DOJ Settles False Claims Act Suit Against Medicare Advantage Provider
On March 26, 2025, the U.S. Department of Justice (DOJ) announced that it settled a False Claims Act (FCA) action against a California-based healthcare provider and a separate radiology group for allegedly submitting and conspiring to submit false diagnosis codes to increase payments from the Medicare Advantage program.1 The recent settlement underscores DOJ's continued commitment to combat healthcare fraud in the Medicare Advantage program, including by targeting diagnosis coding by healthcare providers.
Background
Medicare Advantage, also known as Medicare Part C, gives seniors the option to receive Medicare benefits by enrolling in private healthcare plans. The Centers for Medicare & Medicaid Services (CMS), which oversees the Medicare program, pays Medicare Advantage plans a fixed amount each month for each enrolled senior. CMS then adjusts that amount to account for the health status and demographic characteristics of a given plan's enrolled population—a process known as "risk adjustment." For enrollees with more severe health conditions based on the diagnosis codes reported by their providers, CMS pays the plan more to cover the higher expected costs of treatment. The plan, in turn, pays healthcare providers for the items and services they provide to its members out of the revenue it receives from CMS.
Seoul Medical Group (SMG) employs both primary care providers and specialists. Started in 1993 by Dr. Min Young Cha, SMG contracts with various Medicare Advantage plans to provide healthcare services to patients throughout California, as well as in Washington, Hawaii, Georgia, New Jersey and New York. Advanced Medical Management, Inc. (AMM), a subsidiary of SMG, reviews and audits SMG's financial and medical records.
In 2020, AMM's former chief financial officer filed a qui tam action against SMG and AMM in federal court in California, alleging that the defendants reported inaccurate diagnosis codes to increase the payments that SMG received and that SMG retaliated against him as a result of complaints he submitted about potential fraud.2 On March 21, 2025, DOJ partially intervened in the litigation to effectuate a settlement between the government, the qui tam relator, and SMG and AMM to resolve the alleged upcoding.
According to DOJ, from 2015 to 2021, SMG and Dr. Cha reported diagnosis codes for two severe spinal conditions—spinal enthesopathy and sacroiliitis—for Medicare Advantage plan members who did not have those conditions. When one plan questioned SMG's use of the two diagnosis codes, SMG enlisted Renaissance Imaging Medical Associates to create radiology reports that appeared to support the diagnosis. The inaccurate diagnosis codes triggered higher payments from CMS to the plans, which then passed along a portion of the increased payment to SMG.
In the settlement announced by DOJ, SMG and AMM agreed to pay $58,740,000 and Dr. Min Young Cha agreed to pay $1,760,000 to the government for allegedly causing false diagnosis codes to be submitted to CMS. Renaissance Imaging Medical Associates also agreed to pay $2,350,000 for allegedly conspiring with SMG to submit the false codes. The settlement does not appear to resolve the relator's retaliation claim. In addition, under the False Claims Act, the relator is entitled to a share of the government's recovery as well as reasonable expenses, attorneys' fees and costs.3 The parties, however, have not reached agreement on these amounts.
Key Takeaways
DOJ's settlement with SMG underscores several key points for providers and others that participate in federal healthcare programs, including the Medicare Advantage program:
- First, it is a clear reminder that Medicare Advantage remains a focus of DOJ's FCA enforcement. That focus has spanned administrations of both parties.4 The SMG settlement is consistent with other significant healthcare recoveries by DOJ in recent months, including a $60-million settlement with Oak Street Health in September 2024,5 as well as a $90-million settlement with Independent Health in December 2024.6 It is also consistent with remarks by DOJ leadership at the Federal Bar's most recent Qui Tam conference in February 2025 that the Medicare Advantage program continues to be an enforcement priority under this current administration.
- Second, risk adjustment payments in particular continue to be a central target within Medicare Advantage. The capitated payment structure creates financial incentives for plans to better manage patient care and proactively identify and comprehensively report members' health status. As a result, DOJ has taken a hard look at Medicare Advantage diagnosis coding and, in one case, is even pursuing criminal charges against a former employee of a Medicare Advantage plan for allegedly falsifying and causing others to falsify diagnoses codes.7
- Third, FCA enforcement related to Medicare Advantage encompasses not only plans, but also their providers. In 2024, the former acting head of the Civil Division previewed that DOJ expects to "expand its focus on the Medicare Part C Program to include an examination of the role that vendors and providers play in the diagnoses that are submitted to the government."8 The SMG settlement is a clear example of that expanded focus.9
- Finally, the FCA settlement with Renaissance Imaging Medical Associates signals that DOJ is also likely to sweep in diagnostic testing services like radiology where, as here, the government concludes that they have allegedly conspired with plans or providers to improperly diagnose or support health conditions that trigger higher payments from CMS. Those working with Medicare Advantage companies, including plans, providers, and vendors, should therefore be mindful of the heightened FCA scrutiny and enforcement environment.
As the government continues to pursue FCA enforcement related to Medicare Advantage, our team of experienced FCA litigators and counselors is available to provide legal counseling regarding the False Claims Act and legal developments in this area.
Footnotes
2. Complaint, U.S. ex rel. Pew v. Seoul Medical Group, Inc., No. 2:20-cv-5156 (C.D. Cal. June 10, 2020), ECF No. 1.
3. 31 U.S.C. § 3730(d).
4. Principal Deputy Assistant Attorney General Brian M. Boynton Delivers Remarks at the 2024 Federal Bar Association's Qui Tam Conference (Feb. 22, 2024) ("Another significant health care fraud priority for the department is protecting the Medicare Advantage Program, also known as Medicare Part C."); Assistant Attorney General Jody H. Hunt delivers remarks to the Federal Bar Association 2020 Qui Tam Conference (Feb. 27, 2020) ("First, the Department is investigating and litigating a growing number of matters related to Medicare Part C, which is Medicare's managed care program.").
7. WilmerHale, Client Alert, Criminal Indictment for Medicare Advantage Fraud (Nov. 17, 2023).
8. Id.
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