Keller Grover LLP attorney Kate Scanlan recently appeared on a podcast with her client Kathy Ormsby, the whistleblower behind a lawsuit against Sutter Health that was settled last year for a record $90 million.

In the podcast, Ms. Ormsby describes the frustration and worry after uncovering what she believed was fraud at her workplace and learning her employer would not take steps to correct it. She also discusses how she trusted Ms. Scanlan to take her case.

You can listen to the entire Fraud in America podcast, hosted by Jeb White, president of Taxpayers Against Fraud, here. Ms. Scanlan is also a member of TAF and Chair of the Public Education Committee working to educate potential relators about whistleblower laws and how they work.

Ms. Ormsby alleged in her complaint that Sutter defrauded the government as part of its Medicare Part C program, known as Medicare Advantage, through the submission of inaccurate and unsupported medical information that artificially inflated the reimbursement Medicare provides for Sutter’s Medicare Advantage patients. She also alleged that Sutter and its affiliate defrauded the government by claiming its patients were treated for conditions they either did not have or were not treated for, which increased their risk scores and how much the government reimbursed Sutter for their care.

The $90 million payout by Sutter Health represented the largest False Claims Act settlement against a hospital system involving allegations of fraud on the Medicare Advantage program, and the second-largest reported Medicare Advantage fraud settlement ever.

On the podcast, Ms. Ormsby says she “literally fell out of my chair” when she was working for Sutter and discovered fraud while conducting an audit.

“Why it matters so much to me was they received money to take care of patients that were sick, and these patients weren’t sick,” she said. “From the best of my recollection, 70 percent of the patients I looked at had a stroke every year for four years. … I mean, it doesn’t take a rocket scientist to know people don’t have strokes year over year, they usually die.

“I went in and I looked at the records, and it was one after the other, after the other, after the other. And it was the same for fractures and cancer. 

“And so, Sutter was getting all this money to manage all these poor people (who really didn’t have these conditions). This is taxpayers’ dollars.”

Ms. Ormsby, a coder certified by the American Association of Professional Coders, described the resistance she faced from Sutter management for doing her job.

“They started asking questions like ‘Why are you looking back? Why are you looking at old stuff?’” she said.

Ms. Ormsby had told Sutter staff that she was required to look back if errors had been found.

“My certification says … you have to look both ways, you have to do the right thing, and if you see something that’s wrong, you need to look back and make sure that there isn’t a trend. … And if it has been going on, what are you going to do to correct it?’

“I kept sending emails and going to meetings with vice presidents and saying, ‘Hey, this is what’s going on here. You need to send this money back.’ 

“My boss gave me a phone call and she said ‘You and your team are to immediately stop coding. I want no more auditing taking place. Period.’”  

Worried she would lose her certification if the fraud was uncovered by investigators and it appeared she had something to do with it, Ms. Ormsby looked for legal help.

“I started Googling ‘What do you do when you see fraud?’” she said.

Ms. Scanlan’s name came up. Ms. Ormsby gave her a call and explained her situation.

“I’ve reached out to Medicare. I’ve documented absolutely everything from the day I started. And I said, ‘What do I need to do to protect myself?’” she recalled. “And (Ms. Scanlan) said, ‘Wow, we need to talk. Are you free this week? This is a whistleblower case. The way you protect yourself is to report this to the government’ … That’s how it started.”

Ms. Scanlan says they “hit it off like a house on fire right from the first call.” 

“Every single turn,” Ms. Scanlan said, “I would ask Kathy a question and she’d be like, ‘Hold on a second.’ And then she pulled out a document with evidence that answers whatever the question was. That was really, really important.”

The biggest hurdle for Ms. Ormsby was maintaining the seal in the case, which prevented her from telling her friends and family about the lawsuit she had filed, and then being interviewed by the government.

“It’s extremely stressful because obviously I couldn’t talk to anyone or tell anybody what was going on,” she said.

Ms. Ormsby described passing through a metal detector at the courthouse the day she went to her first interview with the U.S. Attorneys.

“That was one of the most stressful things that happened that day,” she said, “because I felt like ‘Wow, this is what it feels like to be a criminal’ and I’m like, ‘No, I’m not a criminal. You know, I’m doing the right thing.’”

Ms. Scanlan said what Ms. Ormsby was able to accomplish through her whistleblower case was significant not just for financial accountability, but for healthcare accuracy.

“Kathy was finding inaccuracies in these patients’ medical records … If we have learned nothing during the pandemic, it is that people are evaluating your risk of disease based on your comorbidities,” Ms. Scanlan said, “and if your health records are not accurate, you are not going to get the best quality care …

“I think that that is a critical message out of this, is that we all need accurate records and accurate documentation.”

Medicare currently covers about 56 million people, almost one-fifth of the U.S. population, and the number of beneficiaries on Part C in 2023 is expected to approach 50 percent of that number as open enrollment continues.

As Ms. Ormsby’s case shows, government programs of this size present an opportunity for large-scale fraud. If you are a coder with information about fraud in Medicare Part C, contact Keller Grover for a confidential, free consultation. We can advise potential whistleblowers about the best path forward from the very beginning, helping minimize the impact of reporting, protect rights and achieve the best possible outcome for the situation.