Sutter Health Reaches $90 Million Settlement Over Alleged False Claims Act Violations
On August 30, 2021, the United States Department of Justice announced that Sutter Health, a California-based health care provider, agreed to pay $90 million to resolve allegations that the company and several affiliated entities (including Sutter Bay Medical Foundation and Sutter Valley Medical Foundation) violated the False Claims Act by knowingly submitting inaccurate information about the health status of beneficiaries enrolled in Medicare Advantage plans.
According to the DOJ, Sutter Health contracted to provide health care services to California beneficiaries enrolled in certain Medicare Advantage plans in exchange for a portion of the payments for treating the beneficiaries. From January 1, 2010 through December 31, 2016, Sutter Health allegedly knowingly submitted unsupported risk adjusted diagnosis codes for certain patient encounters for beneficiaries under its care which caused inflated payments to be made to the plans and Sutter Health. The DOJ further alleged that once Sutter Health became aware of the unsupported diagnosis codes, it did not take sufficient corrective action to identify and delete additional unsupported diagnosis codes.
The case was initially brought as a qui tam matter by a former employee of Palo Alto Medical Foundation. While the United States did not intervene as to claims submitted by additional Sutter affiliates, the whistleblower continued to pursue them and some of those additional claims are also resolved under this settlement.
In addition to the $90 million settlement, Sutter Health, Sutter Bay Medical Foundation and Sutter Valley Medical Foundation entered into a five-year Corporate Integrity Agreement (CIA) with the United States Department of Health and Human Services Office of Inspector General (HHS-OIG). Among other things, the CIA requires Sutter Health implement a centralized risk assessment program as part of its compliance program and hire an Independent Review Organization to annually review a sample of Sutter Health’s Medicare Advantage patients’ medical records and associated diagnoses data.
Counsel for the whistleblower, Kathleen R. Scanlan of Keller Grover LLP, released a statement, saying, “Today’s settlement is a terrific victory for taxpayers. Kathy Ormsby was the catalyst behind the return of nearly a hundred million dollars to a program we all fund to provide cost-effective healthcare to the most vulnerable in our communities, the elderly. Her case also sends a powerful message to other healthcare providers in the Part C program: gaming a patient’s [risk adjustment factor] RAF score is fraud, and you can be held responsible for it under the False Claims Act.”
Jeffrey F. Keller of Keller Grover LLP, added, “Kathy Ormsby demonstrated tremendous courage when she came forward to allege a major fraud on the Medicare Part C program by California’s second largest healthcare provider. Representing her in this case has been an absolute privilege. Hopefully she inspires others to follow her lead in reporting allegations of fraud on the government.”