FINED: Tax-Exempt Sutter Health Defrauds Medicare

Posted on 09/02/2021

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) (collectively, “Sutter Health”) got caught with Medicare fraud. The non-profit health care system agreed to fork over US$ 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.

Even large healthcare systems are tempted by Medicare fraud. Sutter Health is headquartered in Sacramento.

Under the U.S. DOJ press release, “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.”

In connection with the settlement, Sutter Health, Sutter Bay Medical Foundation, and Sutter Valley Medical Foundation entered into a five-year Corporate Integrity Agreement (CIA) with the U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG). The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act by Kathy Ormsby, a former employee of Palo Alto Medical Foundation.

Sutter Health is a not-for-profit organization, yet many of their executives make well over US$ 1 million in annual compensation.

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