Kaiser Permanente's $556 Million Settlement: Medicare Advantage Compliance Failures
Kaiser Permanente has reached a historic $556 million settlement over allegations of reporting unsupported diagnosis codes to Medicare Advantage. This marks the largest fraud settlement of its kind, highlighting significant regulatory compliance failures. The allegations centered around California and Colorado incidents between 2009 and 2018, where Kaiser was accused of breaching the False Claims Act.
Understanding Medicare Advantage Risk Adjustment
The core of the case involves Medicare Advantage risk adjustment, a critical component where the Centers for Medicare & Medicaid Services (CMS) determine payments to health plans based on patient diagnosis codes. These payments escalate with the patient's health condition severity, creating potential incentives for misreporting.
Allegations of Non-compliance and Misconduct
Federal prosecutors alleged that Kaiser pressured physicians to amend medical records post-visit, inserting diagnoses not evaluated during patient encounters. This practice relied on post-visit documentation addenda, which the Justice Department cited as non-compliant with CMS documentation policies, particularly when recorded months or years later and unrelated to provided care.
Kaiser was reportedly using data analysis tools to uncover undisclosed diagnoses and set high benchmarks for coding accuracy, tying physician incentives to these entries. Consequently, this resulted in an estimated $1 billion in improper payments due to around 500,000 added diagnoses.
Legal and Industry Implications
The case stemmed from multiple qui tam lawsuits filed by former Kaiser employees and physicians, incentivized under the False Claims Act. Whistleblowers are expected to receive approximately $95 million. Kaiser's decision to settle was driven by a wish to avoid protracted litigation, emphasizing differing interpretations of Medicare risk-adjustment documentation requirements and acknowledging similar challenges faced by other health plans.
Impact on the Healthcare Industry
This settlement emphasizes the importance of regulatory compliance, especially for Ambulatory Surgery Centers (ASCs) and physicians, underlining ethical coding practices' significance. It underscores the Department of Justice's dedication to ensuring integrity in Medicare Advantage billing and serves as a warning against submitting inaccurate documentation to CMS.
The settlement aligns with ongoing investigations into Medicare Advantage practices, with numerous major health insurance providers under scrutiny for potential upcoding and risk adjustment infractions.