On March 26, the Department of Justice (“DOJ”) announced that a California-headquartered healthcare provider, Seoul Medical Group Inc. (“Seoul Medical”), its former president and majority owner, and a Seoul Medical subsidiary were ordered to pay over $62 million for violating the False Claims Act. According to the DOJ, Seoul Medical allegedly submitted false diagnosis codes to increase payments from the Medicare Advantage Program. A radiology group that also worked with Seoul Medical agreed to pay $2,350,000 for allegedly conspiring with Seoul Medical.
According to the qui tam relator, who filed a complaint in June 2020, Seoul Medical and its president and former owner allegedly engaged in a scheme of falsifying diagnoses to drive up payments. From 2015 to 2021 they allegedly submitted false diagnosis codes for two severe spinal conditions (spinal enthesopathy and sacroiliitis) that were unsubstantiated by patients’ medical records. The false diagnoses resulted in higher risk scores, which translated into inflated payments from Medicare Advantage plans to the medical group. To carry out the scheme, the group allegedly instructed physicians to diagnose patients with certain medical conditions and the CEO allegedly gave presentations and circulated lists that suggested diagnosis codes. A radiology group also created radiology reports to support the false diagnoses.
The qui tam relator, who was the former Vice President and Chief Financial Officer of Seoul Medical’s subsidiary, brought claims for relief under the whistleblower or qui tam provisions of the False Claims Act (“FCA”), alleging violations of 31 U.S.C. § 3729(a) and 31 U.S.C. § 3730(h) of the FCA. The FCA’s whistleblower provisions allow private parties to file actions on behalf of the United States and receive a portion of the recovery. The whistleblower’s, or relator’s, share of the recovery has yet to be determined. In announcing the settlement, the DOJ noted that there has been no determination of liability against any of defendants in the case and that the claims brought were only allegations.
This case underscores the DOJ’s renewed interest in FCA enforcement, which we can expect to continue given the Trump administration’s recent shift in enforcement priorities.
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