By: Christopher Parrella, Esq., CPC, CHC, CPCO
Parrella Health Law, Boston, MA.
A Health Care Provider Defense and Compliance Firm

The Department of Justice (DOJ) is making clear that its Medicare Advantage (MA) fraud enforcement strategy is no longer limited to insurers such as UHC. Independent medical groups participating in risk-sharing contracts with MA plans are now in the crosshairs especially those submitting unsupported diagnoses that inflate patient risk scores. The recent $58.74 million settlement with California-based Seoul Medical Group (SMG) should serve as a wake-up call to all physician-led entities engaged in value-based care.

From Plans to Providers: A Shift in Enforcement

The DOJ’s settlement with SMG highlights how provider groups are now being held directly accountable for inflated Hierarchical Condition Category (HCC) coding. SMG allegedly submitted diagnoses of severe spinal conditions, spinal enthesopathy and sacroiliitis, for patients who did not have those conditions, leading to higher MA plan payments from CMS. SMG then received a share of those inflated payments under its capitation arrangements. When one MA plan raised concerns, SMG allegedly collaborated with a radiology group to create backdated imaging reports to justify the diagnoses.

This mirrors DOJ’s approach in its False Claims Act case against UnitedHealthcare and others (discussed in our previous blog), where the government alleged that QuantaFlo testing was used to create unsupported peripheral artery disease diagnoses. In both cases, the government emphasized that federal healthcare dollars were misused through risk-score manipulation whether driven by internal pressure or third-party coordination.

FCA Risk Drivers: From Problem Lists to Compensation Models

Inadequate HCC training, problematic use of EHR-integrated problem lists, and shifting the coding burden to physicians are all red flags for compliance. As highlighted in the SMG case and industry commentary, over-reliance on active problem lists, failure to use combination ICD-10 codes, and unclear documentation around “chronic” versus “active” conditions can all lead to inflated coding and eventually, civil and criminal exposure.

Moreover, physician compensation models that reward high risk scores or HEDIS performance may raise anti-kickback or False Claims concerns or both if they effectively incentivize unsupported diagnoses. Even well-intentioned internal education materials could be construed as improper coaching if they appear to prioritize revenue over accuracy.

Bottom Line: Intent Matters but So Does the Appearance of Abuse

The SMG and UHC cases show that DOJ is zeroing in on the upstream coding practices of MA providers and the incentives that drive them. Small and midsize medical groups participating in risk-bearing arrangements must assume they are on DOJ’s radar. If you’re a provider group operating under capitation, shared savings, or other value-based payment models, now is the time to reevaluate your coding and compliance practices not just to avoid scrutiny, but to maintain integrity in patient care and reimbursement.

For a deeper dive into risk mitigation strategies or to conduct an internal compliance review, contact Parrella Health Law at 857.328.0382 or email Chris directly at cparrella@parrellahealthlaw.com.