The United States District Court for the Northern District of California has denied a motion to dismiss the third-amended complaint in a federal False Claims Act (FCA) lawsuit against Kaiser Foundation Health Plan (Kaiser), a Medicare Advantage Organization.  The FCA lawsuit was brought by Kaiser’s former Managing Director of Fixed Income and Liability Management, and alleges that Kaiser submitted false claims relating to its status as a Medicare Advantage Organization.

The third-amended complaint alleges that, under the Medicare Advantage program, a Medicare Advantage Organization is paid annually on a capitated basis, rather than a fee-for-service basis, to cover healthcare services for enrollees.  To determine the amount of reimbursement to which the Medicare Advantage Organization is entitled, the organization must submit “the amount of medical costs, administrative costs, and profit margin it will require to provide benefits to the average Medicare Advantage patient.”  The lawsuit contends that the profit margin of a Medicare Advantage Organization is developed by the organization in accordance with bid instructions promulgated by the Centers for Medicare and Medicaid Services (CMS) and that the 2008 and 2009 CMS bid instructions required that the profit margin submitted in the bid filings be within a narrow range of the profit margin for the health plan’s other lines of business.

The lawsuit contends that Kaiser violated the FCA by submitting bids for its Medicare Advantage plans in 2008 and 2009 that were outside of CMS’s specified profit margin ranges.  As the former executive alleges, Kaiser’s knowingly false certifications that its bids complied with CMS bid instructions were material to the Government’s decision to accept the bids, to allow Kaiser to participate in the Medicare Advantage program, and to pay money to Kaiser.  The lawsuit maintains that the submission of the false certifications of the bids, coupled with Kaiser’s application for payment, constitute false claims under the FCA.

The court’s order paves the way for the lawsuit to proceed to discovery.

Review the court’s order by clicking here.  A copy of the relator’s third-amended complaint is available by clicking here.