Keller Grover represented former Sutter Health employee, Kathy Ormsby, in the United States District Court for the Northern District of California, United States ex rel. Kathy Ormsby v. Sutter Health and Palo Alto Medical Foundation, Case No. cv-15-1062 (JD). a False Claims Act (FCA) case against her former employer alleging massive Medicare Advantage Program fraud. She spent over six years investigating and litigating the case alongside the government before Sutter agreed to settle for $90 million. The settlement also included a groundbreaking Corporate Integrity Agreement pursuant to which the government will continue to monitor Sutter’s Medicare Advantage program. For more information on this case see [press release] and [www.medicareadvantagefraud.
Ormsby alleges in her complaint that her former employer, Sutter Health and its affiliate PAMF, defrauded the government as part of its Medicare Part C program, known as Medicare Advantage, through the submission of inaccurate and unsupported medical information which artificially inflated the reimbursement Medicare provides for Sutter’s Medicare Advantage patients. The Complaint alleges that Sutter Health and PAMF defrauded the by claiming its members were treated for conditions they either did not have or were not treated for which increased the risk scores for these patients and how much the government reimbursed Sutter and PAMF for their care.
Medicare pays more to healthcare providers based on enrollees’ -risk adjustment scores, which are calculated using patients’ medical diagnoses. Higher risk adjustment scores are supposed to reflect these patients are sicker than an average patient, and increased risk-adjustment reimbursement is designed to offset increased costs associated with treating these patients.
The Complaint alleges that Sutter Health and PAMF collected and retained payments from claims that falsely stated its patients were treated during the relevant period for:
- diagnoses the patients did not have;
- more severe diagnoses than the patients had;
- diagnoses for which patients were previously treated but that were not treated in the relevant year; and/or
- diagnoses that otherwise failed to meet CMS requirements for risk adjustment.
The complaint also states that Sutter Health and PAMF failed to correct previously submitted Medicare risk adjustment claims even though they knew, or should have known, that those claims were false. Under Medicare rules and regulations, the healthcare provider was required to report and reimburse the government for any overpayments.
Sutter Health and PAMF executives, according to the Complaint, suppressed efforts of internal auditors to measure and correct false risk adjustment claims. Allegedly, auditors trying to correct the unsupported higher risk adjustment data and calculate how much Medicare should be repaid were ordered to halt their efforts and to instead concentrate on further increasing the stream of ill-gotten payments.
The Complaint also alleges that Sutter Health and PAMF overstated the patients’ risk scores by conducting a review of patient medical records only looking for missed diagnosis that could be reported as higher risk adjustment scores, instead of looking for both missed and unsupported diagnoses that had falsely inflated risk scores, according to the complaint. Allegedly, when Sutter Health and PAMF audited previously submitted claims, error rates were as high as ninety-five percent (95%), yet, Sutter Health and PAMF management refused to take meaningful steps to identify and rectify the problems with the claims submitted to Medicare.
The complaint also alleges Sutter Health and PAMF had no effective compliance auditing program at all for several years while submitting hundreds of millions of dollars in bills to the Medicare Advantage program, and that although internal audit results warned of serious provider over-coding, Sutter and its affiliate failed to correct errors and return overpayments, but even canceled future audits.
On December 4, 2018, the United States Justice Department filed their notice of intervention. On December 11, 2018, the United States District Court ordered the case unsealed.
Relevant Pleadings:
- Complaint
- Notice of Intervention
Other Relevant Information:
- DOJ Press Release