Sutter Health Will Pay $30 Million Over Medicare Advantage Overpayment, Government Intervenes in Related Whistleblower Lawsuit

Sutter Health LLC, a nonprofit healthcare provider based in Northern California, and its affiliates, Sutter East Bay Medical Foundation, Sutter Pacific Medical Foundation, Sutter Gould Medical Foundation, and Sutter Medical Foundation, have agreed to pay $30 million to resolve allegations that they overcharged the Medicare Advantage program.

Sutter Health Will Pay $30 Million Over Medicare Advantage Overpayment, Government Intervenes in Related Whistleblower Lawsuit

Individuals covered by Medicare can choose to enroll in the Medicare Advantage plan. The government healthcare program then pays so-called Medicare Advantage organizations (“MAOs”) a per-person amount to provide services to those Medicare beneficiaries. As the number of seniors who are opting into the Medicare Advantage plans increases, opportunities for this type of fraud also increase. Medicare Advantage offers additional benefits like dental care, eyeglasses, and fitness expense reimbursements.   

Patients with serious diagnoses have a higher “risk score,” which determines the amount of Medicare Advantage’s per-person payments. According to the allegations resolved by the recent settlement, Sutter Health and its affiliates listed unsupported diagnoses for Medicare Advantage enrollees in order to increase billings.

Last year, the government decided to intervene in a separate whistleblower lawsuit over the same issue, which was filed by Kathleen Ormsby under the False Claims Act. Ormsby used to work for the Palo Alto Medical Foundation, a Sutter Health affiliate which is a co-defendant in that suit. The False Claims Act allows individuals to sue fraudsters on behalf of the government. Tipsters like Ormsby then receive a share of any resulting recoveries, between 15 and 25 percent.

Sutter Health is also facing a lawsuit over antitrust violations, led by California Attorney General Xavier Becerra. According to the prosecution, the company’s illegal practices have dramatically increased healthcare costs across Northern California. Filed in March 2018, the complaint seems to be moving forward successfully this year, as the court recently rejected a motion from Sutter to dismiss the allegations of price tampering and combination to monopolize.

California’s Attorney General said in a statement that the court ruling was “a giant step in the right direction,” and that, “Hospitals that participate in anticompetitive practices to the detriment of their patients must be held accountable.”

Commenting on the $30-million settlement, Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division said in a statement, “The Medicare Advantage Program provides benefits to a significant portion of federal health care beneficiaries. The Department of Justice will help ensure that accurate information is supplied to the Medicare Advantage Program by plans and providers, and to pursue appropriate remedies when it is not.”

If the suit against Sutter Health and Palo Alto Medical Foundation succeeds, the whistleblower could potentially receive a multi-million-dollar reward.

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