Kaiser Affiliates Reach $556M Settlement in Medicare Billing Claims Case

Five Kaiser Permanente affiliates have agreed to pay $556 million to resolve allegations that they improperly boosted Medicare Advantage payments by submitting unsupported medical diagnoses, the U.S. Department of Justice announced Wednesday.

The settlement addresses claims that several Kaiser health plans and regional medical groups violated the False Claims Act by submitting diagnoses unsupported by patient records, which were subsequently used to inflate risk-adjustment payments under the Medicare Advantage program.

Federal prosecutors alleged the Kaiser entities pressured physicians to retroactively add diagnoses to patient records after visits had concluded, even when those conditions were not evaluated, treated, or discussed during the original encounter.

“More than half of Medicare beneficiaries are enrolled in Medicare Advantage plans,” said Assistant Attorney General Brett A. Shumate of the DOJ’s Civil Division. “The United States will hold healthcare providers accountable when they knowingly submit or cause false information to be submitted to obtain inflated payments.”

Kaiser maintained in a statement that the settlement includes no admission of wrongdoing or liability, emphasizing they agreed to resolve the matter to avoid the expense and uncertainty of prolonged litigation.

“This matter was not about the quality of care our members received,” Kaiser stated. “It involved a dispute over documentation requirements under the Medicare risk-adjustment program.”

The case originated from whistleblower lawsuits filed in 2013 and 2014 by former Kaiser medical coder Ronda Osinek and physician James M. Taylor under the qui tam provisions of the False Claims Act. Their suits were later consolidated with four additional actions in the Northern District of California, with the federal government formally intervening in 2021.

According to the government’s amended complaint, between 2009 and 2018, Kaiser engaged in a coordinated practice of retrospectively adding diagnoses to medical records specifically to increase Medicare Advantage reimbursement.

The government’s investigation revealed that Kaiser systematically reviewed patient files to identify potential additional diagnoses and then encouraged physicians to add those conditions through record addenda, sometimes months or years after the original patient visit. In many instances, prosecutors alleged, patients were not informed that new diagnoses had been added to their records.

The DOJ claims Kaiser added approximately 500,000 diagnoses during the period in question, resulting in roughly $1 billion in additional Medicare payments. Under the terms of the settlement, the whistleblowers will collectively receive $95 million as their share of the recovery.

This settlement represents one of the largest False Claims Act recoveries related to Medicare Advantage coding practices, highlighting the government’s increasing scrutiny of risk-adjustment programs in Medicare. The Medicare Advantage program, which allows private insurers to provide Medicare benefits, bases payments on risk scores calculated from patient diagnoses, creating potential financial incentives for providers to maximize documentation of patient conditions.

The healthcare industry has seen similar settlements in recent years as federal authorities intensify efforts to combat alleged Medicare Advantage fraud. In 2023, Cigna agreed to pay $172 million to resolve similar allegations, while Sutter Health reached a $90 million settlement in 2021.

Kaiser Permanente, one of the nation’s largest integrated health systems serving approximately 12.7 million members, operates in eight states and the District of Columbia. The organization generated over $95 billion in operating revenue in 2022.

The federal government was represented by attorneys from the DOJ’s Fraud Section and U.S. attorney’s offices in California and Colorado. The whistleblowers were represented by counsel from Gibbs Mura and Whistleblower Partners LLP, while Kaiser was represented by O’Melveny & Myers LLP.

The DOJ emphasized that the claims resolved by the agreement remain allegations and were not formally adjudicated. Kaiser did not respond to additional requests for comment following the announcement.

The consolidated cases remain pending in the U.S. District Court for the Northern District of California.