Affiliates of Kaiser Permanente have agreed to pay $556 million to settle allegations that they violated the False Claims Act by submitting improper diagnosis codes for Medicare Advantage Plan enrollees, which resulted in higher government payments. The settlement involves several Kaiser entities, including those operating in Colorado and California.
The Medicare Advantage program allows beneficiaries to enroll in private health plans, with payments adjusted based on patients’ health conditions. The U.S. government alleged that between 2009 and 2018, Kaiser pressured physicians to add diagnoses after patient visits—sometimes long after the actual encounter—using “addenda” to medical records. These added diagnoses often were not relevant to the original visit and were allegedly used to increase payments from Medicare.
According to a complaint filed in the Northern District of California, Kaiser developed systems to review patient histories and identify additional diagnoses that had not been submitted for risk adjustment. Providers were then urged to update medical records accordingly. The government claimed that Kaiser set specific targets for physicians and facilities related to these diagnoses, tied financial incentives and bonuses to meeting these goals, and ignored internal warnings about the legality of such practices.
“More than half of our nation’s Medicare beneficiaries are enrolled in Medicare Advantage plans, and the government expects those who participate in the program to provide truthful and accurate information,” said Assistant Attorney General Brett A. Shumate of the Justice Department’s Civil Division. “Today’s resolution sends the clear message that the United States holds healthcare providers and plans accountable when they knowingly submit or cause to be submitted false information to CMS to obtain inflated Medicare payments.”
“Medicare Advantage is a vital program that must serve patients’ needs, not corporate profits,” said U.S. Attorney Craig H. Missakian for the Northern District of California. “Fraud on Medicare costs the public billions annually, so when a health plan knowingly submits false information to obtain higher payments, everyone — from beneficiaries to taxpayers — loses. We have an obligation to protect the American taxpayer from waste, fraud, and abuse and we will relentlessly pursue individuals and organizations that compromise the integrity of the Medicare program.”
“The federal government supports the health care of millions of beneficiaries by paying hundreds of billions of dollars every year to Medicare Advantage Plans,” said U.S. Attorney Peter McNeilly for the District of Colorado. “Medicare relies on the accuracy of the information submitted by those plans. This resolution sends a clear message that we will hold health care plans accountable if they seek to game the system and pad their profits by submitting false information.”
“Deliberately inflating diagnosis codes to boost profits is a serious violation of public trust and undermines the integrity of the Medicare Advantage program,” said Acting Deputy Inspector General for Investigations Scott J. Lampert at the U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG). “This outcome demonstrates HHS-OIG’s commitment to protecting Medicare through a unified approach — leveraging the expertise of our investigators, auditors, and counsel, alongside our law enforcement partners. We will continue to hold accountable any entity that seeks to compromise the integrity of the risk adjustment program.”
“Healthcare programs funded by the public are meant to support patients, not pad corporate bottom lines. False claims and the submission of fraudulent information weaken the Medicare system and place an unfair cost on American taxpayers who expect honesty and accountability,” said Special Agent in Charge Sanjay Virmani of the FBI San Francisco Field Office. “This settlement reflects the FBI’s continued commitment to holding accountable those who put profits over patients and abuse federal healthcare programs.”
The settlement also resolves claims brought under whistleblower provisions by two former Kaiser employees: Ronda Osinek and Dr. James M. Taylor. Under these provisions, private individuals can sue on behalf of the United States; Osinek and Taylor will receive $95 million as part of this recovery.
The matter was handled through coordination among several agencies: attorneys from both districts involved worked with staff from HHS-OIG, HHS-Office of Audit Services, as well as agents from FBI offices.
While this agreement settles civil allegations against Kaiser affiliates related to billing practices under Medicare Advantage plans between 2009–2018, officials emphasized there has been no determination or admission regarding liability.
Tips about potential fraud or misuse involving federal healthcare programs can be reported via www.oig.hhs.gov/fraud/report-fraud/ or by calling 800-HHS-TIPS (800-447-8477).
