On 4 March 2019 the Department of Justice (DOJ) filed a complaint in intervention against Sutter Health and its affiliate Palo Alto Medical Foundation (PAMF) in a False Claims Act suit, alleging that the defendants had knowingly submitted and caused the submission of unsupported diagnosis codes for Medicare Advantage patients in order to increase reimbursements from Medicare.
On 11 December 2018 the DOJ announced its decision to intervene (for further details please see "DOJ intervenes in Medicare Advantage False Claims Act suit against provider").
The government's complaint alleged that Sutter and PAMF violated the False Claims Act by knowingly submitting and causing the submission of "thousands of false claims", which resulted in "tens of millions of dollars of overpayments from Medicare". The government also alleged that Sutter and PAMF "compounded this misconduct by knowingly and improperly avoiding their obligations to repay these overpayments".
Specifically, the government's complaint focused on an alleged 'Royal Air Force campaign', originating at the executive level, to increase reimbursements by "maximizing the number of risk-adjusting diagnosis codes" regardless of whether those codes accurately reflected patients' medical conditions. As part of this campaign, Sutter and PAMF also allegedly:
- failed to provide any meaningful training to affiliated physicians;
- maintained an ineffective compliance programme to identify and prevent coding errors;
- ignored red flags that had been identified during audits and by employees; and
- 'encouraged' physicians to aggressively and improperly code diagnoses to increase Medicare reimbursements.
As a result, the government alleged that the defendants knew that the diagnosis codes submitted to the Centres for Medicare and Medicaid Services had been "rife with errors".
The DOJ's intervention reflects its increasingly aggressive enforcement of the Medicare Advantage space under the False Claims Act, despite its losses in UnitedHealthcare (for further details please see "Court vacates Medicare Advantage overpayment rule and curtails DOJ's pursuit of False Claims Act damages").
While the relator's complaint in this case focused primarily on the defendants' failure to train physicians, to conduct appropriate auditing and to 'throttle' the return of overpayments, the DOJ's complaint focuses on a systematic effort, at the highest levels, to encourage and facilitate upcoding.
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