Kaiser Permanente has agreed to pay $556 million to settle Justice Department allegations that it systematically billed Medicare for medical conditions patients did not have, marking the largest Medicare Advantage fraud settlement in history. The landmark agreement, announced by the Department of Justice on January 14, resolves claims that five Kaiser affiliates violated the False Claims Act over nearly a decade.
The settlement addresses allegations that from 2009 to 2018, Kaiser engaged in a scheme to inflate Medicare reimbursements by pressuring physicians to add diagnoses after patient visits through addenda to medical records. Federal investigators found that Kaiser developed mechanisms to mine patients' past medical histories to identify potential diagnoses that had not been submitted to the Centers for Medicare and Medicaid Services for risk adjustment purposes.
According to the government's complaint, Kaiser added approximately half a million diagnoses during the period in question, generating roughly $1 billion in improper payments from federal healthcare programs. The scheme involved systematic pressure on medical staff to alter records in ways that maximized government reimbursements regardless of patients' actual health conditions.
The case originated when two Kaiser employees blew the whistle on the healthcare provider's practices more than a decade ago. These whistleblowers will receive approximately $95 million as their share of the recovery under the False Claims Act's qui tam provisions, which reward individuals who report fraud against the government.
Kaiser Permanente issued a statement emphasizing that the settlement involves no admission of wrongdoing or liability, stating they chose to settle to avoid the delay, uncertainty, and cost of prolonged litigation. The $556 million settlement far exceeds previous Medicare Advantage fraud settlements, including Cigna's $172 million settlement in 2023 and Independent Health's $100 million settlement in 2024, signaling increased federal scrutiny of billing practices in the Medicare Advantage program.