Whistleblower urges court not to dismiss false claims suit against Sutter Health

A whistleblower is asking a California federal court not to dismiss a lawsuit she filed accusing Sacramento, Calif.-based Sutter Health of Medicare Advantage fraud, according to Law360.

In documents filed Aug. 27, Kathy Ormsby, a former employee of the Palo Alto Medical Foundation, which is affiliated with Sutter, told the court for the Northern District of California it should not dismiss the lawsuit based on the U.S. Justice Department's intervention in the case, according to the legal news service. 

"Despite [the federal government's $30 million settlement with Sutter over upcoding allegations], including its carve-out allowing [the whistleblower] to pursue False Claims Act liability for these overpayments, Sutter now tries to dismiss [the whistleblower's] amended complaint by claiming she has no right to pursue the nonintervened claims," the court documents state. "But Sutter's argument misconstrues the government's partial intervention as a complete intervention because it failed to include the magic word 'partial' in the title of the notice of intervention."

Ms. Ormsby argued there is no legal basis behind that requirement, and that Sutter also holds her to an "invented … standard using an arbitrary list of facts it claims are missing from the amended complaint."

Kathy Ormsby initially filed the lawsuit under the False Claims Act, alleging that Sutter and the foundation violated the act by submitting inaccurate and unsupported diagnosis codes for certain Medicare Advantage beneficiaries. The complaint alleged this inaccurate information inflated risk scores and resulted in overpayments, and also that Sutter didn't identify and delete additional potentially unsupported diagnosis codes once the health system knew about the issue.

Sutter told Becker's the system and foundation take seriously their obligations to comply with Medicare Advantage rules.

"This lawsuit involves an unsettled area of law in which several courts have recently rejected attempts by the government and private plaintiffs to expand existing regulatory obligations," Sutter added. "Sutter will continue to vigorously defend itself against those attempts, as outlined in its briefings filed to date."

Ayla Ellison contributed to this report.


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