Whistleblower case against Kaiser Permanente alleging risk-adjustment fraud unsealed, joined by government

SAN FRANCISCO, Aug. 2, 2021 – A whistleblower case against Kaiser Permanente and certain Kaiser consortium members alleging risk-adjustment fraud, which was filed by Phillips & Cohen LLP, has been unsealed and will be pursued by the US Department of Justice and the whistleblower’s counsel.

The “qui tam” (whistleblower) complaint was filed in federal district court in Denver, Colorado, in 2014 under seal as required by the False Claims Act to give the government time to investigate the allegations and decide whether to intervene. The court unsealed the case last week, making it public, after the government filed a notice of intervention.

DOJ is intervening in the case as well as five other qui tam complaints against Kaiser Permanente consortium members Kaiser Foundation Health Plan Inc., Kaiser Foundation Health Plan of Colorado, The Permanente Medical Group Inc., Southern California Permanente Medical Group Inc. and Colorado Permanente Medical Group P.C. Kaiser is headquartered in Oakland, California.  The six cases have been consolidated in the United States District Court for the Northern District of California.

The whistleblower lawsuit filed by Phillips & Cohen alleges Kaiser knowingly engaged in risk-adjustment fraud to get higher reimbursements for its Medicare Advantage patients by submitting false claims about diagnoses for certain serious diseases or conditions. The Centers for Medicare and Medicaid Services bases its payments to Medicare Advantage plans, such as Kaiser, on those claims.

The diagnoses a Medicare Advantage plan reports to CMS help determine the “risk scores” that CMS assigns to its members, which in turn determine how much CMS pays the Medicare advantage plan.

On average, CMS pays Medicare Advantage plans several thousand dollars per year above the base amount for each condition a member has that requires a risk-adjustment payment. With so much money at stake, Medicare Advantage plans often prioritize reporting as many diagnosis codes as possible.

But plans also can cross the line into fraud by reporting diagnosis codes for medical conditions that do not exist or were untreated, or by actively searching for additional diagnosis codes to report while ignoring diagnoses that were inaccurate and must be deleted from CMS’s records.

The qui tam complaint was filed on behalf of Dr. James Taylor, who was an employee of Colorado Permanente Medical Group and served as chair of CPMG’s board of directors for two years. A certified professional coder and AHIMA approved ICD-10 trainer, Dr. Taylor was Kaiser’s national co-chair of the Compliance Committee for ICD-10 and CPMG’s medical director of revenue cycle/claim. He is a nationally recognized authority on coding, compliance and electronic medical records documentation.

The complaint alleges that Kaiser regularly audited the diagnosis codes it reported to CMS and found that substantial percentages of them had been incorrect, yet did not delete the unsupported diagnoses or take steps to prevent the submission of unsupported diagnoses in the future. The unsupported diagnoses Kaiser allegedly identified included conditions that it had reported as being more serious, and therefore more lucrative for Kaiser, than the conditions documented in its members’ medical records.

Dr. Taylor tried a number of times to get Kaiser to change its practices regarding risk-adjustment claims and proposed solutions.

“At times, Kaiser appeared to be taking steps … to address the problems,” the qui tam complaint says. “Unfortunately, [Dr. Taylor] later learned that Kaiser either did not take the steps it had claimed it was taking, or began implementing corrective actions only to stop them later.”

Pursuing Medicare Advantage fraud is one of the government’s top priorities, and whistleblowers are crucial to that effort.

“Medicare’s managed care program relies on the accuracy of information submitted by health care providers and plans to ensure that patients receive the appropriate level of care, and that plans receive the appropriate compensation,” said Deputy Assistant Attorney General Sarah E. Harrington in a press release about the whistleblower cases. “Today’s action sends a clear message that we will hold health care providers and plans accountable if they seek to game the system by submitting false information.”

Phillips & Cohen has filed several cases against Medicare Advantage plans alleging risk adjustment fraud. This includes a qui tam lawsuit against Freedom Health, Optimum Healthcare and their affiliates that settled for $32.5 million, which was the largest settlement so far of a false claims case against a Medicare Advantage plan. Group Health Cooperative (now known as Kaiser Foundation Health) paid the government $6.37 million to settle a whistleblower case alleging risk adjustment fraud. Still pending is a qui tam lawsuit against United Health Group, which the government joined and was one of the first significant cases alleging risk adjustment fraud.

The False Claims Act empowers whistleblowers to pursue qui tam complaints against entities that are defrauding the government and recover funds on the government’s behalf. The law protects whistleblowers against job retaliation and promises rewards of 15% to 25% of the amount recovered if the government intervenes in the case.

About Phillips & Cohen LLP

Phillips & Cohen is the nation’s most successful law firm representing whistleblowers. The firm’s cases have helped recover more than $12.8 billion in civil settlements and criminal fines. Phillips & Cohen represents whistleblowers in qui tam lawsuits as well as whistleblower claims with the reward programs of the SEC, CFTC and IRS. www.phillipsandcohen.com

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