Importance of Whistleblowers in False Claims Act Lawsuits – Kaiser Permanente/MAO

The Legal Intelligencer

October 28, 2021

In the six whistleblower lawsuits against Kaiser Permanente consortium members in which the Department of Justice intervened in July 2021, the whistleblowers allege that Kaiser violated the False Claims Act in its operation of Medicare Advantage plans—specifically that Kaiser caused its doctors to create after-the-fact “addenda” to patients’ medical records for the purpose of adding diagnoses that did not comply with Medicare requirements because the patients did not have those diagnoses or the doctor did not address those diagnoses during the patients’ visits.

This enforcement action represents the latest development in the escalating battle between the DOJ and private Medicare Advantage Organizations over those companies’ compliance with the laws and regulations of the Medicare Advantage program. With the federal government’s annual expenditure on Medicare Advantage exceeding $340 billion, the stakes in the battle with private Medicare Advantage Organizations are enormous. DOJ’s intervention also illustrates the common truth tying together the behavior that DOJ is targeting in pursuing MAOs: these organizations have a financial incentive to assign more serious diagnoses to their beneficiaries when they report to CMS. The greater the health risk the patient appears to present, the more federal money the MAO stands to pull in.

The lawsuits in which the DOJ intervened were brought by health care professionals who worked for or with Kaiser, and who provided the government with important, nonpublic information supporting their allegations. The government’s intervention in these cases illustrates the critical role played by whistleblowers in protecting government programs from fraud and abuse.

Fraud in Medicare Advantage Programs Is in the Government’s Crosshairs

The federal regulations governing how Medicare Advantage Organizations are paid per patient create a framework that is ripe for fraud. MAOs must report their beneficiaries’ diagnoses to the federal government in accordance with applicable laws and regulations. These reported diagnoses contribute to a patient’s annual “risk score,” which is a numerical value used in determining the amount that the government will pay an MAO to cover that specific patient. In general, the government will pay an MAO a larger capitated amount for patients who have certain chronic conditions or diagnoses that are complex or estimated to be more costly to treat.

Recent years have seen an upsurge in government investigative and enforcement activity in the Medicare Advantage space. This has included FCA settlements and litigation, investigations by the Office of Inspector General of the Department of Health and Human Services, and legal disputes over the validity and interpretation of Medicare Advantage regulations before the courts.

The DOJ has brought and settled a number of enforcement actions regarding the provision of false diagnosis codes that cause the government to make higher risk-adjusted payments to MAOs, including with DaVita Medical Holdings LLC, Sutter Health and companies within Kaiser Permanente. And it has brought False Claims Act cases against MAOs, including UnitedHealth Group and Anthem, that are presently being litigated.

Medicare Advantage fraud and abuse has also been a major focus of the OIG in recent years, which has reported on a large and growing number of investigations focusing on fraud and the operations of MAOs.

MAOs have hardly stood idly by in response. They have not only disputed the results of OIG investigations and defended themselves in court against FCA allegations brought by the DOJ and whistleblowers, they have also challenged the legitimacy of specific Medicare Advantage regulations. By way of illustration, a UnitedHealthcare MAO appeared to have scored a huge win when it convinced a district court to invalidate a CMS regulation that required MAOs to return overpayments to the governments. However, the court of appeals recently overturned that decision and reinstated the regulation (UnitedHealthcare Insurance v. Becerra).

The False Claims Act Lawsuits Against Kaiser Showcase the Importance of Whistleblowers

Whistleblowers are a critically important asset when pursuing fraud committed by MAOs. In the Kaiser Permanente case, the Department of Justice intervened in whistleblower claims alleging that Kaiser pressured physicians to create documentation well after patient visits had occurred that added certain diagnoses that patients either did not have or that were not addressed during their visit.

The whistleblower complaints underlying these claims were brought by health care professionals with inside knowledge of Kaiser’s alleged scheme. They included a current or former national co-chair of Kaiser’s coding compliance committee (U.S. ex rel. Taylor v. Kaiser Permanente), national director for coding quality (U.S. ex rel. Bryant v. Kaiser Permanente), data quality trainer (U.S. ex rel. Osinek v. Kaiser Permanente), health information manager (U.S. ex rel. Stein v. Kaiser Foundation Health Plan), and other physicians (U.S. ex rel. Bicocca v. Permanente Medical Group), and coding specialists (U.S. ex rel. Arefi v. Kaiser Foundation Health Plan).

These whistleblowers alleged a range of claims beyond those in which the DOJ intervened. For example, they also alleged that Kaiser directed physicians to “upcode” diagnoses to obtain inflated risk-adjustment payments and that it ignored the results of its own internal audits that indicated certain expensive diagnosis codes were being improperly reported to the government.

The importance of the issues these lawsuits raise cannot be overstated. If MAOs systematically report false diagnoses, the government will pay these private companies millions or even billions of dollars more than is appropriate for the care of their members with MAOs pocketing this ill-gotten revenue enhancement. Meanwhile, critical Medicare dollars are wasted. Medicare Advantage’s risk-adjustment payment structure makes perfect sense provided MAOs play by the rules. But the financial incentive to abuse this structure nevertheless exists. The False Claims Act—with its threat of treble damages—is the government’s most powerful tool to deter illegal activity and recover lost funds when it occurs.

The Important Role Whistleblowers Play in Detecting MAO Fraud

The Medicare Advantage program is one of the most complex and least transparent of all government spending programs. The operation of Medicare Advantage plans by private companies takes place largely outside of public view and in many respects outside of the government’s view as well. At the same time, it implicates enormous amounts of federal money. Accordingly, whistleblowers with inside, nonpublic information regarding fraudulent practices or schemes within MAOs are exceptionally valuable to government enforcement efforts in this industry.

The False Claims Act provides financial incentives for individuals to blow the whistle on companies that defraud the government. Successful whistleblowers may obtain 15% to 25% of the government’s recovery as an award, and an even higher percentage if the whistleblower and her counsel litigate the action themselves. These awards are designed to encourage people with knowledge of fraud to confidentially come forward and assist the government in remedying and deterring fraudulent conduct.

The six whistleblower complaints against Kaiser are perfect examples of this concept. These whistleblowers included company executives, physicians, and coders who by virtue of their positions, knowledge, and experience were able to alert the Department of Justice to serious allegations of fraud that without their efforts may have gone undetected.

Read Importance of Whistleblowers in False Claims Act Lawsuits – Kaiser Permanente/MAO.