Five Kaiser Permanente affiliates have agreed to a record-breaking $556 million settlement with the Department of Justice (DOJ) resolving allegations of fraudulent Medicare Advantage (MA) risk adjustment submissions.
The settlement, unveiled Wednesday, involves DOJ allegations of "systemic" pressure on physicians to add unrelated diagnoses to patients’ medical records well after their medical visits, which would allow the organization’s MA operations to secure higher monthly payments.
The government alleged Kaiser Permanente was engaging in such a scheme from at least 2009 to 2018, collectively adding about half a million diagnoses and generating “in the range of $1 billion” in additional Medicare payments, the DOJ said in a press release.
The settlement is not an admission of wrongdoing or liability. Kaiser Permanente, in a statement, said it “chose to settle to avoid the delay, uncertainty and cost of prolonged litigation.”
The DOJ said the $556 million settlement is the highest to date for a MA case.
“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, of the DOJ’s Civil Division, said in a statement. “Today’s resolution sends the clear message that the United States holds healthcare providers and plans accountable when they knowingly submit or cause to be submitted false information to CMS to obtain inflated Medicare payments.”
The DOJ filed its complaint in October 2021. Also resolved are claims brought by two whistleblowers—a medical coder and a doctor both formerly employed by Kaiser Permanente—who will receive $95 million from the settlement.
The government’s complaint, citing whistleblower claims, alleged that Kaiser Permanente had falsely submitted diagnosis codes for conditions unrelated to a patient’s visit as well as codes for conditions that the patient did not have at the time of their visit—both of which are violations of Centers for Medicare & Medicaid Services (CMS) guidelines.
Those diagnosis codes, the DOJ claims, were “routinely” mined from a patient’s past medical history and then presented to providers for addition to medical records via addenda, “often months and sometimes over a year after visits.” The government also described internal goals for physicians and facilities to add the diagnoses, alleging financial bonuses were tied to these goals.
“As each year drew to a close, some employees referred to Kaiser’s rush to capture as many diagnoses as possible as the ‘dash for cash,’” the government wrote in its 2021 complaint. “Kaiser employed numerous other tactics, such as ‘coding parties,’ where it would gather physicians in a room and expect them to work through lists of diagnoses and add these diagnoses to the records of their patient visits.”
The DOJ said Kaiser Permanente “knew that its addenda practices were widespread and unlawful” and “ignored numerous red flags and internal warnings that it was violating CMS rules, including concerns raised by its own physicians that these were false claims and audits by its own compliance office identifying the issue of inappropriate addenda," the DOJ wrote in its announcement about the settlement.
Kaiser Permanente, in its statement on the resolution, said the case had nothing to do with the quality of care it had delivered, but “involved a dispute about how to interpret the Medicare risk adjustment program’s documentation requirements.”
“Multiple major health plans have faced similar government scrutiny over Medicare Advantage risk adjustment standards and practices, reflecting industrywide challenges in applying these requirements,” the statement reads.
Kaiser Permanente’s $556 million settlement far outpaces other nine-figure agreements secured by the DOJ against a MA insurer, such as Cigna’s $172 million settlement in 2023.
The news also comes in the wake of a Senate report alleging UnitedHealth Group aggressively seeks additional diagnoses and has “turned risk adjustment [in Medicare Advantage] into a major profit centered strategy.”
The five Kaiser Permanente affiliates named in this week’s settlement agreement are: Kaiser Foundation Health Plan Inc.; Kaiser Foundation Health Plan of Colorado; The Permanente Medical Group Inc.; Southern California Permanente Medical Group; and Colorado Permanente Medical Group P.C.