On 11 December 2018 the Department of Justice (DOJ) announced that it had intervened in a False Claims Act suit against Sutter Health and its affiliate Palo Alto Medical Foundation. The suit, originally filed in March 2015 by a former risk adjustment manager at Palo Alto Medical, alleged that Sutter knowingly submitted unsupported diagnosis codes for Medicare Advantage patients in order to increase reimbursements from Medicare.

The relator's complaint alleged that Sutter received "hundreds of millions of dollars in inflated capitation payments" based on risk adjustment data that Sutter knew was inaccurate, incomplete or false, and retained payments from the Centres for Medicare and Medicaid Services (CMS) that it knew constituted overpayments. Specifically, the relator's complaint focused on an alleged "system-wide failure" to train Sutter physicians on proper hierarchical condition category (HCC) coding and to audit the accuracy of the HCCs submitted for payment. The relator allegedly notified Sutter of the overpayments and initiated a return of millions of dollars in refunds to the CMS, but Sutter took "steps to throttle [the] Relator's efforts" by directing her to stop auditing and submitting corrections.

The DOJ's intervention in this case is the latest example of the DOJ's aggressive enforcement under the False Claims Act in the Medicare Advantage space, despite its loss in the recent UnitedHealthcare case, which vacated CMS's Final Overpayment Rule 2014 applicable to the Medicare Advantage programme (for further details please see "Court vacates Medicare Advantage overpayment rule and curtails DOJ's pursuit of False Claims Act damages"). Providers in the industry will be watching to see how the DOJ focuses the allegations in this matter when it files its complaint in intervention on or before 4 March 2019.

Copies of the relator's complaint and the DOJ's Notice of Election to Intervene can be found here and here.

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