California-Based Physician Group to Pay $62.8M Over False Spinal Diagnoses

Los Angeles-based Seoul Medical Group Inc., its subsidiary Advanced Medical Management Inc., and a radiology group have agreed to pay $62.8 million to resolve allegations they falsely inflated Medicare claims for patients with non-existent spinal conditions.

The Seoul Medical Group and Advanced Medical Management are responsible for $58.7 million of the penalty, while Seoul Medical’s former president/majority owner Dr. Min Young Cha is paying $1.76 million and radiology group Renaissance Imaging Medical Associates Inc. is paying $2.35 million to the U.S. government for allegedly conspiring with Seoul Medical Group over the false spinal diagnoses.

The defendants are accused of violating the False Claims Act by submitting bogus diagnosis codes for two spinal conditions in order to increase payments from the Medicare Advantage program.

“Medicare Advantage is a vital program for our seniors and the government expects healthcare providers who participate in the program to provide truthful and accurate information,” said Acting Assistant Attorney General Yaakov M. Roth of the U.S. Justice Department’s Civil Division. “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.”

Under Medicare Advantage (or Medicare Part C program), beneficiaries enroll in managed care insurance plans called Medicare Advantage Plans (MA Plans); these MA Plans contract with healthcare providers such as Seoul Medical Group to provide Medicare-covered benefits. MA Plans are paid a per-person amount to provide care to enrollees and, in turn, the MA Plans pay the providers. The Centers for Medicare and Medicaid Services (CMS), which oversees the Medicare program, adjusts the payments to MA Plans based on demographic information and the diagnosis of each plan beneficiary. The adjustments are commonly referred to as “risk scores.” In general, beneficiaries with diagnoses that are more expensive to treat will have a higher risk score, and CMS will make a larger risk-adjusted payment to the MA Plan for that beneficiary.

“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,” stated Deputy Inspector General for Investigations Christian J. Schrank of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). “HHS-OIG will continue to collaborate with our law enforcement partners and rigorously probe false claims to the fullest extent possible.”

Seoul Medical Group is a healthcare provider founded in 1993 in Los Angeles that has expanded into at least six states and employs (at times) 150 primary care providers and 1,000 specialists. Dr. Cha was president and majority owner until 2023.

For six years (2015-2021) Seoul Medical Group and Dr. Cha submitted bogus diagnoses for two severe spinal conditions—spinal enthesopathy and sacroiliitis—from which patients did not suffer, according to U.S. prosecutors . When questioned by an MA Plan about its use of spinal enthesopathy, Seoul Medical Group enlisted the help of Renaissance Imaging Medical Associates to create radiology reports that appeared to support the spinal enthesopathy diagnosis. Both diagnoses resulted in higher payments from CMS to the MA Plan, and the MA Plan then passed along a portion of the increased payment to Seoul Medical Group.

“My office is committed to ensuring that healthcare providers are held accountable for unlawful misrepresentations to Medicare and other healthcare programs,” said Acting U.S. Attorney Joseph T. McNally for the Central District of California. “As this settlement makes clear, we will diligently pursue those who defraud government programs.”

The civil settlement resolves claims brought under the qui tam or whistleblower provisions of the False Claims Act by Paul Pew, former vice president and chief financial officer of Advanced Medical Management. Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery.  The qui tam case is captioned U.S. ex rel. Pew v. Seoul Medical Group Inc., et al. The relator’s share of the settlement has not yet been determined.

The resolution obtained in this matter was the result of a coordinated effort between the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section, and the U.S. Attorney’s Office for the Central District of California, with assistance from the Department of HHS-OIG.

The matter was investigated by Fraud Section Attorneys J. Jennifer Koh and Robbin O. Lee and Assistant U.S. Attorney Karen Paik for the Central District of California.