Federal and State Investigations and Lawsuit Involving Kaiser Permanente® 

Summary:  This article provides a comprehensive, fact-based review of federal and state investigations, regulatory enforcement actions, and civil litigation involving Kaiser Permanente (Kaiser) and its affiliated lines of business. Drawing exclusively from publicly available court records, government filings, enforcement actions, settlements, and regulator findings, it examines matters across Medicare Advantage risk adjustment, overpayment compliance, Medicaid and commercial operations, mental health parity enforcement, pharmacy benefit management, broker and sales practices, and controlled substance oversight. Each section documents who initiated the action, the alleged or substantiated conduct, the time period involved, the financial exposure or penalties at issue, and the current status of each matter, offering payers, providers, and compliance professionals a consolidated reference for understanding Kaiser's regulatory and legal risk history.

False Claims Acts - DX Codes - $556M (January 2026)

Who: Kaiser Foundation Health Plan, Inc. and related medical groups (KFHP, KFHP‑Colorado, The Permanente Medical Group, Southern California Permanente Medical Group, and Colorado Permanente Medical Group); U.S. Department of Justice (DOJ); U.S. Department of Health and Human Services Office of Inspector General (HHS‑OIG); whistleblowers Ronda Osinek and James M. Taylor, M.D.

What: DOJ alleged that Kaiser systematically inflated risk‑adjustment payments by adding unsupported diagnosis codes to Medicare Advantage submissions. Kaiser’s data‑mining teams combed through patients’ histories for conditions not recorded during visits and sent “queries” to physicians, urging them to add the diagnoses as addenda, sometimes months after the encounter. The government said Kaiser set facility‑specific goals and tied physician bonuses to meeting diagnosis‑addition targets, pressuring underperforming clinicians. Many additional diagnoses were unrelated to the visits and violated the Centers for Medicare & Medicaid Services (CMS) documentation requirements. Internal audits and physician complaints warned that the practices created false claims.

When: The fraudulent conduct occurred between 2009 and 2018. Whistleblowers filed qui‑tam lawsuits in 2013 and 2014; the United States intervened in part of the consolidated action in 2021. The settlement was announced on January 14, 2026.

Financial Impact: Kaiser agreed to pay $556 million, including $278 million in restitution and interest, to resolve the False Claims Act allegations. Whistleblowers Osinek and Taylor will share approximately $95 million. Kaiser also agreed to pay attorneys’ fees for the relators and to implement corrective actions; no criminal charges were filed.

Status: Civil settlement finalized. Kaiser and the government characterized the agreement as resolving disputed documentation issues and avoiding protracted litigation. There has been no admission of liability.


Sources:  Justice GOV

Behavioral Halth Access Settlement - $200M (Oct 2023)

Who: California Department of Managed Health Care (DMHC); Kaiser Foundation Health Plan, Inc.; Kaiser members and mental‑health clinicians.

What: Following a surge of complaints in 2022, DMHC conducted non‑routine surveys and found that Kaiser’s behavioral‑health plan failed to provide timely follow‑up appointments and appropriate referrals. Investigators discovered that Kaiser patients waited an average of 19 days for follow‑up therapy appointments, nearly twice the 10‑day limit established by state law. Kaiser also relied heavily on group therapy when individual therapy was clinically appropriate and did not consistently refer patients to out‑of‑network providers when internal capacity was insufficient. A 2022 labor strike by 2,000 mental‑health workers highlighted systemic issues.

When: DMHC opened the investigation in May 2022 and expanded it during the workers’ strike. The settlement agreement was announced on October 12, 2023. DMHC will continue monitoring Kaiser’s corrective actions through quarterly reports and an extended consultation period through 2026.

Financial Impact:  Kaiser agreed to invest $200 million, including a $50 million administrative penalty (the largest ever issued by DMHC) and $150 million in new funding over five years to expand behavioral‑health services. The investments will fund clinician staffing, training, and infrastructure to meet access standards.

Status:  Settlement in progress. The Corrective Action Work Plan requires ongoing monitoring and quarterly reporting; DMHC may impose additional penalties if Kaiser fails to meet benchmarks.

Sources:  DMHC, CalMatters

Harzardous-Waste & Patient Privacy - $49M (Sep 2023)

Who: California Attorney General Rob Bonta; district attorneys of Alameda, San Bernardino, San Francisco, San Joaquin, San Mateo, and Yolo counties; Kaiser Foundation Health Plan and Kaiser Foundation Hospitals.

What: Undercover inspections of dumpsters at 16 Kaiser facilities revealed unlawful disposal of hazardous medical waste and paper records containing protected patient information. Inspectors found aerosols, syringes, medical tubing with body fluids, pharmaceuticals, and more than 10,000 patient records in unsecured landfill‑bound dumpsters. The state alleged that these practices violated California’s Hazardous Waste Control Law, the Medical Waste Management Act, the Confidentiality of Medical Information Act, and the federal HIPAA rule.

When:  District attorneys conducted the dumpster inspections in the years preceding the settlement. The California Department of Justice joined the investigation and expanded it statewide before announcing the settlement on September 8, 2023.

Financial Impact:  Kaiser will pay $49 million, including $47.25 million in civil penalties, attorneys’ fees, and environmental projects, and up to $1.75 million in additional penalties if it fails to invest $3.5 million in compliance measures within five years. The settlement requires Kaiser to retain an independent auditor to conduct at least 520 trash‑compactor audits and 40 field audits annually for five years to ensure compliance with waste and privacy requirements.

Status:  Settlement finalized with five‑year monitoring. Kaiser immediately hired a third‑party consultant, conducted more than 1,100 trash audits and revised operating procedures to improve waste handling. The case underscores environmental and privacy compliance obligations rather than traditional claims fraud.

Sources: OAG California, HIPAA Journal

Group Health Cooperative - $6.3M (Nov 2020)

Who:  Kaiser Foundation Health Plan of Washington (formerly Group Health Cooperative); U.S. Department of Justice; U.S. Attorney’s Office for the Western District of New York; whistleblower Teresa Ross.

What: The government alleged that Group Health submitted diagnoses to Medicare Advantage that were not supported by beneficiaries’ medical records, inflating risk‑adjustment payments. The settlement resolved claims that the insurer knowingly reported unsupported diagnoses to increase reimbursement. The allegations originated in a qui‑tam lawsuit filed by former employee Teresa Ross.

When:  The complaint concerned conduct in earlier years (the government did not specify dates). The settlement was announced on November 16 2020. Ross filed her lawsuit in 2012 and the government intervened in subsequent litigation.

Financial Impact: Kaiser Foundation Health Plan of Washington agreed to pay $6.375 million to resolve the False Claims Act allegations. Relator Teresa Ross received approximately $1.5 million.

Status: Civil settlement concluded with no admission of liability. DOJ highlighted the case as part of its broader focus on risk‑adjustment fraud.

Sources: Tech Target, Health Leaders,

FWA and Settlement Summary

These cases show that Kaiser Permanente’s compliance challenges span multiple domains — from Medicare risk‑adjustment coding and behavioral‑health access to environmental waste disposal. The 2026 risk‑adjustment settlement underscores the high stakes of data‑driven revenue optimization: aggressive coding queries, retrospective addenda and physician incentives produced inflated Medicare reimbursements and triggered the largest False Claims Act settlement in the history of the Medicare Advantage program. At the state level, regulators used patient complaints and facility inspections to uncover systemic violations in mental‑health access and waste disposal, resulting in substantial penalties and ongoing monitoring. For payers, these actions highlight the need for robust internal controls, accurate documentation, transparent incentive structures and proactive compliance programs. Claims editors and auditors should focus on risk‑adjustment patterns, patient‑access metrics and operational waste streams rather than relying solely on isolated claim reviews. Relationship‑based analysis — connecting data mining, provider behaviors and incentive plans — remains essential to detecting and preventing fraud, waste and abuse.

Stay Tuned for more Kaiser Updates

As an FWA expert, PCG Software remains committed to updating this article on any and all Kaiser-related FWA or lawsuits so that you can keep abreast of all its legal dealings to ensure your organization, your patients, and your practice are safe. Subscribe to our blog for updates.