Sutter Health to pay $90M to resolve false claims allegations days after reaching antitrust settlement

Sacramento, Calif.-based Sutter Health and several of its affiliates will pay $90 million to resolve allegations that they violated the False Claims Act by submitting inaccurate information about Medicare Advantage beneficiaries, the Justice Department said Aug. 30.

Under the Medicare Advantage program, CMS makes monthly payments to organizations according to a system of risk adjustment determined by enrollees' health statuses. Providers submit diagnostic codes that determine beneficiaries' health statuses and the resulting payment. 

Prosecutors claimed that Sutter Health knowingly submitted unsupported diagnosis codes for certain patient encounters, which caused inflated payments to be made to the health system. Prosecutors also alleged that Sutter Health was aware of the unsupported diagnostic codes but failed to take sufficient corrective action.

In addition to the payment, Sutter Health will enter a five-year agreement that requires the health system to hire an independent review organization to review its records and implement a risk assessment program.  

The settlement resolves claims brought under the whistleblower provisions of the False Claims Act by former employee Kathleen Ormsby.

The settlement is the largest False Claims Act settlement against a hospital system involving allegations of fraud in the Medicare Advantage program, according to lawyers representing the whistleblower. 

The $90 million settlement comes three days after San Francisco Superior Court Judge Anne-Christine Massullo granted final approval of Sutter Health's $575 million antitrust settlement. The settlement, approved Aug. 27, resolved a suit alleging that Sutter Health violated state antitrust laws by using its market dominance in Northern California to overcharge patients and employer-funded health plans. The lawsuit claimed that Sutter Health's higher prices led to $756 million in overcharges. 

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