For decades, strikes were unheard of at Kaiser Permanente, the heavily unionized health maintenance organization that invested in a highly touted partnership with its unions. Now, increasingly, strikes are back, and so are dark warnings from union leaders about the decisions coming out of the executive suite.
A case in point: The U.S. Department of Justice announced Jan. 14 that Kaiser Permanente will pay $556 million to settle claims that it defrauded Medicare in California and Colorado to the tune of about $1 billion over a period of 10 years.
The case began with a pair of whistleblower lawsuits filed by two Kaiser employees in 2013 and 2014. The U.S. Department of Justice joined those lawsuits in October 2021. According to the lawsuits, Kaiser systematically pressured physicians to alter medical records after patient visits. The altered records caused the government to increase its payments to Kaiser under Medicare Part C, also known as Medicare Advantage.
In Medicare Advantage — a partially privatized alternative to traditional Medicare — seniors enroll in private insurance plans that offer extra benefits but require patients to use certain providers and to get prior authorization for treatment. The federal government pays a fixed amount for each Medicare beneficiary enrolled in the plans, but adjusts that amount to account for various risk factors, paying more for sicker beneficiaries.
To make those “risk adjustments,” the government collects medical diagnosis codes from the insurers. That’s where Kaiser went astray. The lawsuit says Kaiser submitted invalid diagnosis codes for Medicare Advantage Plan enrollees in order to receive higher payments from the government.
According to the government’s legal filings, Kaiser mined patients’ medical histories to identify potential diagnoses that hadn’t been submitted to Medicare, then sent “queries” urging doctors to add those diagnoses to medical records, often months or even over a year after an office visit. Kaiser set aggressive goals for doctors to add the diagnoses, singled out underperforming doctors, and linked financial bonuses to meeting the diagnosis goals. Between 2009 and 2018, Kaiser added roughly a million diagnoses.
In a statement on its web site, Kaiser said it did not admit to wrongdoing in the settlement.
“We chose to settle to avoid the delay, uncertainty, and cost of prolonged litigation,” said the statement. “Multiple major health plans have faced similar government scrutiny over Medicare Advantage risk adjustment standards and practices.”
That much is true. According to reporting in The New York Times, the kind of coding fraud alleged against Kaiser has become widespread: Five of the 10 largest insurers have either settled a federal civil fraud suit or currently face one.
