Sutter Health agrees to pay $30M to settle accusations of inflated MA 'risk scores'

Sutter Health Building
The Department of Justice said several Sutter Health affiliates—including Sutter East Bay Medical Foundation and Sutter Pacific Medical Foundation—submitted inaccurate information about the health status of Medicare Advantage beneficiaries that resulted in overpayments. (Sutter Health)

Sacramento-based Sutter Health agreed to pay $30 million to settle allegations of overpayments to its Medicare Advantage plans.

The Department of Justice said several Sutter affiliates—including Sutter East Bay Medical Foundation and Sutter Pacific Medical Foundation—submitted inaccurate information about the health status of Medicare Advantage (MA) beneficiaries that resulted in the overpayments.

MA plans are paid a per-person amount to provide Medicare-covered benefits to beneficiaries, and the Centers for Medicare & Medicaid Services (CMS) adjusts the payments to those based on demographic information and the health status of each plan beneficiary in what is called a "risk score."

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CMS will make larger risk-adjusted payments to MA plans for beneficiaries with higher risk scores.

RELATED: DOJ joins lawsuit accusing Sutter Health of Medicare Advantage fraud

According to the DOJ, Sutter Health affiliates contracted with certain Medicare Advantage Organizations (MAOs) to provide healthcare services and, in exchange, Sutter received a share of the payments from CMS for the beneficiaries under Sutter’s care.  

The DOJ said Sutter submitted diagnoses to the MAOs for the MA plan enrollees that they treated. The MAOs, in turn, submitted the diagnosis codes to CMS from the beneficiaries’ medical encounters, such as office visits and hospital stays. The diagnosis codes were used in CMS’ calculation of a risk score for each beneficiary. 

In the settlement, the DOJ said Sutter resolved allegations that its affiliates submitted unsupported diagnoses that inflated the risk scores of certain patients under their care, resulting in the overpayments.

A spokeswoman for Sutter said the settlement reflects its decision to resolve a dispute with the federal government over the reimbursement. 

"As the Department of Justice noted in its press release, the claims being resolved are allegations only, and neither Sutter nor its affiliated medical foundations admit any liability," said Lisa Page, Sutter's vice president of communications and public relations, in a statement.

Risk scores have become a contentious issue in recent years as several large insurers have disclosed they have received civil investigative demands related to MA risk adjustment practices.

In November, a judge ruled that the DOJ can force testimony from Anthem regarding its risk adjustment data and retrospective chart review program. UnitedHealth successfully beat back a whistleblower lawsuit alleging it submitted erroneous diagnosis codes.

RELATED: California attorney general sues Sutter Health for anticompetitive practices

This comes as Sutter and its affiliated entity Palo Alto Medical Foundation face a complaint alleging False Claims Act violations by knowingly submitting unsupported diagnosis scores. In that case, a former employee claimed the California-based health system submitted incorrect diagnosis codes and then failed to take sufficient corrective action once it became aware the codes were incorrect.

That case is still ongoing.

"With respect to the reimbursement claims at issue in the pending litigation, we look forward to the opportunity to explain why neither Sutter Health nor Palo Alto Medical Foundation violated the False Claims Act," Page said.

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