Sutter Health pays DOJ $90M to settle False Claims Act lawsuit over Medicare Advantage mischarging

Sutter Health settled allegations that it "knowingly submitted" unsupported medical codes to get higher payments from Medicare, the Department of Justice alleged. (Pixabay)

Sutter Health has agreed to pay the federal government $90 million to settle allegations that it submitted inaccurate information on some of its Medicare Advantage (MA) beneficiaries.

The settlement, announced by the Department of Justice (DOJ) Monday, comes less than a week after a major $575 million settlement was finalized on allegations the health system overcharged patients. The federal government has been heavily scrutinizing improper coding practices from MA insurers, which experts say is a likely driver of increased Medicare spending.

“Today’s result sends a clear message that we will hold health care providers responsible if they knowingly provide or fail to correct information that is untruthful,” said Deputy Assistant Attorney General Sarah E. Harrington of the department’s civil division in a statement.

DOJ alleges that Sutter “knowingly submitted unsupported diagnosis codes for certain patient encounters for beneficiaries under its care,” according to a release on the settlement. “These unsupported diagnosis codes caused inflated payments to be made to the plans and Sutter Health.”

RELATED: KFF: Medicare Advantage payments increased federal spending by $7B in 2019

The agency further alleged that Sutter failed to correct the issue after it became aware of the coding problem.

“The knowing submission of inaccurate information to Medicare diverts funds from this vital healthcare program, which is a disservice to patients needing care,” said Special Agent in Charge Steven J. Ryan with the Department of Health and Human Services’ Office of Inspector General (HHS-OIG).

Sutter said in a statement that it had already partially resolved the issue for $30 million and that it agreed to pay an additional $60 million to resolve the litigation. 

Sutter said that it agreed to enter into a corporate integrity agreement, its first, with HHS for a period of five years.

"Today’s agreements bring closure to a long-running dispute, allowing Sutter to avoid the uncertainty and further expense of protracted litigation," the system said in a statement.

The settlement comes a few days after a federal judge finalized Friday a $575 million settlement against the Northern California hospital system. That judgment resolves allegations that Sutter gouged prices for patients due to several anti-competitive practices.

Under the settlement, Sutter must adopt a cap on out-of-network services and abide by price transparency reforms.

The settlement is the latest in a crackdown the federal government is instituting over MA coding that can contribute to overpayments.

The DOJ intervened earlier this month into several lawsuits against health system and insurer Kaiser Permanente. The lawsuits allege Kaiser pressured physicians to include additional diagnoses even if patients didn’t have the conditions or were not considered when the patient visited.

CVS divulged recently that the HHS-OIG is investigating the “risk-adjusted related data” for its insurer Aetna.

OIG also announced in May that Anthem’s MA plan overcharged Medicare by nearly $3.5 million.