On January 14, 2026, the Department of Justice announced that several affiliates of Kaiser Permanente agreed to pay $556 million to resolve allegations that they violated the False Claims Act (FCA) “by submitting invalid diagnosis codes for their Medicare Advantage Plan enrollees in order to receive higher payments from the government.”
As outlined in the government’s press release, under the Medicare Advantage Program (Medicare Part C), Medicare beneficiaries may opt out of traditional Medicare and enroll in plans offered by private companies called Medicare Advantage Organizations (MAOs). Unlike Medicare Part B’s fee-for-service model, under Medicare Advantage, the Centers for Medicare & Medicaid Services (CMS) pays the MAO a fixed monthly amount for each Medicare beneficiary enrolled in their plan. The monthly payments depend upon various risk factors, with CMS paying an MAO more for sicker beneficiaries and less for healthier ones. CMS’ risk adjustment is based upon diagnoses codes that it collects from the MAO, which must be supported by the medical record of a face-to-face visit between the patient and the provider.
In this case, the government alleged that Kaiser “engaged in a scheme . . . to improperly increase its risk adjustment payments” by “systematically pressur[ing] its physicians to alter medical records after patient visits to add diagnoses that the physicians had not considered or addressed at those visits, in violation of CMS rules.” According to the press release, “Kaiser developed various mechanisms to mine a patient’s past medical history to identify potential diagnoses that had not been submitted to CMS for risk adjustment” and then sent “queries” to its providers “urging them to add these diagnoses to medical records via addenda, often months and sometimes over a year after visits. In many instances, the United States alleged, the diagnoses added by the providers had nothing to do with the patient visit in question, in violation of CMS requirements.”
The press release goes on to allege that Kaiser “singled out underperforming physicians and facilities and emphasized that the failure to add diagnoses cost money for Kaiser, the facilities, and the physicians themselves.” The DOJ also alleged that “Kaiser knew that its addenda practices were widespread and unlawful,” and “ignored numerous red flags and internal warnings that it was violating CMS rules, including concerns raised by its own physicians that these were false claims and audits by its own compliance office identifying the issue of inappropriate addenda.”
The massive settlement was the result of two whistleblower lawsuits filed under the FCA’s qui tam provisions, both brought by former employees of Kaiser, one of them a physician. The combined Relator’s share is $95 million.
This settlement is the latest in a series of large FCA settlements against Medicare Advantage Organizations and providers. For example, in December 2024, Independent Health Association, which operates a Medicare Advantage plan, agreed to pay up to $98 million to resolve allegations similar to the ones against Kaiser. In January 2025, in announcing the previous fiscal year’s FCA statistics, the DOJ including Medicare Advantage matters on a list of its top FCA enforcement priorities. And in March 2025, Medicare Advantage provider Seoul Medical Group, agreed to pay over $62 million to resolve an FCA qui tam. Based on the government’s success in obtaining these significant settlements, is likely that we will see more large FCA settlements related to Medicare Advantage in 2026 and beyond.
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The attorneys at Chilvis Grubman represent healthcare providers of all types and sizes in connection with government investigations and False Claims Act litigation. If you need assistance with such a matter, please contact us.