Feds join lawsuit accusing Sutter Health of Medicare Advantage fraud

The Department of Justice has intervened in a lawsuit against Sacramento, Calif.-based Sutter Health, alleging the health system and an affiliated medical foundation violated the False Claims Act by submitting inaccurate information about Medicare Advantage beneficiaries.

Sutter contracted with certain Medicare Advantage organizations to provide healthcare services to California residents enrolled in the MAOs' Medicare Advantage plans. Under the agreement, Sutter received a share of the reimbursement the MAOs received from CMS for beneficiaries under Sutter's care.

CMS adjusts payments to Medicare Advantage plans based on the health status and demographic information of each beneficiary. Sutter allegedly submitted inaccurate information about the health status of certain beneficiaries to the MAOs.  

The lawsuit alleges the unsupported diagnosis scores inflated the risk scores for certain beneficiaries Sutter treated, resulting in the health system receiving inflated payments. The lawsuit further alleges once Sutter became aware of the issue, it failed to identify and delete additional potentially unsupported diagnosis codes.

A former employee of the Palo Alto Medical Foundation, which is affiliated with Sutter and named as a defendant in the lawsuit, originally filed the complaint under the qui tam, or whistle-blower, provision of the False Claims Act. The Justice Department's decision to intervene in the lawsuit shows it's committed to "protecting the integrity of the Medicare Advantage program," Alex Tse, U.S. Attorney for the Northern District of California, said in a press release.

"The share of Medicare beneficiaries enrolled in Medicare Advantage has steadily grown over the past decade, with 19 million beneficiaries enrolled in 2017," he said. "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."

Sutter intends to "vigorously defend" itself against the allegations in the lawsuit, the system said in a statement to Becker's Hospital Review

"Sutter Health and PAMF are aware of the matter and take the issues raised in the complaint seriously," the health system said. "The lawsuit involves an area of law that is currently unsettled and the subject of ongoing litigation in multiple jurisdictions."

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