California-Based Hospital Agrees to $90 Million Settlement After Whistleblower Lawsuit

Sutter Health, a California-based hospital operator, has just agreed to a $90 million settlement regarding claims that it overcharged the federal government by misrepresenting the needs of patients using private Medicare Advantage plans.

This settlement is the result of a 2015 whistleblower lawsuit filed by a former employee of a Sutter Health affiliate. It’s the second-largest Medicare Advantage fraud settlement ever and the largest settlement under the False Claims Act for the program.

Sutter Health’s actions may have led to hundreds or thousands of misdiagnoses and medical record errors. If the fraudulent claims were also placed on patients’ records, then those patients may be suffering from health impacts even while their Medicare plans are being drained.  Here’s what you need to know about the Sutter Health lawsuit, why insurance fraud can affect patients’ health, and what it means for you.

Why the Lawsuit Took Place

Sutter Health was first sued in 2015 after whistleblower Kathy Ormsby informed the government about rampant insurance fraud being performed by the hospital operator. The lawsuit alleged that Sutter Health had knowingly submitted inaccurate information about the health status of Medicare Advantage beneficiaries.

The fraud allegedly took advantage of a quirk in Medicare payments. Healthcare providers who provide treatment to people on Medicare plans receive a per-person sum for each patient. In general, people with more “severe” diagnoses lead to the provider receiving a larger sum because of the assumption that their care is more complex.

According to the lawsuit, Sutter Health was inflating many of its patients’ diagnoses and insurance codes. This would lead to the provider receiving funds beyond what was deemed necessary to care for the patients. Specifically, the provider submitted unsupported codes that led to inflated payments and continued to submit these codes after becoming aware that they were unsupported.

The False Claims Act

The False Claims Act (FCA) plays a significant role in the Sutter Health lawsuit. The FCA is intended to protect people who “blow the whistle” on fraudulent insurance practices and incentivize accurate reports. One way that the FCA accomplishes this is by positively connecting the whistleblower to any lawsuits filed.

This is known as a “whistleblower reward.” Essentially, if the government recovers money through a case filed due to a whistleblower’s report, the whistleblower is entitled to a percentage of the amount recovered.

The False Claims Act is fair from the only way that California disincentivizes insurance fraud. Fraudulent claims against private companies are barred under the California Insurance Fraud Prevention Act (CIFPA). Like the FCA, whistleblowers can receive bounties for bringing suit under the CIFPA on behalf of the state.

These laws have two significant impacts on fraud. First, they incentivize every single person connected to health insurance filing to watch out for false claims. Second, they heavily disincentivize the perpetration of fraud since any one employee or patient could receive significant compensation for helping the government recover funds.

How Insurance Fraud Harms Patients

There are good reasons for the laws against insurance fraud. Fraudulent claims damage the entire healthcare system. Not only do they drain the resources of insurance plans, they actively harm patients.

For example, in the Sutter Health case, the provider was billing Medicare for unsupported insurance codes and diagnoses. These claims remain part of patients’ permanent medical records. By using these unsupported codes, Sutter Health was permanently affecting patients’ medical histories.

While the Department of Justice press release on the case doesn’t state whether the diagnoses themselves were inflated, they state that the payments were higher than appropriate. This implies that the patients were diagnosed with more severe conditions than they truly had. They may be overtreated for the rest of their lives unless their inflated diagnoses are rectified.

Even when a patient’s diagnosis isn’t affected, fraud is still damaging. For example, in private insurance, many patients need to pay for a portion of the care they receive. If a provider knowingly performs actions like double billing or fabricating claims, they may be forcing their patients to pay for care they haven’t received and can’t afford.

What to Do If You Suspect Insurance Fraud

Unfortunately, insurance fraud is more common than you’d think. You may already be suffering from fraud that’s affecting your medical records.

Monitor your insurance. You know what services and procedures you’re receiving when you go to the doctor. You need to make sure that your bills actually reflect the medical care you received. For example, you should read every invoice to ensure that you’re not being doubled-billed or billed for services you haven’t received. You should also check diagnoses listed in your insurance bills to make sure they align with what you’ve been told by your physician.

Monitor your medical records. You can request copies of your medical records at any time. If you suspect that your healthcare practitioner is committing fraud, you should immediately get copies of your records. They will list procedures and diagnoses that may not be easy to find through your insurance. Again, your records should line up with the care and diagnoses you know you’ve received.

Find an excellent attorney. Once you believe your insurance, medical records, or health have been impacted by fraud, it’s time to work with a qualified attorney. A lawyer with experience handling medical malpractice, misdiagnoses, and medical record errors will be able to help you make your case and get your health records fixed.

In combination, these three tactics can help you spot and resolve fraud and potentially act as a whistleblower on a larger problem.

Don’t Let Fraud Ruin Your Health

Insurance fraud can harm so much more than your finances. If your medical team is committing fraud, it can also affect your health. Whether they charge you for care you don’t receive or diagnose you with conditions you don’t have, they’re preventing you from getting the help you need. You should take action to reclaim your right to accurate, fraud-free medical records and care. Reach out today to schedule your consultation and discuss your case.

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