SACRAMENTO, Calif. (CN) — A Sacramento federal judge on Tuesday dismissed portions of a suit brought by a former Kaiser Permanente employee who claimed the health care giant defrauded the government out of millions of dollars through improper overpayments.
However, U.S. District Court Judge Dale Drozd allowed some of the claims to continue, giving the former employee three weeks to file an amended complaint.
Jeffrey Mazik, who served as senior practice leader for Kaiser’s National Compliance Office, filed suit in 2019. He said the defendants — several entities that fall under the Kaiser umbrella — used false information that resulted in inflated payments since 2008. Mazik also said they misused software intended to catch errors by disabling key features.
“The more that (Mazik) spoke up about unsupported diagnosis codes and overpayments, and the more that he ‘tried to steer Kaiser in the direction of full compliance,’ the more he was ‘sidelined and closed out from data and documents,’” Drozd wrote in his decision.
Mazik’s complaint hit an obstacle that ultimately led to its partial dismissal: Another similar lawsuit was already filed.
Mazik is a relator under the law, meaning he told the government about the fraud under the False Claims Act. However, Kaiser argues that Mazik can’t sue because that act prohibits it, as he wasn’t the first person to accuse the health care consortium of the actions described in the complaint.
The judge agreed, except regarding the claim that Kaiser interfered with compliance software that affected its ability to catch faulty information that led to overpayments. That specific accusation isn’t in the first filed complaint.
Drozd also dismissed retaliation claims against the Permanente Medical Group, Southern California Permanente Medical Group and Colorado Permanente Medical Group, but said Mazik can amend them. Mazik’s retaliation claims against the Kaiser Foundation Health Plan and Kaiser Foundation Hospitals remain, as does his claim under the California False Claims Act.
"This is an important victory not only for Mr. Mazik but for everyone who cares about access to high quality health care," said attorney Adam Pollock, a partner at Pollock Cohen LLP, the law firm representing Mazik. "We believe — and the court agrees — that giant health care providers like Kaiser should not and cannot rig the game to put profits over care. We are very gratified by the court's decision."
The fraud accusations stem from diagnosis codes, which are used to determine the amount government programs like Medicare reimburse a health care provider.
According to Mazik, the Permanente Medical Group, Southern California Permanente Medical Group and Colorado Permanente Medical Group give diagnosis codes to the Kaiser Foundation Health Plan, which passes them to the federal Centers for Medicare & Medicaid Services, and the federal agency uses the codes to adjust its rates.
“More severe diagnosis codes lead to higher capitation rates, resulting in greater profits for all defendants," Drozd writes.
Medicare places requirements on health care groups like Kaiser in an attempt to stop improper diagnosis coding. The groups must certify their accuracy as a prerequisite to getting paid.
Mizak’s job focused on compliance and fraud control measures. He also investigated possible fraud and created plans about fraud risk.
During his time at Kaiser, Mizak encountered a series of compliance issues.
In 2015, some employees found $5.3 million in overpayments. These came from the deactivation of certain “rules” in software. No executive acted when Mizak reported the finding.
In February 2016, Mizak found significant overpayments because of improper diagnosis codes. None of his superiors requested an investigation and his superiors took steps to stop him from any further investigation.
Around seven months later, Mizak audited regional office claims from August 2010 through July 2016. He discovered that inflated diagnosis codes caused $209 million in Medicare Advantage overpayments, $181 million in Medi-Cal overpayments and $181 million in other Medicaid programs.
Mizak was fired in January 2017.
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