Affiliates of Kaiser Permanente have agreed to pay $556 million to settle allegations that they violated the False Claims Act by submitting improper diagnosis codes for their Medicare Advantage Plan members. The settlement involves Kaiser Foundation Health Plan Inc., Kaiser Foundation Health Plan of Colorado, The Permanente Medical Group Inc., Southern California Permanente Medical Group, and Colorado Permanente Medical Group P.C.
The government alleged that from 2009 to 2018, Kaiser pressured physicians in California and Colorado to change medical records after patient visits. This was allegedly done to add diagnoses not considered or addressed during those visits, allowing Kaiser to receive higher payments from Medicare under the risk adjustment system.
Medicare Advantage plans are paid a fixed monthly amount per enrollee, with adjustments based on the health status of each beneficiary. Sicker patients bring higher payments, so accurate coding is required. According to the Department of Justice, Kaiser systematically encouraged providers to use “addenda” in medical records—sometimes months or over a year after a visit—to include additional diagnoses unrelated to the actual appointment.
The United States further claimed that Kaiser set targets for physicians and facilities regarding added risk adjustment diagnoses and linked financial incentives and bonuses to meeting these goals. There were internal warnings and compliance audits within Kaiser raising concerns about these practices, but according to federal officials, these were ignored.
“More than half of our nation’s Medicare beneficiaries are enrolled in Medicare Advantage plans, and the government expects those who participate in the program to provide truthful and accurate information,” said Assistant Attorney General Brett A. Shumate of the Justice Department’s Civil Division. “Today’s resolution sends the clear message that the United States holds healthcare providers and plans accountable when they knowingly submit or cause to be submitted false information to CMS to obtain inflated Medicare payments.”
“Medicare Advantage is a vital program that must serve patients’ needs, not corporate profits,” said U.S. Attorney Craig H. Missakian for the Northern District of California. “Fraud on Medicare costs the public billions annually, so when a health plan knowingly submits false information to obtain higher payments, everyone — from beneficiaries to taxpayers — loses. We have an obligation to protect the American taxpayer from waste, fraud, and abuse and we will relentlessly pursue individuals and organizations that compromise the integrity of the Medicare program.”
“The federal government supports the health care of millions of beneficiaries by paying hundreds of billions of dollars every year to Medicare Advantage Plans,” said U.S. Attorney Peter McNeilly for the District of Colorado. “Medicare relies on the accuracy of the information submitted by those plans. This resolution sends a clear message that we will hold health care plans accountable if they seek to game the system and pad their profits by submitting false information.”
“Deliberately inflating diagnosis codes to boost profits is a serious violation of public trust and undermines the integrity of the Medicare Advantage program,” said Acting Deputy Inspector General for Investigations Scott J. Lampert at HHS-OIG. “This outcome demonstrates HHS-OIG’s commitment to protecting Medicare through a unified approach — leveraging the expertise of our investigators, auditors, and counsel, alongside our law enforcement partners. We will continue to hold accountable any entity that seeks to compromise the integrity of the risk adjustment program.”
“Healthcare programs funded by the public are meant to support patients, not pad corporate bottom lines. False claims and submission of fraudulent information weaken the Medicare system and place an unfair cost on American taxpayers who expect honesty and accountability,” said Special Agent in Charge Sanjay Virmani of FBI San Francisco Field Office. “This settlement reflects FBI's continued commitment to holding accountable those who put profits over patients and abuse federal healthcare programs.”
The settlement resolves certain claims brought under whistleblower provisions by former employees Ronda Osinek and Dr. James M. Taylor; they will receive $95 million as part of this agreement.
Officials noted that while these allegations led Kaiser affiliates into settlement negotiations with multiple federal agencies—including offices from both California and Colorado—the claims remain allegations only; there has been no determination or admission of liability.
