The case focused on Medicare Advantage, the privately managed alternative to traditional Medicare that now covers more than half of all U.S. Medicare beneficiaries, and whether Kaiser manipulated the program’s risk-adjustment payment system — which compensates insurers at higher rates for sicker patients — by directing physicians to add diagnoses to medical records months or more than a year after patients were seen.
Kaiser Permanente affiliates will pay $556 million to settle a federal lawsuit alleging the Oakland-based health care giant committed Medicare fraud by pressuring physicians to record more severe patient diagnoses than warranted in order to receive higher government reimbursements, federal prosecutors said Wednesday.
The settlement resolves a U.S. Department of Justice case filed in San Francisco more than four years ago that consolidated allegations from six whistleblower complaints. Five Kaiser entities are named in the agreement: Kaiser Foundation Health Plan; Kaiser Foundation Health Plan of Colorado; The Permanente Medical Group; Southern California Permanente Medical Group; and Colorado Permanente Medical Group P.C.
The lawsuit alleged that Kaiser gamed the Medicare Advantage program — the privately managed alternative to traditional Medicare — by directing physicians to create addenda to medical records, often months or more than a year after an initial patient consultation, to document more severe diagnoses. Under Medicare Advantage’s risk-adjustment payment system, plans receive higher reimbursements for enrollees with more serious health conditions, so more severe diagnoses generally result in larger government payments.
“More than half of our nation’s Medicare beneficiaries are enrolled in Medicare Advantage plans, and the government expects those who participate in the program to provide truthful and accurate information,” Assistant Attorney General Brett A. Shumate said Wednesday.
Kaiser said the settlement carries no admission of wrongdoing or liability. The company said it chose to resolve the matter to avoid “the delay, uncertainty, and cost” of a trial.
The company framed the litigation as a documentation dispute rather than a patient-care failure. “The Kaiser Permanente case was not about the quality of care our members received,” Kaiser said in a statement. “It involved a dispute about how to interpret the Medicare risk adjustment program’s documentation requirements.” Kaiser also said that multiple major health plans have faced similar government scrutiny, describing the situation as reflecting “industrywide challenges in applying these requirements.”
Kaiser, based in Oakland, California, is a consortium of entities that together form one of the largest nonprofit health care plans in the United States, with more than 12 million members and dozens of medical centers.