Osinek v. Kaiser Permanente

Background

The consolidated cases alleged that various Kaiser entities submitted false claims for payment to the federal government under Medicare Part C, also called Medicare Advantage. Medicare Advantage plans receive payments that are adjusted according to beneficiaries’ demographic information and reported medical conditions. The complaints alleged that Kaiser entities increased those payments by improperly adding or exaggerating diagnosis codes, including codes for high-value conditions.

Ronda Osinek filed the first case in 2013. Five later cases—Taylor, Arefi, Stein, Bryant, and Bicocca—were eventually consolidated with it. The United States intervened in part and declined to intervene in part. The defendants moved to dismiss the later-filed cases under the False Claims Act’s first-to-file bar, which prevents a person other than the government from bringing a related action based on the facts underlying a pending action.

Legal rulings

The court held that the False Claims Act’s first-to-file bar is jurisdictional, meaning that it limits the court’s authority to hear a later action. Applying Ninth Circuit precedent, the court held that it must compare Osinek’s original complaint with the original complaints in the later-filed cases. Later amendments could not create jurisdiction that did not exist when a case was first filed.

The court rejected an “identical facts” test. Instead, it applied a “material facts” test: a later case is barred when it alleges the same material elements of fraud as the earlier case, even if it provides different details. The practical question was whether Osinek’s complaint gave the government enough information to investigate the fraud alleged in a later complaint. The court also held that naming different Kaiser entities does not automatically avoid the bar; the result depends on whether the first complaint alleged a local problem or a broader corporate-wide scheme.

Application to the consolidated cases

Taylor. The court did not dismiss Taylor based merely on the different defendants or the broader geographic scope alleged there. Osinek was California-focused, while Taylor alleged a nationwide or corporate-wide problem. The court found that some Taylor allegations—concerning Kaiser’s failure to respond to high error rates for high-value diagnoses—were based on the same underlying problem as Osinek: unsupported or improper coding of high-value conditions. Those allegations were barred. The court found other Taylor allegations materially different and not barred: improper coding by external providers, and Kaiser’s alleged failure to evaluate “True Positive” results from its natural-language-processing software. Taylor was dismissed in part, but not in its entirety.

Arefi. The Arefi plaintiffs did not oppose dismissal. The order’s conclusion states that Arefi was dismissed in its entirety.

Stein. Stein alleged improper coding involving sepsis and malnutrition. The court found those allegations overlapped with Osinek’s allegations about improper upcoding, including unsupported diagnoses and malnutrition as a high-value condition. Although Stein suggested that its allegations extended beyond California, the court found that Taylor’s broader allegations already encompassed the relevant nationwide conduct. Stein was dismissed in its entirety. The court also rejected the request for leave to amend because its analysis was limited to the original Stein complaint.

Bryant. Bryant alleged improper coding involving Medicare Advantage and the Affordable Care Act, as well as retaliation claims. The court held that the Affordable Care Act allegations concerned a different program and distinct claims from the Medicare Advantage allegations in Osinek. The retaliation claims were also not subject to the first-to-file bar identified in the motion. Bryant was dismissed in part, with retaliation claims and claims based on fraud in the Affordable Care Act program surviving.

Bicocca. Bicocca acknowledged that its original complaint was barred but argued that an amended complaint added a different theory. The court held that the original complaint had to be compared with Osinek’s complaint and that the amended complaint could not change that result. It also stated that, even if the amended complaint were considered, its allegations about requiring physicians to reconfirm prior diagnoses were essentially the “refreshing” conduct already raised in Osinek. Bicocca was dismissed except for claims under the California False Claims Act, which the defendants had not contested for purposes of the first-to-file bar.

Disposition

Judge Edward M. Chen granted in part and denied in part the defendants’ motion to dismiss. The order states:

- Arefi and Stein were dismissed in their entirety. - Taylor was dismissed except for claims alleging a nationwide or corporate-wide fraud, improper coding by external providers, and fraud based on True Positive results from the natural-language-processing program. - Bryant was dismissed except for retaliation claims and claims based on fraud in the Affordable Care Act program. - Bicocca was dismissed except for claims based on the California False Claims Act.

The order disposed of Docket No. 141.