U.S. Joins Keller Grover Whistleblower's Suit Against Sutter Health and Palo Alto Medical Foundation for Allegedly Overcharging Medicare Hundreds of Millions of Dollars

SAN FRANCISCO, Dec. 21, 2018 /PRNewswire/ --  announced today that the U.S. Department of Justice has joined its client's whistleblower lawsuit claiming that Sutter Health – one of California's largest medical providers — and Palo Alto Medical Foundation (PAMF) defrauded the Medicare managed care program of over one hundred millions dollars.  Sutter Health and PAMF are accused of improperly gaming a program known as risk adjustment, or risk scoring, by claiming its members were treated for conditions they either did not have or were not treated for. 

Taxpayers have paid out hundreds of millions of dollars to Sutter Health and its affiliates for false claims, the suit alleges. The "qui tam" whistleblower suit, filed under the federal False Claims Act, was unsealed yesterday.

Sutter Health and PAMF allegedly submitted unsupported and inaccurate risk-adjustment claims to Medicare under its Part C (managed care) program. Medicare makes extra payments to healthcare providers based on enrollees' health-risk scores, which are calculated using patients' medical diagnoses. Higher risk scores are supposed to reflect the higher cost of treating sicker patients, and risk-adjustment reimbursement is designed to offset increased costs associated with treating these patients.

The suit claims that Sutter Health and PAMF collected and retained payments from claims that falsely stated its patients were treated during the relevant period for:

• diagnoses the patients did not have;
• more severe diagnoses than the patients had;
• diagnoses for which patients were previously treated but that were not treated in the relevant year; and/or
• diagnoses that otherwise failed to meet CMS requirements for risk adjustment.

The complaint states that Sutter Health and PAMF failed to correct previously submitted Medicare risk adjustment claims even though they knew, or should have known, that those claims were false. Under Medicare rules and regulations, the healthcare provider was required to report and reimburse the government for any overpayments.

Sutter Health and PAMF executives suppressed efforts of internal auditors to measure and correct false risk adjustment claims, the suit charges.  Allegedly, auditors trying to correct the unsupported higher risk adjustment data and calculate how much Medicare should be repaid were ordered to halt their efforts and to instead concentrate on further increasing the stream of ill-gotten payments. 

One way Sutter Health and PAMF overstated the patients' risk scores was by conducting only a "one way look" into patient medical records, searching only for diagnoses that would inflate the scores instead of "looking both ways" by also reviewing for unsupported diagnoses that had falsely inflated risk scores, according to the complaint. Allegedly, when Sutter Health and PAMF audited previously submitted claims, error rates were as high as ninety percent, yet, according to the whistleblower, Sutter Health and PAMF refused to take meaningful steps to identify and rectify the problems with the claims submitted to Medicare.

The complaint also charges Sutter Health and PAMF had no effective compliance auditing program at all for several years while submitting hundreds of millions of dollars in bills to the Medicare Advantage program, and that although internal audit results warned of serious provider overcoding, Sutter and its affiliate failed to correct errors and return overpayments, but even canceled future audits.  

"This program was supposed to save Medicare money.  Instead, companies like Sutter are abusing it and costing taxpayers hundreds of millions of dollars," said , a founding partner of Keller Grover and co-lead counsel on the case.  "If I accidentally walked out of a store without paying for something, both the law and common decency requires that I go right back and pay for it. That's what Sutter should do for Medicare.  Instead, they just walk back in and help themselves to more.  That money would have been far better used to reduce Medicare premiums or provide care for our nation's seniors rather than simply padding this provider's bottom line."

"Compliance auditors form the backbone of Medicare Advantage fraud prevention.  They protect taxpayers who fund Medicare as well as the millions of Americans who rely on the program to meet their healthcare needs," said , who is co-lead counsel on the case.

The whistleblower, who is represented by Keller Grover LLP, Constantine Cannon LLP, and the Law Office of Mark Kleiman, filed her complaint on March 6, 2015.  The suit has been kept under seal while the Justice Department investigated the claims. The Justice Department filed their notice of intervention on December 4, 2018.

The False Claims Act promotes collaboration among corporate insiders and the government to fight fraud on taxpayers. The law encourages whistleblowers to expose companies that are defrauding the government by allowing a private party to file a civil lawsuit on the government's behalf and providing for a reward of 15 to 25 percent of the government's civil recovery if the government joins, or intervenes in, the case.

About Keller Grover's Whistleblower Practice:
Keller Grover has extensive experience representing whistleblowers in federal and state courts under the False Claims Act as well as other federal and state whistleblower laws. Recognizing that whistleblowers often need help with their employment issues, the firm combines sophisticated understanding of False Claims Act litigation with a quarter century of experience protecting employee rights.

To learn more about Keller Grover's .

About Constantine Cannon LLP 
Constantine Cannon, with offices in New York, Washington, D.C., San Francisco, and London, has deep expertise in practice areas that include antitrust and complex commercial litigation, whistleblower representation, government relations, securities, and e-discovery. The firm's antitrust practice is among the largest and most well recognized in the nation. Constantine Cannon's experience spans across multiple industries including healthcare, banking, electronic payments, insurance, high tech, telecommunications, the Internet, and government contracting.

To learn more about the firm, .

About the Law Office of Mark Kleiman
Mark Kleiman practices law in Los Angeles, and has brought cases leading to over $700 million in recoveries for fraud against the federal and state and local governments involving drug companies, hospitals, nursing homes, and defense contractors.  He is a former Presidential appointee to an FDA panel and consultant to HHS on health care policy regulation.

Media Contact:
Kirk Monroe

202-680-0282

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SOURCE Keller Grover LLP