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Sutter Medicare Advantage Pays $90 million Due to False Data

September 1, 2021

Summary: Sutter Health (California) is paying $90 million to settle allegations that it submitted false diagnoses to increase payments to its Medicare Advantage plans. This type of gaming and fraud permeates the private insurance-run Medicare Advantage program. Let’s return to a social insurance model – traditional Medicare, without the privates. Then extend it to everyone.

Sutter Health and Affiliates to Pay $90 Million to Settle False Claims Act Allegations of Mischarging the Medicare Advantage Program
August 30, 2021
The United States Department of Justice

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) … 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.

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 claims resolved by the settlement are allegations only and there has been no determination of liability.

Comment by: Don McCanne

Sutter Health does not have a reputation of being a crooked organization. But here they have agreed to pay a penalty for knowingly submitting inaccurate information about the health status of beneficiaries enrolled in Medicare Advantage Plans. So what happened?

The primary culprits are Congress and the prior administrations. We had a publicly administered program, Medicare, that required updating so that it would function better for the beneficiaries and provide better value to the taxpayers. Instead of making the appropriate adjustments in this social program, they decided to turn it over to the private sector in the form of private Medicare Advantage plans. Thus, rather than being operated as a social insurance program primarily serving the interests of the patients, it was operated as a private business model serving the interests of the investing entity, whether nominally for profit or non-profit.

Should we have been relying on Sutter, or any other sector in the health care delivery system, to override the business model presented to them and provide their services based on a public social insurance model? That’s not the way it works.

You know, we don’t have to continue to cater to the private insurers at a cost to the beneficiary-taxpayers. We can eliminate the private insurance business model and proceed with efforts to improve the Medicare public social insurance program. The vision we have had would be such a beneficial program that it would be appropriate to extend it to everyone and thus eliminate many of the injustices in our health care system. Health justice for all. Although it took the efforts of our Department of Justice to publicize that conclusion, that is also our message here at Health Justice Monitor.


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