The Department of Justice announced this week that California-based primary care provider Seoul Medical Group, Inc. (SMG), SMG’s former president and majority owner, and California-based radiology group Renaissance Imaging Medical Associates Inc. (Renaissance) will pay a combined $62.85 million to resolve allegations of False Claims Act violations related to the submission of unsupported diagnosis codes to Medicare Advantage Organizations in order to increase reimbursement from the government.

The resolution was announced following a partial intervention for the purposes of settlement by DOJ’s Civil Division, in coordination with the U.S. Attorney’s Office for the Central District of California and HHS-OIG.

Allegations Against Seoul Medical Group

The complaint contends that SMG took the following actions:

1. Instructed and trained its providers to diagnose patients with high-reimbursement risk-adjusting diagnosis codes, sometimes in the absence of clinical support.
2. Employed a nurse to “re-write and/or modify” medical records after provider visits to add support for otherwise unsupported risk-adjusting diagnosis codes.
3. Took affirmative steps to conceal potentially unsupported codes by engaging Renaissance to create false radiology reports that appeared to support the false diagnoses.  

The allegations focus primarily on spinal enthesopathy but also reference sacroiliitis, hepatitis, arthritis, immunity disorders, coagulation defects, drug and alcohol dependence, angina pectoris, vascular disease, and autoimmune disorders, all of which were risk-adjusting diagnoses impacting reimbursement during the relevant time.

Failure to Correct Unsupported Codes

There is also a focus on SMG’s purported failure to correct unsupported codes detected during an audit by third-party Advanced Medical Management, Inc. (AMM).  The relator—a former EVP and CFO of AMM–alleges that AMM first detected a prevalence of unsupported diagnosis codes in 2017 and recommended that SMG correct and delete the unsupported diagnosis codes and implement corrective action, but that SMG did not do so. SMG acquired AMM in 2018 and reportedly terminated certain AMM personnel, including the relator, in an alleged effort to “prevent any correction” to the previously submitted unsupported diagnoses or change coding practices.

Finally, the relator contends that one of SMG’s Medicare Advantage payor partnersquestioned SMG’s “dramatically increasing risk scores,” in 2017.  In response, the complaint alleges that SMG “convinced [the payor] that the incident of such diagnosis codes was unique to the Korean patients served by SMG” and hired Renaissance to create fake reports to support the diagnoses.

Broader Implications of the Settlement

Here, and as we often see in Medicare Advantage enforcement cases, one of the focus areas is the failure to correct allegedly known data inaccuracies. However, what stands out to us are the allegations that the provider group did not just fail to retract the unsupported diagnoses, but also took affirmative steps to falsify the medical record in an apparent attempt to conceal unsupported diagnosis codes after issues were detected by outside parties, signaling facts that go beyond coding and documentation concerns. 

We also note that all of the diagnoses referenced here have been considered historically “high risk” from an enforcement perspective and that some, including spinal enthesopathy, will no longer impact risk-based scores and corresponding payments under CMS’s new risk adjustment model (v28).  

More broadly, the settlement demonstrates a sustained enforcement focus on risk adjustment fraud in the Medicare Advantage space and comes on the heels of a $98 million settlement with MA provider Independent Health.

Several other risk adjustment cases continue to be litigated, including U.S. ex rel. Poehling v. UnitedHealth Group, Inc. et al., United States ex rel. Osinek v. Kaiser Permanente, U.S. ex rel. Khushwinder Singh v. Aledade Inc., and Zafirov v. Florida Medical Associates, LLC. Our Healthcare Fraud & Abuse Review 2024 provides additional detail on recent developments in Medicare Advantage enforcement.

For more information about Medicare Advantage enforcement, please subscribe to this blog or contact the authors or a member of the Bass, Berry & Sims Healthcare Fraud & Abuse Task Force.