, especially in the healthcare sphere. Unfortunately, it also showcases how easy it is for long-term care organizations to fraudulently operate and take advantage of a system meant to help millions of Americans in their most vulnerable state.

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