Osinek v. Kaiser Permanente

Background

This False Claims Act case includes claims brought by the United States, Dr. James Taylor, and relators Gloryanne Bryant and Victoria M. Hernandez. This order addressed Kaiser’s motion to dismiss Bryant and Hernandez’s second amended complaint. The complaint asserted that Kaiser entities used inaccurate medical coding and documentation in the Affordable Care Act’s risk-adjustment program, including alleged overcoding of conditions such as ventilator dependence, malnutrition, arrhythmia, major depression, and aortic atherosclerosis.

The relators advanced three theories: (1) Kaiser submitted inaccurate risk-adjustment data and certifications; (2) Kaiser’s conduct caused the government to pay excessive premium tax credits; and (3) Kaiser was ineligible to participate in the Affordable Care Act exchanges, making related payments false claims. The court applied the standard for a motion to dismiss, under which factual allegations are accepted as true and must make liability reasonably plausible.

Rulings on the False Claims Act theories

The court made no concrete ruling on the third, eligibility-based theory because Kaiser’s motion did not clearly address it. The court stated that the theory appeared problematic, including because the relators had not clearly shown that inaccurate risk adjustment alone made an insurer ineligible to participate in the exchanges.

As to the first theory, the court rejected Kaiser’s argument that a risk-adjustment certification could not be a claim for payment. The court held that participation in the Affordable Care Act risk-adjustment program could constitute an implicit request for money presented to the United States. The court also rejected Kaiser’s argument that the relators’ allegations were merely conclusory.

The court held that the relators adequately pleaded falsity for alleged schemes involving two medical conditions: ventilator dependence and malnutrition. The allegations concerning ventilator dependence plausibly covered coding patients who received only short-term ventilation, although the court found that coding based solely on 21- or 30-day timeframes was not inherently inconsistent with the coding rules. For malnutrition, the court found plausible the allegations that doctors co-signed dietitians’ notes even though those notes alone were not sufficient medical documentation.

The court found no viable Affordable Care Act claim based on aortic atherosclerosis. It also found the allegations concerning arrhythmia and major depression inadequate. The court further held that the relators had not adequately pleaded a broad, condition-independent scheme to defraud, but granted leave to amend that theory. The court found materiality adequately pleaded for the ventilator-dependence and malnutrition theories, based in part on the alleged connection between diagnosis codes and risk-adjustment payments.

The court rejected the second theory, which alleged that Kaiser’s coding caused other insurers to charge higher premiums, thereby increasing the government’s premium tax-credit payments. The court found that theory too speculative and based on an indirect chain of causation. The court dismissed those claims with prejudice because amendment would be futile.

Conspiracy and defendant-specific allegations

The court allowed the conspiracy claim to proceed only to the extent it alleged bilateral conspiracies between an insurer and an affiliated medical group or hospital. It held that the complaint did not plausibly allege one overarching conspiracy involving all Kaiser health plans, medical groups, and hospitals. The court did not grant leave to amend the overarching-conspiracy theory at that point, while stating that the relators could later seek permission to amend if discovery provided a good-faith basis.

The court also held that the relators had adequately alleged wrongdoing by Kaiser entities in California and the Northwest region, but not by entities in the other regions identified in the complaint. The court granted leave to amend to identify specific wrongdoing by additional Kaiser entities.

Disposition

The court granted in part and denied in part Kaiser’s motion to dismiss. Claims based on ventilator dependence and malnutrition, within the limits described in the order, could proceed. Claims based on the premium-tax-credit theory were dismissed with prejudice. The relators had 45 days to file an amended pleading consistent with the order, and Kaiser then had 45 days to respond.