Sutter Health agreed to pay $30 million to settle allegations that the Sacramento, Calif.-based health system submitted inflated diagnosis codes to the CMS for Medicare Advantage beneficiaries, the Justice Department announced Friday.
The CMS pays private insurers a set amount per person to administer program benefits under Advantage plans and adjusts the payments based on "risk scores," calculated using demographic information and health status data. Sutter and its affiliates contracted with certain Medicare Advantage organizations and received a share of the reimbursement for the beneficiaries under Sutter's care.
Sutter and its affiliates Sutter East Bay Medical Foundation, Sutter Pacific Medical Foundation, Sutter Gould Medical Foundation and Sutter Medical Foundation allegedly inflated the risk scores, resulting in overpayments.
Earlier this month, the federal government sued Sutter and affiliate Palo Alto Medical Foundation with similar allegations. The case is still ongoing.
Neither Sutter nor its affiliated medical foundations admit any liability, the Justice Department noted in its news release.
"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," Sutter Health said in a statement.
A growing number of seniors are opting for Advantage plans, which typically offer more benefits, including dental care, fitness reimbursement, eye exams and glasses. Medicare Advantage also receives bipartisan support and is generally seen as a more stable investment than plans in the individual market.
As about one-third of Medicare beneficiaries are enrolled in MA plans, large health systems like Sutter can expect a thorough investigation of claimed enrollees' health status, authorities said.
"Misrepresenting patients' risk results in higher payments and wasted Medicare funds," Steven Ryan, special agent in charge with HHS' Office of Inspector General, said in prepared remarks.