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The suits allege that defendant Kaiser Permanente inappropriately inflated reimbursement applications for Medicare Advantage beneficiaries.

In a titanic legal battle over healthcare reimbursement, a prominent whistleblower law firm suddenly has a powerful new ally in its corner: the federal government.

Constantine Cannon LLP and the U.S. Department of Justice (DOJ) both issued press announcements recently noting that federal prosecutors are intervening in six complaints alleging that Kaiser Permanente, one of the nation’s largest managed-care organizations, violated the False Claims Act by submitting inaccurate diagnosis codes for its Medicare Advantage (MA) plan enrollees in order to receive higher reimbursements.

The individual defendants include Kaiser Foundation Health Plan Inc., Kaiser Foundation Health Plan of Colorado, The Permanente Medical Group Inc., Southern California Permanente Medical Group Inc., and Colorado Permanente Medical Group P.C.

“Medicare’s managed care program relies on the accuracy of information submitted by healthcare providers and plans to ensure that patients receive the appropriate level of care, and that plans receive the appropriate compensation,” Deputy Assistant Attorney General Sarah E. Harrington of the DOJ’s Civil Division said in a statement. “Today’s action sends a clear message that we will hold healthcare providers and plans accountable if they seek to game the system by submitting false information.”

Federal officials explained in the press release that MA plans are paid a per-person amount to provide Medicare-covered benefits to beneficiaries. The Centers for Medicare & Medicaid Services (CMS) adjusts those payments based on demographic information and the diagnoses of each plan beneficiary, with the payments commonly referred to as “risk scores” – and in general, a beneficiary with more severe diagnoses will have a higher risk score.

Medicare requires that for outpatient encounters, MA plans submit diagnoses to CMS only for conditions that required or affected patient care, treatment, or management during an in-person encounter in the service year – and that’s where the accusations against Kaiser Permanente lie. “In order to increase its Medicare reimbursements,” federal officials said, “Kaiser allegedly pressured its physicians to create addenda to medical records after the patient encounter, often months or over a year later, to add risk-adjusting diagnoses that patients did not actually have and/or were not actually considered or addressed during the encounter, in violation of Medicare requirements.”   

The six suits were filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private parties to sue on behalf of the government for false claims, and to receive a share of any recovery. Following the filing of the suits, the matter was investigated by the Civil Division’s Commercial Litigation Branch, Fraud Section, and the U.S. Attorney’s Offices for the Northern District of California and the District of Colorado, with assistance from the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG).

“The integrity of government healthcare programs must be protected,” acting U.S. Attorney Stephanie Hinds for the Northern District of California said in a statement. “The Medicare Advantage Program maintains the health of millions, and wrongful acts that defraud the program cannot continue and will be pursued.”

“The federal government pays hundreds of billions of dollars every year to Medicare Advantage Plans,” added acting U.S. Attorney Matt Kirsch for the District of Colorado. “The District of Colorado will vigorously pursue investigations with our partners to make sure that money supports necessary healthcare, not fraud.”

Kaiser Permanente last week denied any wrongdoing in a statement published to its website.

“We are confident that Kaiser Permanente is compliant with Medicare Advantage program requirements, and we intend to strongly defend against the lawsuits alleging otherwise,” the statement read. “Our medical record documentation and risk adjustment diagnosis data submitted to the Centers for Medicare & Medicaid Services comply with applicable laws and Medicare Advantage program requirements. Our policies and practices represent well-reasoned and good-faith interpretations of sometimes vague and incomplete guidance from CMS. For nearly a decade, Kaiser Permanente has achieved consistently strong performance on Risk Adjustment Data Validation audits conducted by CMS. With such a strong track record with CMS, we are disappointed the Department of Justice would pursue this path.”

“While Kaiser Permanente plans to vigorously defend against these allegations, we will not allow this litigation to distract from our mission,” the company added. “Our dedicated healthcare teams will remain focused on continuing to provide our patients and members with leading-edge treatment, prevention, and the whole-person care that is the cornerstone of our integrated health system.”

Constantine Cannon identified the whistleblower in this case as James M. Taylor, M.D., who was previously employed at Kaiser’s Colorado Permanente Medical Group (CPMG), where he was medical director of revenue cycle/claims and physician director of coding – “not only a physician,” the law firm noted, but “a certified coder and coding trainer who was the recipient of RISE Health’s Martin L. Block Award for Clinical Excellence and Innovation.”

Taylor was reportedly elected to the board of CPMG and was also chairman for two years, and he also served as national co-chair of Kaiser Permanente’s ICD-10 Compliance Committee, acting as the delegate representing all physicians in regions outside of California in Kaiser’s national Coding Governance Group.

While still a Kaiser employee, Constantine Cannon said that Dr. Taylor repeatedly proposed solutions internally to address the issues outlined in the whistleblower complaint, but corrective action was either not performed by the organizations or only briefly implemented before Kaiser would return to prior behavior.

“The scale of this case, and the number of whistleblowers who have come forward, shows how serious the claims are,” said Michael Ronickher, a partner in Constantine Cannon’s Washington, D.C., office, and co-lead counsel on the case. “Dr. Taylor’s unique position within Kaiser, along with his deep knowledge of Medicare Advantage compliance, will be key in helping the Department of Justice recover for the frauds he and the other whistleblowers allege.”

“Medicare Advantage fraud, especially on this scale, shows a blatant disrespect for the millions of Americans who rely on the program for their healthcare needs, as well as the taxpayers paying for it,” added Edward Baker, counsel in Constantine Cannon’s Washington, D.C., office, and co-lead counsel on the case. “We look forward to bringing this case to a successful resolution.”

The Kaiser case is one of several similar cases being handled by Constantine Cannon; the firm also represents Benjamin Poehling in a suit against UnitedHealth Group (UHG) – the largest False Claims Act lawsuit for Medicare risk-adjustment fraud in history. That suit alleges fraud by UHG that cost taxpayers more than $1.4 billion from 2011 to 2014 alone; it is currently expected to go to trial in 2023.

Program Note: Listen to Mary Inman, Esq. report this story live during Monitor Mondays, Monday, Aug. 9 at 10 Eastern.

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