Sutter to pay $30M to settle Medicare Advantage overpayment allegations – Healthcare Dive

Dive Brief:

  • Sacramento, California-based Sutter Health has agreed to pay $30 million to settle allegations of overpayment related to Medicare Advantage, the Department of Justice said Friday. DOJ noted the settlement is not a determination of liability.
  • Sutter is accused of inflating the risk scores of some MA beneficiaries to receive higher capitated payments. Risk scores are meant to measure the health status of a beneficiary and, typically, the higher the risk score, the sicker the beneficiary.
  • According to the original complaint filed in federal court in Northern California, Sutter and its affiliates sell 10 MA plans through three private insurance companies, covering about 48,000 beneficiaries.

Dive Insight:

As Medicare Advantage’s popularity surges among seniors, the DOJ warned it will remain vigilant in its review of claims and payments. More than 20 million seniors are enrolled in MA plans across the country, nearly double from just a decade ago.

“With some one-third of people in Medicare now enrolled in managed care Advantage plans, large health systems such as Sutter can expect a thorough investigation of claimed enrollees’ health status,” Steven Ryan, special agent in charge with the HHS Office of Inspector General, said in a statement.

In a statement provided by Sutter Health, Lisa Page, a spokeswoman, said, “As the Department of Justice noted in its press release, the claims being resolved are allegations only, and neither Sutter nor its affiliated medical foundations admit any liability.”

A separate case involving similar allegations is ongoing, according to the DOJ, which filed a complaint to join the continuing lawsuit brought by a former employee of a Sutter affiliate.  

With respect to the reimbursement claims at issue in the pending litigation, we look forward to the opportunity to explain why neither Sutter Health nor Palo Alto Medical Foundation violated the False Claims Act,” Page said.

CMS is changing up its methodology for calculating the risk scores in its MA plans to include a higher blend of encounter data, as opposed to fee-for-service claims data. Payers have opposed the change.

DOJ has ramped up investigation of healthcare fraud in recent years. Last week, the department indicted 24 people, including leaders at telemedicine and durable medical equipment companies, for a $1.2 billion scheme involving unneeded medical devices in exchange for kickbacks. DOJ touted its largest healthcare fraud case ever last year with a $2 billion false billing claim involving about 600 people.

MA plans have been a lucrative line of business for payers and have fueled membership growth.

Those plans now cover roughly 34% of all Medicare beneficiaries, and this year plans are receiving payment for services that in the past have been viewed outside of the scope of traditional care. For example, plans can receive reimbursement for adult daycare services or meals, all of which is geared toward improving overall health.

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