A $62.85 million False Claims Act settlement against Seoul Medical Group is one of the largest Medicare Advantage risk adjustment enforcement actions ever brought against a provider group. Here is what value-based care providers in capitated arrangements must understand about their compliance obligations.
Last year, the Department of Justice announced that Seoul Medical Group Inc., its subsidiary Advanced Medical Management Inc., their former president and majority owner Dr. Min Young Cha, and Renaissance Imaging Medical Associates Inc. agreed to pay a combined $62.85 million to settle allegations that they violated the False Claims Act by causing the submission of false diagnosis codes to increase payments from the Medicare Advantage program[1][2]. The settlement is one of the largest Medicare Advantage fraud and risk adjustment enforcement actions targeting a provider group in recent memory, and it carries significant implications for value-based care providers operating under risk-adjusted capitated arrangements.
The Alleged Risk Adjustment Upcoding Scheme
According to the DOJ, from 2015 to 2021, Seoul Medical Group and Dr. Cha “submitted diagnoses for two severe spinal conditions, spinal enthesopathy and sacroiliitis, for patients who did not suffer from either of these conditions.” When an MA Plan questioned Seoul Medical Group’s use of spinal enthesopathy diagnoses, rather than correcting course, Seoul Medical Group allegedly “enlisted the assistance of Renaissance Imaging Medical Associates to create radiology reports that appeared to support the spinal enthesopathy diagnosis.” Both diagnoses increased the risk scores of the affected beneficiaries, resulting in inflated payments from CMS to the MA Plan, which then “passed along a portion of the increased payment to Seoul Medical Group.”
Key Takeaways from the Seoul Medical Group Settlement
The message from the government could not be clearer. Acting Assistant Attorney General Yaakov M. Roth stated: “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.” HHS-OIG Deputy Inspector General Christian J. Schrank echoed that sentiment, warning that “[p]roviders 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.”
The case was brought under the qui tam provisions of the False Claims Act by Paul Pew, the former Vice President and Chief Financial Officer of Advanced Medical Management—a reminder that corporate insiders are often the ones who bring such schemes to light.
Compliance Imperatives for Value-Based Care Providers
For providers operating in risk-adjusted capitated arrangements, this settlement underscores several critical compliance imperatives. First, diagnosis code accuracy is not merely an administrative function; it is a legal obligation with potentially devastating financial consequences. Under the CMS risk adjustment model, inaccurate or unsupported diagnoses directly inflate the capitated payments a provider group receives, and the government treats the knowing submission of such codes as fraud. Second, the Seoul Medical Group allegations highlight that the failure to correct known data inaccuracies, and worse, taking affirmative steps to conceal them, will invite the most aggressive enforcement response. Third, this settlement arrives alongside a sustained wave of Medicare Advantage risk adjustment enforcement actions, including a $98 million settlement with Independent Health, signaling that DOJ’s focus on this space is not abating.
Value-based care providers, particularly those in capitated payment arrangements where revenue is tied to beneficiary risk scores, should treat this settlement as a call to action. Robust internal compliance programs, rigorous coding audits, and a culture of accurate documentation are no longer optional—they are essential safeguards against False Claims Act liability. Any provider that identifies unsupported diagnoses in its data must act swiftly to retract or correct them. The cost of inaction, as Seoul Medical Group has now learned, can be measured in the tens of millions of dollars.
Frequently Asked Questions
Q: What was the Seoul Medical Group False Claims Act settlement about?
A: Seoul Medical Group agreed to pay $62.85 million to settle allegations it submitted unsupported diagnosis codes to inflate Medicare Advantage risk scores, in violation of the False Claims Act.
Q: What compliance steps should Medicare Advantage providers take after this settlement?
A: Providers should conduct rigorous ICD-10 coding audits, implement robust internal False Claims Act compliance programs, and promptly correct any unsupported diagnoses identified in their data.
Q: What is risk adjustment fraud in Medicare Advantage?
A: Risk adjustment fraud occurs when providers submit inaccurate or unsupported diagnosis codes to artificially inflate beneficiary Risk Adjustment Factors (or RAFs), resulting in higher capitated payments from CMS.
How Can Frier Levitt Help?
Frier Levitt is a national healthcare boutique law firm with deep experience in the Medicare Advantage risk adjustment space, False Claims Act defense, and healthcare fraud investigations. We represent value-based care providers in both commercial payor disputes and False Claims Act matters and counsel provider groups, IPAs, ACOs, and clinically integrated networks on risk adjustment compliance, audit response, and government investigations.
If your organization participates in risk-adjusted capitated arrangements and needs guidance on safeguarding against regulatory exposure or in handling a value-based-care-related commercial dispute, we are here to help.
[1] The claims resolved by the settlement are allegations only and there has been no determination of liability.
[2] See https://www.justice.gov/opa/pr/medicare-advantage-provider-seoul-medical-group-and-related-parties-pay-over-62m-settle
Senior Associate
Senior Associate
