U.S. Justice Dept. alleges Kaiser Permanente committed Medicare fraud in California suit

The U.S. Department of Justice announced last week that it had filed a Medicare fraud case against Oakland-based Kaiser Permanente that consolidates allegations made in a half-dozen whistleblower cases filed nationwide.

The government’s complaint alleged that Kaiser pressured its physicians to go back into medical records, often months or even more than a year later after patient visits, to add diagnoses that were not considered or addressed in the initial consultation. Those changes made it appear the patient had a more serious diagnosis and consequently garnered increased reimbursements from the U.S. Centers for Medicaid & Medicare Services, according to the complaint filed in U.S. District Court in San Francisco.

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

In a response to The Bee’s request for comment, Kaiser issued a statement saying the company would vigorously defend its practices.

“Our policies and practices represent well-reasoned and good-faith interpretations of sometimes vague and incomplete guidance from CMS,” Kaiser leaders said in the statement. “For nearly a decade, Kaiser Permanente has achieved consistently strong performance on ... audits conducted by CMS. With such a strong track record with CMS, we are disappointed the Department of Justice would pursue this path.”

Edward Baker, an attorney at Constantine Cannon, said a portion of a whistleblower complaint filed by one of his clients has been combined into the federal lawsuit. The Centers for Medicare & Medicaid Services recognized that it’s more costly to treat some patients, Baker said, and agreed to reimburse providers at a higher rate when patients have higher risk scores.

Employees at a number of providers — Kaiser, Sutter Health and UnitedHealth Group — have filed whistleblower complaints alleging that the companies mounted campaigns to change records in order to overcharge CMS. Doing so violates the False Claims Act, Baker said, and Constantine Cannon represents whistleblowers in cases against all three companies.

Sutter settled one such case brought by Kathleen Ormsby, formerly a medical coding expert at a Sutter affiliate, in 2019, but the company did not acknowledge any wrongdoing.

“There’s a clear pattern that these large corporations have been seeking and acting to line their ... pockets at the expense of taxpayers, at the expense of the government Medicare program,” Baker said, “and they’ve been doing it in a very sophisticated way through the reimbursement system, and Medicare Advantage, which is undeniably complicated, and involves a lot of data, a lot of diagnoses, and a lot of patients.”

Baker’s team represents Dr. James M. Taylor, who worked at Kaiser’s Colorado Permanente Medical Group. To establish Taylor’s knowledge, credibility and expertise, the Constantine Cannon team listed his roles and accomplishments in their suit, saying: Taylor served as medical director of revenue cycle/claims and physician director of coding. He was not only a physician but also a certified coder and coding trainer.

He was elected to the Colorado medical group’s board and served two years as its chairman. He co-chaired and served on national Kaiser groups to ensure the company’s compliance with medical coding. He was selected to complete Harvard’s Executive Leadership Program, and when he filed his suit, he was the only physician to have received Kaiser’s National Revenue Cycle “Distinguished Leadership” award.

Taylor’s complaint was kept sealed until the government filed suit Thursday. The practice, known as sealing the record, is put in place to avoid tipping off any wrongdoers as government prosecutors collect information.

Baker said that Taylor repeatedly proposed solutions internally to address the violations he has alleged in his lawsuit but that other Kaiser leaders ignored his concerns or made only temporary attempts to change the alleged behavior.

The consolidated federal lawsuit could result in penalties and damages totaling hundreds of millions of dollars, Baker said, since the allegations date to 2004 and because companies must pay back triple what they received in overpayments.

Kaiser’s leaders said they will not allow this litigation to distract from their mission.

“Our dedicated health care 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,” they said in the statement.