Sutter Health, a California-based health care services provider, and several affiliated entities including Sutter Bay Medical Foundation (dba Palo Alto Medical Foundation, Sutter East Bay Medical Foundation, and Sutter Pacific Medical Foundation) and Sutter Valley Medical Foundation (dba Sutter Gould Medical Foundation and Sutter Medical Foundation) (collectively, “Sutter Health”), have agreed to pay $90 million to resolve allegations that Sutter Health violated the False Claims Act by knowingly submitting inaccurate information about the health status of beneficiaries enrolled in Medicare Advantage Plans.

Under Medicare Advantage, also known as the Medicare Part C program, Medicare beneficiaries have the option of enrolling in managed health care insurance plans called Medicare Advantage Plans. The plans are paid a capitated, or per-person, amount to provide Medicare-covered benefits to beneficiaries who enroll in one of their plans. Payments to plans are based on demographic information and the health status of each plan beneficiary. In general, plans receive larger payments for beneficiaries with more severe diagnoses.

Sutter Health, headquartered in Sacramento, contracted to provide health care services to California beneficiaries enrolled in certain plans. In exchange, Sutter Health received a portion of the payments for treating the beneficiaries under its care.
The government alleged that Sutter Health knowingly submitted unsupported diagnosis codes for certain patient encounters for beneficiaries under its care. These unsupported diagnosis codes caused inflated payments to be made to the plans and to Sutter Health. The lawsuit further alleged that, once Sutter Health became aware of these unsupported diagnosis codes, it failed to take sufficient corrective action to identify and delete additional unsupported diagnosis codes.

“The government relies on health care providers, including those furnishing services to Medicare Part C beneficiaries, to submit accurate information to ensure proper payment,” said Deputy Assistant Attorney General Sarah E. Harrington of the Justice Department’s Civil Division. “Today’s result sends a clear message that we will hold health care providers responsible if they knowingly provide or fail to correct information that is untruthful.”

“Today’s settlement exemplifies our commitment to fighting fraud in the Medicare program,” said Acting U.S. Attorney Stephanie M. Hinds for the Northern District of California. “Health care providers who flout the law need to know that my office will hold accountable those who pad their bottom line at taxpayer expense.”

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