August 17, 2021. When going to the doctor, one’s diagnosis should not drastically change after a visit, nor should one expect to see a diagnosis on their health insurance claim for a condition not discussed at the visit. Kaiser Permanente consortium members (“Kaiser”) allegedly encouraged physicians to falsify diagnosis codes for Medicare Advantage Plan patients to garner higher reimbursements. After investigating six qui tam cases regarding these claims, the United States Department of Justice decided to intervene, consolidate, and litigate these False Claims Act cases in the US District Court for the Northern District of California. Several whistleblowers from various Kaiser Permanente consortium units across Colorado and California reported this wrongful practice. Whistleblowers are entitled to receive 15-25% of the government’s recovery.

Kaiser Permanente operates an HMO (Health Maintenance Organization) model of care, whereby patients and the federal government, for any federally funded plan are expected to save money by seeking care within the Kaiser ecosystem. A primary care physician refers patients to other specialists within the Kaiser medical centers, and these providers are all contracted to charge a specified amount for services.

Medicare Advantage Plans, or Medicare Part C, are plans that operate similarly to Medicare Parts A, B and D and are managed by Medicare-approved private insurers who offer plans that set limits on what Medicare beneficiaries may have to pay out-of-pocket.

Medicare Part C is called a “capitated” healthcare plan, whereby the plan provides Medicare-covered benefits in exchange for a per-person (per capita) amount. The amount the plan pays may be adjusted based on diagnoses and demographic information which comprise a “risk score.” The Center for Medicare and Medicaid Services (CMS) pays a higher risk-adjusted amount to a Medicare Advantage plan for beneficiaries with more severe diagnoses. Enrollment in private Medicare plans has increased more than 80 percent since 2009.

According to the allegations, Kaiser sought to increase its Medicare reimbursements by encouraging physicians to falsify patient diagnoses months, if not years, after the fact. Physicians were allegedly expected to add diagnoses for conditions either not discussed or that patients did not have, thus driving up the amount of risk-related Medicare reimbursement Kaiser was receiving from the government.

The severity of these allegations is twofold. Being diagnosed with a condition one does not actually have can lead to improper medical treatment with potentially disastrous results. Fraudulently billing the government for conditions beneficiaries do not have undermines the purpose of the Medicare Advantage program, which is intended to protect older and vulnerable populations.

Several whistleblowers brought this wrongful practice to light in six qui tam suits, as the False Claims Act allows private parties to sue on behalf of the government in exchange for a share of the recovery. The Department of Justice needs whistleblowers to report improper coding, for the integrity of both the Medicare Advantage program and of the physicians who serve Medicare beneficiaries.

On a related note, the D.C. Circuit Court recently issued an opinion regarding Medicare Advantage overpayments, holding that when insurers knowingly receive Medicare Advantage overpayments based on fraudulent diagnoses, they are obligated to report and return those overpayments. UnitedHealthcare Insurance Company had challenged the Overpayment Rule, arguing that CMS “must ensure ‘actuarial equivalence’ between payments in Medicare Advantage and traditional government-run Medicare.” This ruling supports False Claims Act enforcement of Medicare Advantage fraud, as the court determined actuarial equivalence does not apply to overpayments.