DOJ to take on Sutter Health in False Claims Act lawsuit

The U.S. government has jumped into a False Claims Act lawsuit stemming from a whistleblower against Sutter Health, a healthcare services company based in California, and its affiliate Palo Alto Medical Foundation.

Sutter allegedly violated the act by submitting inaccurate information about the health status of some Medicare Advantage enrollees, according to the Justice Department. MA plans, which are private insurance plans that contract with Medicare, are paid a per-person amount to provide services and care covered by regular Medicare. Those rates are based on demographic information and health status, designated as risk scores. Enrollees with higher risk scores generally have a higher risk-adjusted payment.

“Federal healthcare programs rely on the accuracy of information submitted by healthcare providers to ensure that patients are afforded the appropriate level of care and that managed care plans receive appropriate compensation,” Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division said in a statement. “Today’s action sends a clear message that we will seek to hold healthcare providers responsible if they fail to ensure that the information they submit is truthful.” 

Sutter contracted with Medicare Advantage Organizations (MAOs) to care for MA enrollees in California and received a share of the CMS payments from the MAOs in return, according to the DOJ. Sutter submitted diagnoses to the MAOs, which then submitted those diagnosis codes to CMS for risk calculation from office visits, hospital stays and other medical encounters.

Sutter Health and Palo Alto Medical Foundation “knowingly submitted unsupported diagnosis codes” for certain patients that allegedly inflated the risks scores and, therefore, resulted in higher payments, according to the lawsuit. Sutter also failed to take sufficient corrective action once it became aware of the unsupported diagnoses, the lawsuit alleges.

The case is not the first bout of trouble for Sutter Health, which came under fire in 2017 for allegedly destroying documents sought in an antitrust lawsuit against the not-for-profit healthcare company.

"Sutter Health and Palo Alto Medical Foundation take the issues raised in the complaint seriously," Amy Thoma Tan, director of public affairs and issues management at Sutter Health, told HealthExec in an emailed statement. "The lawsuit involves an area of law that is currently unsettled and the subject of ongoing litigation in multiple jurisdictions. Sutter Health intends to vigorously defend itself against the allegations in the complaint."