Seoul Medical to Pay $62M in Medicare Fraud Settlement

Seoul Medical to Pay $62M in Medicare Fraud Settlement

Introduction

Seoul Medical Group Inc., along with its subsidiary Advanced Medical Management Inc., both based in California, have agreed to pay $58.74 million to resolve allegations of violating the False Claims Act.

These allegations involve the submission of inaccurate diagnosis codes related to spinal conditions to inflate payments from the Medicare Advantage program. Additionally, the former president and majority owner of the companies has agreed to a separate settlement of $1.76 million.

Radiology Group Also Pays to Settle Related Allegations

Renaissance Imaging Medical Associates Inc., a California-based radiology group, has also entered into a settlement agreement. The group will pay $2.35 million for allegedly conspiring with Seoul Medical Group in connection with the false spinal diagnoses. This brings the total settlement amount across the involved parties to over $62.8 million.

How Medicare Advantage Payments Work

Medicare Advantage, also known as Medicare Part C, allows Medicare beneficiaries to enroll in private managed care plans (MA Plans) that contract with providers to offer Medicare-covered services. The Centers for Medicare & Medicaid Services (CMS) pays these plans a fixed amount per enrolled beneficiary. This amount is adjusted based on the demographic and health profile of each individual, a process known as risk adjustment. More severe diagnoses lead to higher risk scores and, consequently, increased payments to the MA Plan.

Alleged Fraudulent Diagnoses and Financial Gain

Between 2015 and 2021, Seoul Medical Group allegedly submitted false diagnoses for two serious spinal conditions—spinal enthesopathy and sacroiliitis—for patients who did not have these conditions. These misrepresented diagnoses led to higher risk scores and larger payments from CMS to the MA Plans. The plans then shared a portion of the increased funds with Seoul Medical Group.

When questioned by an MA Plan about the use of the spinal enthesopathy diagnosis, Seoul Medical Group is said to have involved Renaissance Imaging Medical Associates to produce radiology reports that falsely supported the diagnosis. These reports helped to justify the false claims and secure higher payments from the federal government.

Enforcement of Healthcare Integrity

Officials emphasized the importance of protecting the Medicare Advantage program and holding providers accountable. Acting Assistant Attorney General for the Justice Department’s Civil Division stated that the government expects honest and accurate reporting from healthcare providers. “Today’s result sends a clear message to the Medicare Advantage community that the United States will zealously pursue appropriate action against those who knowingly submit false claims for taxpayer funds,” the official said.

The Acting U.S. Attorney for the Central District of California echoed this sentiment, asserting the office's commitment to pursuing those who defraud government healthcare programs. “As this settlement makes clear, we will diligently pursue those who defraud government programs,” he stated.

Consequences for Misusing Public Healthcare Funds

A representative from the Department of Health and Human Services Office of Inspector General (HHS-OIG) emphasized the impact of such fraudulent activity. “Providers who game the Medicare program to increase profit undermine the foundation of care and diminish patient trust in the nation’s public health care system,” the official said. He also reaffirmed the department’s dedication to investigating and addressing false claims in collaboration with law enforcement partners.

Whistleblower Filed Suit Under the False Claims Act

The civil settlement stems from a lawsuit filed under the qui tam provisions of the False Claims Act. The whistleblower in this case is a former Vice President and Chief Financial Officer of Advanced Medical Management.  The False Claims Act allows private individuals to sue on behalf of the federal government and potentially receive a portion of the settlement proceeds. The whistleblower’s share of this particular recovery has yet to be determined.

Government Agencies Cooperated in the Investigation

The successful resolution of this case was the result of a coordinated effort between several government agencies. The Justice Department’s Civil Division, the Commercial Litigation Branch's Fraud Section, the U.S. Attorney’s Office for the Central District of California, and the HHS-OIG all contributed to the investigation.

Upholding the Integrity of Medicare

This case highlights the federal government’s ongoing focus on combating healthcare fraud, especially within Medicare Advantage. The False Claims Act remains a key legal tool in the government’s efforts to preserve the integrity of public healthcare programs and protect taxpayer dollars.