Kaiser Permanente Affiliates Settle Medicare Risk Adjustment Fraud Case For $556 Million

On January 14, the Department of Justice (DOJ) announced that five Kaiser Permanente affiliates agreed to pay $556 million to resolve allegations that they violated the False Claims Act (FCA) by submitting unsupported diagnosis codes for Medicare Advantage (MA) beneficiaries to increase reimbursement from the federal government. The relators will receive approximately $95 million as their share of the recovery.

Key Points

1. At $556 million, this represents the largest FCA settlement involving allegations of MA risk adjustment fraud to date, far eclipsing prior MA risk‑adjustment settlements, including Cigna ($172 million, 2023) and Independent Health ($100 million, 2024).
2. No Corporate Integrity Agreement (CIA) has been publicly announced despite CIAs being a common government tool used in major healthcare fraud settlements. It remains to be seen whether Kaiser will be added to the Department of Health and Human Services (HHS) Office of Inspector General's (OIG) “Heightened Scrutiny” list for providers who refuse to enter into CIAs or if Kaiser avoided the oversight and reporting obligations typical of CIAs, such as hiring an Independent Review Organization, submitting annual compliance reports, implementing enhanced employee training, and adopting additional written policies and procedures.

The announcement also comes on the heels of an unrelated class action settlement, preliminarily approved in December 2025, in which Kaiser agreed to establish a $46 million fund to resolve claims that its websites and mobile applications impermissibly disclosed members' information to third parties between 2017 and 2024.

Background & Allegations

Under the MA program, the Centers for Medicare & Medicaid Services (CMS) adjusts payments to Medicare Advantage Organizations (MAOs) based, in part, on MA enrollees' health conditions and the expected costs to manage their care. MAOs receive higher monthly payments from CMS when beneficiaries have documented diagnoses that increase their assigned “risk scores.” The higher the risk score, the higher the payment.

The Kaiser matter began as a series of qui tam actions brought under the FCA, alleging that improper coding and documentation practices in place between 2009 and 2018 resulted in artificially inflated risk scores. On July 30, 2021, DOJ partially intervened and consolidated the actions in the Northern District of California. After several years of litigation and discovery, the court granted a 90‑day stay in October 2025 to permit settlement negotiations. The January 2026 settlement resolves those matters.

The government's allegations included the following:

• Data mining and medical record addenda.  DOJ alleged that Kaiser developed mechanisms to identify potential diagnoses that had not been submitted and then sent “queries” to providers, encouraging them to add those diagnoses via medical‑record addenda, sometimes months to more than a year after the patient visit. Notably, the complaint included allegations involving both factually inaccurate diagnoses and clinically accurate but legally noncompliant diagnoses, and the court allowed both theories to survive motions to dismiss.
• Targets and incentives.  DOJ further alleged that Kaiser established aggressive internal targets for securing addenda, scrutinized underperforming physicians and facilities, and tied performance evaluations and financial incentives to meeting risk‑adjustment objectives.
• Failure to delete unsupported diagnoses. The government also claimed that Kaiser ignored internal warnings, including from its own compliance personnel and physicians, that the addenda practices violated CMS regulatory and sub-regulatory requirements, and that Kaiser failed to remove diagnoses later determined to lack clinical support, allowing inflated risk scores to persist.

According to DOJ, these practices generated approximately $1 billion in unsupported payments from CMS associated with nearly 500,000 diagnoses added through addenda.

Implications of the Kaiser Settlement

Broadly, the settlement fits squarely within an increasingly active MA enforcement landscape and underscores DOJ's willingness to pursue theories tied to diagnosis capture and chart‑review practices, even absent allegations of compromised quality of care. DOJ has repeatedly emphasized MA enforcement as a priority, including through its recent relaunch of the joint DOJ–HHS False Claims Act Working Group, which considers MA enforcement first among its focus areas. Other recent resolutions—including Cigna's $172 million settlement involving chart reviews and in‑home assessments and the $62 million settlement with Seoul Medical Group and related parties for alleged false spinal diagnoses—demonstrate that both plans and downstream participants remain targets of scrutiny.

The Kaiser settlement may also foreshadow heightened enforcement attention on data analytics and artificial intelligence (AI) tools. Here, DOJ's allegations focused on large‑scale diagnosis “mining” and addenda practices, mechanisms that, in today's environment, are increasingly driven or augmented by machine‑learning and large language model‑enabled technologies that surface, suggest, or auto‑populate diagnoses in ways that may inflate reimbursement.

Congressional oversight further reinforces this trend. Earlier this week, the Senate Judiciary Committee released a report asserting that UnitedHealth Group “turned risk adjustment into a major profit‑centered strategy,” highlighting what it characterized as aggressive diagnosis‑capture tactics and extensive data‑ and AI‑driven capabilities. Meanwhile, CMS has moved to expand Risk Adjustment Data Validation (RADV) audits and apply extrapolation beginning with Payment Year 2018, a policy move that, despite a 2025 district‑court vacatur now on appeal, signals the agency's intent to defend robust MA oversight and pursue recovery of overpayments at scale. In addition, effective January 5, 2026, CMS implemented an online provider complaint form allowing for the submission of standardized complaints regarding MA plan practices, including those related to risk adjustment.

Taken together, these developments point to continued—and potentially expanding—MA enforcement activity in the coming year.

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