Osinek v. Kaiser Permanente
- Edward Chen
- 3:13-cv-03891
- U.S. District Court · Northern District of California
- 9
In Osinek v. Kaiser Permanente, Judge Chen granted in part and denied in part Kaiser’s dismissal motion, dismissing KFHP and allowing Dr. Taylor’s narrowed claims to proceed.
Dr. James Taylor’s claims against the Kaiser entities were affected. Kaiser Foundation Health Plan, Inc. was dismissed with prejudice, while Taylor’s claims against Kaiser Foundation Health Plan of Colorado and Colorado Permanente Medical Group P.C. were allowed to proceed within the limits stated by the court.
What happened
In Osinek v. Kaiser Permanente, the court considered Kaiser’s request to dismiss Dr. James Taylor’s third amended complaint under the False Claims Act. Taylor alleged that Kaiser submitted diagnosis codes for Medicare risk-adjustment payments even after audits identified coding errors, while pursuing additional codes that increased revenue.
The court dismissed Kaiser Foundation Health Plan, Inc. because Taylor did not substantively oppose Kaiser’s argument for dismissing that entity. The court otherwise found that Taylor adequately described potentially material coding errors, including diagnoses unsupported by medical records or inconsistent with coding guidelines. The court said Taylor could not leave the complaint open-ended by asserting additional categories of errors without a good-faith basis.
The court granted in part and denied in part Kaiser’s motion to dismiss. Dr. Taylor may proceed against the remaining defendants on claims aligned with the government’s allegations, but not on conclusory claims involving other types of coding errors. Judge Edward M. Chen ordered Kaiser to answer within 45 days.
The detailed version
- Osinek v. Kaiser Permanente · No. 3:13-cv-03891
- Edward Chen
- June 15, 2023
Background
This False Claims Act case includes claims brought by the United States, Dr. James Taylor, and Gloryanne Bryant and Victoria M. Hernandez against various Kaiser entities. The order addressed only Kaiser’s motion to dismiss Dr. Taylor’s third amended complaint.
Taylor alleged three related theories involving Kaiser’s audits of diagnosis codes used for Medicare risk-adjustment claims. According to the allegations described in the opinion, Kaiser’s audits identified high error rates, including codes that were unsupported by medical records or violated coding requirements, but Kaiser allegedly did not correct those errors while pursuing additional diagnoses that could increase revenue.
The court had previously dismissed Taylor’s second amended complaint but allowed him to amend. It had found that he sufficiently alleged falsity but had not adequately alleged materiality—the requirement that the alleged false claims mattered to the government’s payment decision—or a sufficient basis for holding Kaiser Foundation Health Plan, Inc. liable.
Claims Against Kaiser Foundation Health Plan, Inc.
The court held that Taylor waived opposition to dismissal of Kaiser Foundation Health Plan, Inc. Although he continued to name that entity in the third amended complaint, his opposition brief did not substantively respond to Kaiser’s argument that the entity should be dismissed. The court therefore dismissed Kaiser Foundation Health Plan, Inc. with prejudice.
The court stated that Taylor’s remaining case was essentially against Kaiser Foundation Health Plan of Colorado and Colorado Permanente Medical Group P.C. The opinion also notes that two other Kaiser entities had been dismissed in a prior order.
Materiality
The court concluded that Taylor adequately pleaded materiality in the third amended complaint. The complaint alleged that the relevant errors involved diagnoses that were not supported by medical records, were not made consistently with applicable coding guidelines, did not affect patient care or treatment, concerned resolved conditions, or relied on uncertain language such as a beneficiary “possibly” having a condition.
The court also relied on allegations that the Centers for Medicare & Medicaid Services bases risk-adjustment payments on diagnosis codes, that Kaiser’s audits identified the challenged categories as unacceptable for submission, and that Kaiser knew the government considered the codes material. The court rejected Kaiser’s argument that Taylor had merely repeated legal requirements without alleging meaningful errors.
The court cautioned, however, that Taylor could not pursue conclusory allegations about additional categories of coding errors. The opinion states that, if he later believed other categories of materially improper coding existed, he could seek permission to amend under the Federal Rules of Civil Procedure.
Disposition
The court granted in part and denied in part the motion to dismiss Dr. Taylor’s third amended complaint. Kaiser Foundation Health Plan, Inc. was dismissed with prejudice. Taylor’s case was allowed to proceed against the remaining defendants to the extent it was aligned with the government’s allegations, but not to the extent it relied on conclusory allegations about other types of coding errors. The court ordered Kaiser to file an answer within 45 days and stated that the order disposed of Docket No. 250.
Read the full 9-page opinion on CourtListener, the free public archive maintained by the Free Law Project.