Sutter Health Reaches $13 Million Settlement Over False Claims Act Allegations

In October 2022, Sutter Health reached a $13 million settlement to resolve allegations that it violated the False Claims Act by billing for toxicology screening tests performed by outside labs.

The United States alleged that Alta Bates Summit Medical Center, a Sutter Health hospital, entered into a Laboratory Services Agreement with Navigant Network Alliance, LLC, by which Navigant would refer urine toxicology specimens obtained from physicians and laboratories throughout the United States to Sutter. Sutter then submitted bills – or caused bills to be submitted – for the reimbursement of the qualitative and quantitative testing it supposedly performed on those specimens.

However, the United States alleges that Sutter did not perform the quantitative testing on thousands of the specimens, and instead the quantitative tests were performed by third party labs. Even still, Sutter sought reimbursement for the tests.

The United States alleges that this behavior took place between August 1, 2016, and June 30, 2017. During that period, Medicare, Medicaid, Tricare, and the Federal Employees Health Benefits Program all made payments urine toxicology testing that Sutter did not perform.

To resolve the allegations, Sutter agreed to pay $13,091,452. Of that amount, Sutter has already paid over $6.5 million, and the balance (or approximately $6.5 million) was set to be paid by mid-November. As we often see, this settlement is not an admission of liability by Sutter Health.

The Settlement also included a clause whereby Sutter agreed that within 90 days of the Effective Date, it will identify any Unallowable Costs included in payments previously sought from the United States or any State Medicaid program. This includes any payments sought in cost reports, cost statements, information reports or payment requests submitted by Sutter or its subsidiaries/affiliates. In the event an Unallowable Cost is identified, the United States will be able to recoup any overpayment (as wella s applicable interest and penalties) from Sutter.

Additionally, the settlement does not release Sutter from any liability under the Internal Revenue Code, criminal liability, any other administrative liability not explicitly stated in the Agreement, any liability to the United States for conduct other than the Covered Conduct, any liability based upon obligations created under the agreement, or liability for any individuals.

Sutter also waived any potential criminal or administrative action defenses related to the Covered Conduct, including any defenses based on Double Jeopardy or Excessive Fines Clauses in the Constitution.

This settlement was brought to bear by the work of many different federal agencies, including the Federal Bureau of Investigation, the Office of Personnel Management Office of Inspector General, Health and Human Services Office of Inspector General, and the Department of Defense Office of Inspector General.

“Sutter Health agreed to pay $13 million to settle allegations that it billed government health programs for lab tests performed by others,” said U.S. Attorney Stephanie M. Hinds. “Government health care programs must be protected, and this office will investigate and pursue health care providers that fail to provide the services paid for by public health care programs.”