Sutter Health settlement ends fraud lawsuit

Sutter Health has settled with the U.S government over charges of knowingly inflating Medicare costs for $90 million, the Department of Justice said Monday.

The Sacramento-based health care provider and its affiliates in Palo Alto, the East Bay and Central Valley were accused of violating the False Claims Act and inflating payments received under Medicare by submitting inaccurate patient information. The government alleged that Sutter didn’t correct the discrepancies when it became aware of them.

Sutter’s settlement includes a five-year Corporate Integrity Agreement with the government that includes an independent review of some medical records and data.

Sutter didn’t admit wrongdoing as part of the settlement. “Today’s agreements bring closure to a long-running dispute, allowing Sutter to avoid the uncertainty and further expense of protracted litigation, and enabling a constructive relationship with the government as we work together under the Corporate Integrity Agreement,” the health care nonprofit said.

Sutter patients in the Medicare Advantage program have the option of enrolling in private insurance plans, with Medicare paying a higher amount for patients with higher health risk scores. Sutter was accused of increasing the scores and payments with false diagnosis codes.

“Today’s settlement exemplifies our commitment to fighting fraud in the Medicare program,” said Stephanie Hinds, acting U.S. attorney for the Northern District of California, in a statement. “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.”

Kathleen Ormsby, a former employee of Palo Alto Medical Foundation, filed a whistleblower lawsuit in 2015 related to the allegations. The federal government joined the lawsuit in 2018.

Separately, a California judge gave final approval last week to a $575 million settlement between Sutter and the state, unions and employees over antitrust charges. Former California Attorney General Xavier Becerra sued Sutter in 2018, arguing the health care system raised prices and harmed patients through its large market share.