The United States has intervened in six complaints pending in Northern California federal court, alleging that members of the Kaiser Permanente consortium violated the False Claims Act by submitting inaccurate diagnosis codes for its Medicare Advantage Plan enrollees in order to receive higher reimbursements. The Kaiser Permanente consortium members are headquartered in Oakland, California.

The six lawsuits were filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private parties to sue on behalf of the government and to receive a share of any recovery. The Act also permits the government to intervene in such lawsuits, as it has done here.

Ronda Osinek was the first-filed case and was followed by five other cases: Taylor, Arefi, Stein, Bryant, and Bicocca.The cases were consolidated in June 2021.

The Defendants’ filed a motion to dismiss based on the first-to-file bar in the False Claims Act . The Act provides that “When a person brings an action under this subsection, no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.”

The court therefore was required to compare the Osinek Complaint with the complaints in the other cases to determine whether the cases are related, and thus the plaintiff who was the first-to-file only is allowed to proceed. The federal judge in a May 5 46 page ruling, allowed some claims but the majority of the claims were denied.

In the discussion leading up to the ruling, the opinion provides an excellent summary, if not a full treatise, on how sophisticated such efforts at “upcoding” and other Medicare billing strategies have become.

Adjustments are made to the payments to Medicare Advantage Plans based on demographic information and the diagnoses of each plan beneficiary. The adjustments are commonly referred to as “risk scores.” A beneficiary with more severe diagnoses will have a higher risk score, and CMS will make a larger risk-adjusted payment to the MA Plan for that beneficiary.

How can this be the subject of a whistleblower claim? Osinek alleged that starting around 2007, Kaiser Permanente began a “scheme to upcode diagnoses to ensure Medicare payments for reimbursable, high-value conditions.” This was done was by use of data mining for high value cases, and then determining the diagnoses its doctors would need to make to support the Medicare reimbursement.

She then alleges that there is “an escalation process for physicians who do not agree with the data mining prompts”; “[p]hysicians will have to meet one-on-one with Data Quality Trainers if they refused to make diagnoses changes that are presented by data mining”; “physicians have personal report cards based on how they perform in certain areas [including response to refreshing and data mining prompts], which are tied to their compensation”; and there are “mandatory meetings called ‘coding parties,’ where physicians are gathered in a single room with computers and asked to review past progress notes for addenda related to revised medical diagnoses.”

Another strategy was “refreshing” with Osinek alleging that “Kaiser tracks and rewards physicians based on the percentage of chronic conditions they are able to capture and refresh.” If a patient has a chronic condition, then that condition must be rediagnosed each year ” i.e., refreshed. She alleged the doctor would be told to include the chronic condition as a diagnosis for a visit even if that condition was not at issue in the patient visit.
And Kaiser allegedly provided guidance or policies that supported upcoding. For example, “Kaiser told its physicians to diagnose chronic kidney disease instead of the lower value nephritis or nephropathy.”

Kaiser allegedly had its doctors use addenda to retroactively diagnose – e.g., long after a patient visit, for a condition for which the patient was not treated at the time of the face-to-face visit, based on tests run after the face-to-face visit, to change a diagnosis to a higher value and more complicated form of disease, without proper support/documentation, and/or using boilerplate language.

The 46 page Opinion, then compares and contrasts the allegations in the Osinek complaint, with those in the other cases, which then exposes nuances and embellishments. For example, Dr. Taylor in his complaint claims that his differs from the Osinek Complaint because he has made allegations about Kaiser’s Natural Language Processing (“NLP”) software. “All face-to-face visits to a physician or hospital . . . are run through the NLP software to identify new diagnoses that might be appropriate to use for submission of additional risk adjustment claims.” And goes on to argue that “different frauds were implicated in each case.”

The Court concluded that the nature of wrongdoing claimed by Dr. Taylor here involves different “material elements” from Osinek.

“The Taylor case is not dismissed in its entirety but only in part. Taylor differs materially from Osinek in three ways: (1) Taylor points to a nationwide or corporate-wide problem whereas Osinek is local or regional (i.e., California-centric) in nature; (2) Taylor has identified a fraud related to external providers rather than high-value conditions; and (3) Taylor asserts a problem with Kaiser failing to evaluate the True Positives results yielded by the NLP program.”

A similar process was used to evaluate the other plaintiffs, with some being dismissed in their entirety.