Oakland, Calif.-based Kaiser Permanente has agreed to pay $556 million to resolve allegations that it violated the False Claims Act by submitting invalid diagnosis codes for Medicare Advantage enrollees to obtain higher payments from the federal government.
According to the Justice Department, multiple Kaiser Permanente affiliates improperly increased risk-adjusted MA payments by pressuring physicians to add diagnoses to patient medical records after visits had occurred — even when those diagnoses were not evaluated or treated during the visit.
The settlement covers Kaiser Foundation Health Plan, Kaiser Foundation Health Plan of Colorado, The Permanente Medical Group, Southern California Permanente Medical Group, and Colorado Permanente Medical Group.
Under the MA program, CMS pays insurers a fixed monthly amount per beneficiary, adjusted based on patient health status. Plans receive higher payments for sicker patients, based on diagnosis codes that must be supported by documentation from face-to-face provider visits and must have affected patient care, treatment or management.
Between 2009 and 2018, Kaiser allegedly engaged in a scheme to inflate risk adjustment payments in California and Colorado, the Justice Department alleged in a complaint filed in October 2021. Prosecutors alleged Kaiser used internal data-mining tools to identify diagnoses from patients’ past medical histories that had not been submitted to CMS and then sent “queries” to physicians urging them to add those diagnoses through addenda — sometimes months or more than a year after the original visit.
In many cases, the added diagnoses had no connection to the patient visit, violating CMS rules, the Justice Department alleged.
The government also alleged Kaiser set aggressive diagnosis submission targets for physicians and facilities, flagged underperforming providers, and tied financial incentives and bonuses to meeting risk adjustment goals. Internal compliance audits and physician complaints raised concerns about the legality of the practices, but Kaiser allegedly continued them.
The settlement also resolves whistleblower claims filed under the False Claims Act by former Kaiser employees Ronda Osinek and James Taylor, MD. Under the law’s qui tam provisions, whistleblowers may receive a portion of government recoveries.
Kaiser said it chose to settle the case to avoid prolonged litigation.
“We chose to settle to avoid the delay, uncertainty and cost of prolonged litigation,” the health system said in a Jan. 14 statement. “Multiple major health plans have faced similar government scrutiny over Medicare Advantage risk adjustment standards and practices, reflecting industrywide challenges in applying these requirements. The Kaiser Permanente case was not about the quality of care our members received. It involved a dispute about how to interpret the Medicare risk adjustment program’s documentation requirements.”
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