Seoul Medical Group and Related Parties Pay $62 Million to Settle False Claims Act Case

On March 26, the following four entities agreed to pay roughly $62 million to settle a whistleblower’s allegations under the False Claims Act:

• Seoul Medical Group (SMG), a medical practice that has operated in various states, including California, and is headquartered in Los Angeles’ Koreatown neighborhood, and its subsidiary, Advanced Medical Management, which provides healthcare operational services, who combined paid over $58 million of the $62 million settlement;
• The companies’ former president and majority owner, Dr. Min Young Cha, who agreed to pay about $1.8 million; and
• Renaissance Imaging Medical Associates, a radiology group that worked with SMG, which agreed to pay about $2.4 million.

The allegations resolved in the case are that during the six-year period from 2015 to 2021, SMG submitted false diagnosis codes for two severe spinal conditions, spinal enthesopathy and sacroiliitis, which are notably expensive to treat and have a high risk score, in order to increase payments under Medicare Part C.

Because SMG treated many Medicare Advantage (MA) beneficiaries, these allegedly false codes caused higher outlays from the Centers for Medicare & Medicaid Services (CMS), since, in Medicare Advantage, the government payments are in part determined by the health status of the population, and patients with severe conditions like spinal enthesopathy and sacroiliitis garner a larger risk-adjusted payment from the MA Plan for those beneficiaries.

A portion of the MA plans’ payments, including the allegedly inflated capitated payments from the upcoded spinal conditions, were passed on to SMG under a capitation arrangement between SMG and the MA plans, whereby SMG shared in a portion of the health plans’ risk and upside.

According to the complaint, in 2017, Healthnet, one of the MA plans SMG contracted with, alerted SMG that it believed some of its documented conditions were in fact false, questioning SMG about its dramatically increasing risk scores arising from its previous year’s submission of hierarchical condition categories (HCCs).

Soon thereafter, SMG allegedly contracted with Renaissance Imaging Medical Associates to create radiology reports that appeared to support the spinal enthesopathy diagnosis.

The whistleblower, Paul Pew, was a very highly placed insider, having served as the Executive Vice President and CFO of Advanced Medical Management for 10 years until his termination in 2019, allegedly in retaliation for raising complaints internally about SMG’s practice of generating and submitting false diagnosis codes that were unsupported by the patients’ medical charts.

For his role in launching this case with his qui tam whistleblower complaint, Mr. Pew will receive a share of the proceeds in an amount that is yet to be determined.