Sutter Health to return $30 million to Medicare Advantage for alleged false claims | News | Palo Alto Online |


Sutter Health to return $30 million to Medicare Advantage for alleged false claims

A separate lawsuit regarding Palo Alto Medical Foundation remains

In order for all area residents to have important local information on the coronavirus health emergency, Palo Alto Online has lifted its pay meter and is providing unlimited access to its website. We need your support to continue our important work. Please join your neighbors and become a subscribing member today.

The health care provider that operates Palo Alto Medical Foundation has agreed to pay the federal government $30 million to settle a major lawsuit for allegedly submitting false information about the health status of Medicare Advantage Plan beneficiaries, the U.S. Department of Justice announced Friday.

Sutter Health LLC, a California-based health care services provider headquartered in Sacramento, and several of its affiliated entities were sued for allegedly violating the federal False Claims Act by submitting inaccurate billing codes related to the patients' health status. The false claims allegedly netted Sutter millions of dollars in overpayments.

The DOJ filed a separate federal complaint in March of this year in support of a whistleblower lawsuit filed in March 2015 against Sutter and Palo Alto Medical Foundation alleging the same practices. Kathleen Ormsby, a former employee of the foundation, filed the 2015 lawsuit under whistleblower provisions of the False Claims Act, which permits private parties to sue on behalf of the government for false claims and to receive a share of any recovery. The act also allows the government to intervene or join in whistleblower lawsuits.

Medicare offers a program called Medicare Part C, which has managed health care insurance plans called Medicare Advantage Plans owned and operated by private Medicare Advantage Organizations or MAOs. The program provides benefits to as many as one-third of Medicare beneficiaries, DOJ officials said in a statement. The Centers for Medicare and Medicaid Services adjusts payments to these plans based on demographic information and the health status of each beneficiary. Patients with more serious conditions receive a higher "risk score," which gets higher reimbursement rates from Medicare.

Sutter contracted with Medicare Advantage organizations to provide health care services to California beneficiaries who were enrolled in the organizations' plans. Sutter received a share of the payments the organizations received from Medicare for those patients. It allegedly submitted diagnoses codes for the patients to the organizations for services such as office visits and hospital stays. But the codes were for more serious diagnoses than patients had and resulted in the patients having higher risk scores. Sutter's reimbursement from the federal government was higher for those purported serious illnesses, according to the Department of Justice.

Last December, during a discussion over the allegations related to Palo Alto Medical Foundation, Sutter company officials appeared to be banking on a September 2018 court ruling that found the standards in the Overpayment Rule under the Affordable Care Act were inconsistent between Medicare Advantage and other Medicare programs. Medicare Advantage plans contain more diagnosis codes than in traditional Medicare, which could lead to "overpayments" when compared to traditional Medicare costs for the same patient, the court noted. While the False Claims Act applies to willful false coding, the Overpayment Rule has a broader standard under which it penalizes the Medicare Advantage organizations.

But if the government proved that Sutter "knowingly" provided false information as defined under the False Claims Act, Sutter could be held liable for the overpayments.

On Friday, federal officials maintained that Sutter knowingly submitted the claims with the incorrect codes.

"Misrepresenting patients' risk results in higher payments and wasted Medicare funds," Steven J. Ryan, special agent in charge with the Office of Inspector General for the U.S. Department of Health and Human Services, said in a press release. "With some one-third of people in Medicare now enrolled in managed care Advantage plans, large health systems such as Sutter can expect a thorough investigation of claimed enrollees' health status."

The DOJ noted that claims resolved by the settlement are only allegations, and had no determination of liability.

Other Sutter entities involved in the settlement include Sutter East Bay Medical Foundation, Sutter Pacific Medical Foundation, Sutter Gould Medical Foundation and Sutter Medical Foundation.

Sutter didn't respond to the Weekly's questions on how or if the $30 million cost might affect patient services at Sutter facilities, but did provide an email statement on the settlement as a whole.

"This settlement reflects our decision to resolve a dispute with the federal government over whether Sutter Health and certain affiliated medical foundations received overpayments after submitting claims for reimbursement through the Medicare Advantage program," said Lisa Page, vice president of communications and public relations for Sutter.

"As the Department of Justice noted in its press release, the claims being resolved are allegations only, and neither Sutter nor its affiliated medical foundations admit any liability. With respect to the reimbursement claims at issue in the pending litigation, we look forward to the opportunity to explain why neither Sutter Health nor Palo Alto Medical Foundation violated the False Claims Act," Page said.


Follow the Palo Alto Weekly/Palo Alto Online on Twitter @PaloAltoWeekly and Facebook for breaking news, local events, photos, videos and more.

We need your support now more than ever. Can we count on you?


33 people like this
Posted by Neal
a resident of Community Center
on Apr 13, 2019 at 6:04 pm

Neal is a registered user.

This doesn't surprise me one bit. Over the years I've had numerous billing disputes with Sutter at Palo Alto Medical Foundation. I've prevailed in all those disputes. They have a habit of over billing and over charging insurance companies. It's called up coding. Make sure the medical procedure code number on your bill matches the treatment your received. If the code number is not on the bill, call them and ask for it if you think something is amiss. You can Google the procedure code to get a precise definition. For example, I was billed for three colonoscopies. They said they would correct the bill. The next bill was for two colonoscopies. After much ado, they finally conceded they made a "mistake" and I only had one colonoscopy. This was deliberate and not just a clerical error.

1 person likes this
Posted by CaliGirl7x7
a resident of another community
on Apr 13, 2019 at 7:29 pm

Sue, this is very interesting, considering Medicare Supplement programs will no longer be offered after this year, but patients who currently have supplements will be grandfathered. New Medicare enrollees will have to purchase Plan C Medicare HMO plans, potentially opening the door for more fraudulent billing.

13 people like this
Posted by Rick Scott
a resident of Greater Miranda
on Apr 13, 2019 at 9:14 pm

Who do they think they are?

Rick Scott?

1 person likes this
Posted by Barbara
a resident of Downtown North
on Apr 15, 2019 at 12:11 pm

I wonder how many people miss the long-ago "private physicians"?? I sure do - whenever I need to make an appointment.

Like this comment
Posted by ChrisC
a resident of College Terrace
on Apr 15, 2019 at 10:35 pm

ChrisC is a registered user.

Doesn't Surprise me either. I think they are bilking the government of many thousands of dollars on their behavioral health coding. I thought about trying to report it. It’s too bad, because they have really fine doctors there.

Like this comment
Posted by Anon
a resident of Another Palo Alto neighborhood
on Apr 16, 2019 at 10:34 am

I'm still confused about the status of Sutter Health. On the web, it calls itself a "non-for-profit health system" based in Sacramento, and, lists PAMF as a "subsidiary". Does PAMF have an independent existence, or, not? Could PAMF take itself out of Sutter? I admit that in recent years, I've become more and more dissatisfied with PAMF. But, I'm not sure if that is specifically Sutter's fault, or, the entire insurance-driven health system we have now, where every question you ask a doctor has to become a "code" and billed separately.

3 people like this
Posted by Abigail
a resident of Professorville
on Apr 20, 2019 at 6:18 am

I too am not surprised. For decades my family went to PAMF - wonderful doctors, staff, administrators. Several years ago we started noticing real differences when a family member had an acute serious illness. During these stressful weeks we were being sent for procedures that didn’t make sense and then getting charges for things not done - like 3 CAT scans. Hours, days and weeks were spent trying to resolve - while dealing with illness - and each step only led to more disturbing observation of absolutely no regard for the patient. Patient services use to be wonderful but now they are skilled at falsely pretending to care about the patient while focusing on how to protect Sutter - not make it better for both doctors and patients. Even someone in the billing department (as I was crying over this torture) confided it was all true and she couldn’t take it anymore and was leaving. I applaud the DOJ for their work, but Sutter has probably been getting away with this and will probably continue. After this incident my entire family and several friends left Sutter. Most of us went to Stanford’ - night and day difference!!

Like this comment
Posted by Jennifer
a resident of South of Midtown
on Apr 25, 2019 at 9:23 pm

Sutter took over PAMF and it's worse ever since. Sutter doctors push people to get physical examinations and then use them to add on health problems to the exams and refer them to their specialists only. My mother in law's doctor said she had to get a physical. She did and died the following month. Sutter got easy free money from insurance for the physical and tests. Sutter did not care about her after she died. When she was alive, they loved her for making appointments to get more insurance money. If Sutter keeps ripping off Medicare and other insurances, it raises the costs of health care for every person in America.

Don't miss out on the discussion!
Sign up to be notified of new comments on this topic.


Sorry, but further commenting on this topic has been closed.

Get fact-based reporting on the COVID-19 crisis sent to your inbox daily.

Singapore's oldest cafe was about to open in Palo Alto. Then, the coronavirus hit.
By Elena Kadvany | 2 comments | 5,896 views

Coronavirus Food Safety Update + New! Insider Tips
By Laura Stec | 7 comments | 5,297 views

A Pragmatic Approach to A Trillion Trees
By Sherry Listgarten | 4 comments | 4,214 views

Repairing a Disagreement with your Beloved & “Physical” vs. “Social” Distancing
By Chandrama Anderson | 2 comments | 2,903 views

The University of California’s flexible policies during COVID-19
By John Raftrey and Lori McCormick | 6 comments | 2,759 views



The 34th Annual Palo Alto Weekly Short Story Contest is now accepting entries for Adult, Young Adult and Teen categories. Send us your short story (2,500 words or less) and entry form by April 10, 2020. First, Second and Third Place prizes awarded in each category. Sponsored by Kepler's Books, Linden Tree Books and Bell's Books.

Contest Details