Sutter Health: Latest Part C Participant to Settle on Whistleblower Allegations

This is the largest Medicare Advantage fraud settlement involving a hospital group.

Late last month, Sutter Health, a healthcare giant operating more than 20 hospitals in the Western United States, reached a $90 million settlement with whistleblower Kathy Ormsby and the U.S. Department of Justice (DOJ), resolving allegations that Sutter defrauded the Medicare Advantage (MA) program by improperly inflating risk scores.

Unlike traditional Medicare, which pays healthcare providers based on the services they provide, otherwise known as a fee-for-service model, MA pays private insurance companies called Medicare Advantage Organizations, or MAOs, premiums to cover Medicare beneficiaries. Those premiums are “risk adjusted,” with certain demographic and health variables resulting in higher premiums. Generally, the more diseases a beneficiary is diagnosed with, or the older they are, the higher the payment from Medicare. Human nature and profit motive being what they are, there are huge incentives for exaggerating the disease state of MA beneficiaries.

Medicare Advantage was introduced roughly 18 years ago and has exploded in popularity since, now accounting for roughly 40 percent of all Medicare beneficiaries… and that rate is growing! The MA program is especially popular out West, where Sutter is based.

Sutter Health contracted with MAOs to provide certain services to their beneficiaries. In exchange, MAOs generally paid Sutter a capitated rate, i.e., a percentage of the total amount of money Medicare paid for a beneficiary. This generally aligning Sutter’s incentives to increase risk scores with MAOs.

Ormsby was employed as a risk adjustment manager at Sutter Health’s affiliate, Palo Alto Medical Foundation (PAMF), where she discovered the alleged wrongdoing. Ormsby alleged that Sutter submitted unsupported diagnosis codes for beneficiaries under its care to MAOs, and those diagnoses were then passed onto Medicare. These unsupported diagnosis codes caused Medicare to make improperly inflated payments to the MA plans, and also to Sutter. Once Sutter Health became aware of these unsupported diagnosis codes, it allegedly failed to take sufficient corrective action to identify and delete additional unsupported diagnosis codes.

In 2019, the government intervened in the part of Ormsby’s case related to alleged wrongdoing by PAMF, while Ormsby continued to pursue the rest of her case against other Sutter affiliates on a non-intervened basis. The $90 million settlement resolves both parts of the case, and follows Sutter’s unsuccessful effort to dismiss both the government’s and whistle blower’s complaints. That effort led to a critically important 2020 court decision in the U.S. District Court for the Northern District of California, finding that the plaintiffs’ allegations properly alleged a False Claims Act (FCA) violation and denouncing any effort by Medicare Part C participants to avoid FCA liability for inflated risk adjustment factor (RAF) scores.

Our law firm, Constantine Cannon, along with co-counsel Keller Grover and Kleinman Rajaram, represented Ormsby, who first brought this case forward in 2015 under the FCA, a law that allows whistleblowers to fight fraud against the government by suing in the name of the United States and sharing in any potential recovery.

This $90 million result is the largest MA fraud settlement involving a hospital group, and the second-largest MA fraud settlement ever reached.

Despite the fact that MA now covers over 40 percent of Medicare beneficiaries, DOJ’s fraud actions have not tracked and seem to be lagging behind. However, this summer has proved to be a turning point in that trend. Along with this Sutter settlement, the government has intervened in cases against Kaiser, with a government complaint filed last week, and it continues to pursue litigation against UnitedHealth Group (UHG) and Anthem. Except for the Anthem matter, all other cases were brought by whistleblowers. Additionally, also in August, the U.S. won an important case in the D.C. circuit, UnitedHealthcare Insurance v. Becerra, regarding a rule requiring MA plans to return erroneously collected premiums to the Medicare program (also known as the overpayment rule). 

Part C risk adjustment is clearly a hot area of both fraud and litigation. We will be sure to keep RACmonitor readers apprised of future developments.

Programming Note: Listen to Mary Inman’s exclusive whistleblower report this coming Monday on Monitor Mondays, 10 Eastern.

Print Friendly, PDF & Email

Mary Inman, Esq.

Mary Inman is a partner and co-founder of Whistleblower Partners LLP, a law firm dedicated to representing whistleblowers under the various U.S. whistleblower reward programs. Mary and her colleagues have pioneered a series of successful whistleblower cases against prominent health insurers, hospitals, provider groups, and vendors under the False Claims Act alleging manipulation of the risk scores of Medicare Advantage patients. Mary is a recognized expert and frequent author, commentator, and speaker on frauds in the healthcare industry, particularly those exposed by whistleblowers. Mary is a member of the RACmonitor editorial board and a popular panelist on Monitor Monday.

Related Stories

Leave a Reply

Please log in to your account to comment on this article.

Featured Webcasts

Leveraging the CERT: A New Coding and Billing Risk Assessment Plan

Leveraging the CERT: A New Coding and Billing Risk Assessment Plan

Frank Cohen shows you how to leverage the Comprehensive Error Rate Testing Program (CERT) to create your own internal coding and billing risk assessment plan, including granular identification of risk areas and prioritizing audit tasks and functions resulting in decreased claim submission errors, reduced risk of audit-related damages, and a smoother, more efficient reimbursement process from Medicare.

April 9, 2024
2024 Observation Services Billing: How to Get It Right

2024 Observation Services Billing: How to Get It Right

Dr. Ronald Hirsch presents an essential “A to Z” review of Observation, including proper use for Medicare, Medicare Advantage, and commercial payers. He addresses the correct use of Observation in medical patients and surgical patients, and how to deal with the billing of unnecessary Observation services, professional fee billing, and more.

March 21, 2024
Top-10 Compliance Risk Areas for Hospitals & Physicians in 2024: Get Ahead of Federal Audit Targets

Top-10 Compliance Risk Areas for Hospitals & Physicians in 2024: Get Ahead of Federal Audit Targets

Explore the top-10 federal audit targets for 2024 in our webcast, “Top-10 Compliance Risk Areas for Hospitals & Physicians in 2024: Get Ahead of Federal Audit Targets,” featuring Certified Compliance Officer Michael G. Calahan, PA, MBA. Gain insights and best practices to proactively address risks, enhance compliance, and ensure financial well-being for your healthcare facility or practice. Join us for a comprehensive guide to successfully navigating the federal audit landscape.

February 22, 2024
Mastering Healthcare Refunds: Navigating Compliance with Confidence

Mastering Healthcare Refunds: Navigating Compliance with Confidence

Join healthcare attorney David Glaser, as he debunks refund myths, clarifies compliance essentials, and empowers healthcare professionals to safeguard facility finances. Uncover the secrets behind when to refund and why it matters. Don’t miss this crucial insight into strategic refund management.

February 29, 2024
2024 SDoH Update: Navigating Coding and Screening Assessment

2024 SDoH Update: Navigating Coding and Screening Assessment

Dive deep into the world of Social Determinants of Health (SDoH) coding with our comprehensive webcast. Explore the latest OPPS codes for 2024, understand SDoH assessments, and discover effective strategies for integrating coding seamlessly into healthcare practices. Gain invaluable insights and practical knowledge to navigate the complexities of SDoH coding confidently. Join us to unlock the potential of coding in promoting holistic patient care.

May 22, 2024
2024 ICD-10-CM/PCS Coding Clinic Update Webcast Series

2024 ICD-10-CM/PCS Coding Clinic Update Webcast Series

HIM coding expert, Kay Piper, RHIA, CDIP, CCS, reviews the guidance and updates coders and CDIs on important information in each of the AHA’s 2024 ICD-10-CM/PCS Quarterly Coding Clinics in easy-to-access on-demand webcasts, available shortly after each official publication.

April 15, 2024

Trending News

Happy National Doctor’s Day! Learn how to get a complimentary webcast on ‘Decoding Social Admissions’ as a token of our heartfelt appreciation! Click here to learn more →

Happy World Health Day! Our exclusive webcast, ‘2024 SDoH Update: Navigating Coding and Screening Assessment,’  is just $99 for a limited time! Use code WorldHealth24 at checkout.

SPRING INTO SAVINGS! Get 21% OFF during our exclusive two-day sale starting 3/21/2024. Use SPRING24 at checkout to claim this offer. Click here to learn more →