Sutter Health to Pay $90 Million to Settle Medicare Fraud Allegations


Specifically, Sutter Health allegedly knowingly submitted thousands of false diagnosis codes to Medicare Advantage Plans. The hospital system also allegedly intentionally caused the submission of thousands of false diagnosis codes to the Centers for Medicare and Medicaid Services (CMS).

The CMS pays  Medicare Advantage Plans a capitation amount using its risk-adjusted methodology for every beneficiary. Payments to plans are based on the demographic information and health status of every beneficiary. Plans receive higher payments for beneficiaries with more severe diagnoses.

Sutter Health receives a portion of the payments for providing treatments to beneficiaries of Medicare Advantage Plans.

The submission of false diagnosis codes, which are used in CMS’ risk adjustment of payments is a false claim under the FCA. The false diagnoses codes caused CMS to pay higher payments to Medicare Advantage Plans and to Sutter Health.

Additionally, the U.S. government and Ormsby alleged that the hospital system did not take sufficient corrective action to determine and delete additional diagnosis codes when it became aware of the inaccurate submissions.

Details of the settlement

Under the settlement, Sutter Health and its affiliates entered into a five-year Corporate Integrity Agreement (CIA) with the U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG).