Kaiser Permanente Settles Medicare Fraud Claims for $556 Million

In one of the largest settlements of its kind, healthcare giant Kaiser Permanente has agreed to pay $556 million to resolve allegations of Medicare fraud, according to federal officials who announced the deal on Thursday.

The settlement addresses claims that Kaiser Permanente systematically submitted inaccurate diagnosis codes for Medicare Advantage plan beneficiaries, resulting in significant overpayments from the federal government. The Justice Department alleged that Kaiser’s practices inflated patient risk scores, triggering higher reimbursements than the organization was entitled to receive.

“This settlement underscores our commitment to ensuring that healthcare providers play by the rules,” said Principal Deputy Assistant Attorney General Brian Boynton, head of the Justice Department’s Civil Division. “When organizations manipulate the Medicare Advantage program for financial gain, they divert critical resources from patient care and burden taxpayers with unnecessary costs.”

Kaiser Permanente, which operates as an integrated managed care consortium based in Oakland, California, serves more than 12.5 million members across eight states and the District of Columbia. The organization, which includes Kaiser Foundation Health Plan, Kaiser Foundation Hospitals, and various Permanente Medical Groups, has maintained its innocence throughout the investigation.

In a statement following the settlement announcement, Kaiser Permanente denied any wrongdoing, stating: “We are confident our medical record documentation and risk adjustment practices comply with government requirements and represent our commitment to accurate and complete coding that reflects our members’ medical conditions.”

The case emerged from multiple whistleblower lawsuits filed under the qui tam provisions of the False Claims Act, which allows private citizens to file suits on behalf of the government and share in any recovery. The whistleblowers, former Kaiser employees, will receive approximately $108 million from the settlement proceeds.

The investigation centered on allegations that between 2010 and 2017, Kaiser Permanente conducted “sweeps” and other initiatives that encouraged physicians to add diagnoses to medical records, often without proper clinical support. These added diagnoses allegedly increased the risk adjustment factors used to calculate Medicare payments.

Medicare Advantage, also known as Medicare Part C, allows beneficiaries to receive their benefits through private health insurers rather than through traditional Medicare. Under this program, Medicare pays insurers a set amount per enrollee, adjusted based on demographic factors and health status as reflected by diagnosis codes. This risk adjustment system was designed to prevent insurers from selectively enrolling healthier patients while avoiding those with complex medical needs.

Industry experts note that this settlement is part of a broader crackdown on Medicare Advantage billing practices. Government scrutiny has intensified as enrollment in these plans has surged, now covering approximately 46 percent of all Medicare beneficiaries.

“This settlement represents a significant development in the ongoing effort to ensure integrity in the Medicare Advantage program,” said healthcare policy analyst Jennifer Morales, who was not involved in the case. “As these plans continue to grow in popularity, we’re seeing increased regulatory attention to how risk adjustment is being implemented.”

The Kaiser Permanente case is notable not only for its size but also for involving one of the nation’s most prominent healthcare organizations. The integrated care model pioneered by Kaiser has often been cited as an example of efficient healthcare delivery.

As part of the settlement agreement, Kaiser Permanente will enter into a five-year corporate integrity agreement with the Department of Health and Human Services’ Office of Inspector General. This agreement requires enhanced compliance measures, including regular audits and reports on the organization’s Medicare Advantage coding practices.

The settlement comes at a time when healthcare costs continue to be a major concern for policymakers and the public. Medicare spending reached approximately $944 billion in 2022, representing 21 percent of total national health expenditures, according to the Centers for Medicare and Medicaid Services.

Federal officials emphasized that the settlement demonstrates their continued commitment to protecting public health programs from fraud and abuse, regardless of the size or reputation of the organization involved.