Kaiser Permanente Affiliates Paying $556M to Resolve False Claims Act Allegations

An integrated healthcare consortium headquartered in Oakland, California, that are affiliates of Kaiser Permanente agreed to pay $556 million to resolve allegations that they violated the False Claims Act by submitting invalid diagnosis codes for their Medicare Advantage Plan enrollees.

The invalid diagnosis codes, which the U.S. Department of Justice says was to receive higher payments from the government, resulted in settlements from Kaiser Permanente affiliates: Kaiser Foundation Health Plan Inc.; Kaiser Foundation Health Plan of Colorado; The Permanente Medical Group Inc.; Southern California Permanente Medical Group; and Colorado Permanente Medical Group P.C.

Under the Medicare Advantage Program (MA), Medicare beneficiaries may opt out of traditional Medicare and enroll in private health plans offered by insurance companies known as Medicare Advantage Organizations, or MAOs. 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 payments to account for various risk factors that affect expected health expenditures for the beneficiary. CMS generally pays MAOs more for sicker beneficiaries expected to incur higher healthcare costs and less for healthier beneficiaries expected to incur lower costs. To make these risk adjustments, CMS collects medical diagnosis codes from the MAOs. The diagnoses must be supported by the medical record of a face-to-face visit between a patient and a provider, and for outpatient visits, must have required or affected patient care, treatment, or management at the visit.

Kaiser owns and operates MAOs that offer MA plans to beneficiaries across the country. In a complaint filed in the Northern District of California in 2021, the U.S. government alleged that Kaiser engaged in a scheme in California and Colorado to improperly increase its risk adjustment payments. Specifically, the government alleged that Kaiser pressured physicians to alter medical records after patient visits to add diagnoses that the physicians had not considered or addressed at those visits.

The resolves allegations that from 2009 to 2018, Kaiser engaged in a scheme to increase its Medicare reimbursements by pressuring physicians to add diagnoses after patient visits through addenda to medical records. The government 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. In many instances, the United States alleged, the diagnoses added by the providers had nothing to do with the patient visit in question.