US Medical Provider Allegedly Defrauded Medicare

Published: 12 December 2018

HealthSutter Health allegedly exaggerated patient diagnoses to inflate Medicare payments. (Photo: pxhere)

By Lydia Osborne

The United States Justice Department is backing a whistleblower complaint against a healthcare services provider that allegedly exaggerated patients’ illnesses to inflate reimbursements from the country’s national health insurance program.

The US attorney general announced Tuesday that the DOJ has intervened in a false claims lawsuit against California-based Sutter Health on behalf of a former employee, Kathleen Ormsby, who charged in 2015 that the non-profit medical provider manipulated diagnoses to defraud Medicare Advantage.

“Federal healthcare programs rely on the accuracy of information submitted by healthcare providers to ensure that patients are afforded the appropriate level of care and that managed care plans receive appropriate compensation,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division.

Sutter, one of the nation’s largest non-profit healthcare systems, provided medical services to California patients enrolled in Medicare Advantage plans. In exchange, Sutter received a portion of federal Medicare funding for the beneficiaries under its care.

Under Medicare Advantage Plans, insurers are paid a set, per-person sum based on the demographic information and health status of each enrollee, commonly referred to as “risk scores.” In general, patients with more severe diagnoses have higher risk scores, and garner higher, risk-adjusted payments.

“It is critically important that the data submitted to the Medicare Advantage program is truthful, because the government relies on this information to set payment levels,” said US Attorney Alex Tse for the Northern District of California.

Ormsby, a former employee of Sutter affiliate Palo Alto Medical, alleges that the healthcare providers intentionally submitted inaccurate diagnosis codes to inflate beneficiaries' risk scores and therefore receive inflated Medicare payments.

Sutter and Palo Alto Medical were both notified of the bogus diagnoses, according to the DOJ, but the lawsuit claims that executives did not take action to correct and delete the unsupported codes.