Seoul Medical Group settlement resolves false claims case

Seoul Medical Group and related parties will pay over $62 million to resolve allegations of submitting false medical diagnoses to increase payments under the Medicare Advantage program, according to the U.S. Attorney’s Office for the Central District of California.

The Los Angeles-based healthcare provider, along with its Koreatown subsidiary Advanced Medical Management, agreed to pay $58.74 million. In addition, former president and majority owner Dr. Min Young Cha will pay $1.76 million. Prosecutors alleged that the parties submitted false diagnosis codes for two spinal conditions—spinal enthesopathy and sacroiliitis—to inflate Medicare Advantage reimbursements.

Radiology group faces penalties

Furthermore, Renaissance Imaging Medical Associates, a radiology group based in Northridge, agreed to pay $2.35 million. Authorities claim the group collaborated with Seoul Medical Group by generating radiology reports that falsely supported the spinal diagnoses. As a result, these reports helped trigger higher payments from Medicare.

“These false claims led to significant losses to the government,” said Acting U.S. Attorney Joseph McNally. “This $62.85 million settlement helps recover those losses and holds the providers accountable.”

How the fraud worked

The Medicare Advantage program, also known as Medicare Part C, allows beneficiaries to join managed care plans that partner with providers like Seoul Medical Group. The government adjusts payments to these plans based on each patient’s medical conditions. Generally, more severe diagnoses lead to higher “risk scores” and larger reimbursements.

From 2015 to 2021, federal officials allege that Seoul Medical Group submitted diagnoses for patients who did not suffer from the conditions listed. When a Medicare Advantage plan questioned these claims, Seoul Medical reportedly worked with Renaissance Imaging to create documentation that appeared to support the spinal enthesopathy diagnosis. Consequently, the group received inflated payments.

Company: No financial or operational impact

In response, Seoul Medical Group released a statement on March 26, emphasizing that the settlement will not affect the company’s finances or operations.

“We are pleased to have resolved this matter and demonstrated that SMG reversed the conduct described in the settlement,” a company spokesperson said. “The settlement will not have any financial, operational, or other costs or impact to SMG or AMM. We are committed to continually enhancing our practices and maintaining the highest standards of compliance. We remain focused on our mission of serving our communities and improving access, affordability and quality of healthcare for our patients.”

Whistleblower helped uncover scheme

The case began under the False Claims Act, which allows whistleblowers to file lawsuits on behalf of the government. Paul Pew, the former Vice President and Chief Financial Officer of Advanced Medical Management, filed the complaint. Under the law’s qui tam provisions, whistleblowers can receive a portion of any recovered funds. Pew’s share has not yet been determined.

“Providers who manipulate the Medicare system undermine trust and the integrity of care,” said Christian J. Schrank, Deputy Inspector General for Investigations at HHS-OIG. He emphasized the importance of interagency cooperation in fighting healthcare fraud.

Investigation and resolution

Multiple agencies collaborated on the investigation, including the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Central District of California, and the Department of Health and Human Services Office of Inspector General.

Although the settlement resolves civil allegations, officials clarified that there has been no determination of liability.

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BY YOONJAE JUNG [jung.yoonjae@koreadaily.com]