By Jonathan Stempel

Jan 14 (Reuters) - The U.S. Department of Justice said five Kaiser Permanente affiliates in California and Colorado agreed to ​pay $556 million to resolve claims they illegally pressured doctors to add codes ‌for diagnoses they never considered to patients' medical records, in order to inflate Medicare payments ‌from the government.

Wednesday's settlement resolves two whistleblower lawsuits accusing the affiliates of Oakland, California-based Kaiser of violating the federal False Claims Act.

Kaiser did not immediately respond to requests for comment. The affiliates included Kaiser Foundation Health Plan, Kaiser ⁠Foundation Health Plan of Colorado, ‌Colorado Permanente Medical Group, Permanente Medical Group, and Southern California Permanente Medical Group.

Under Medicare Advantage, also known as Medicare ‍Part C, patients who opt out of traditional Medicare may enroll in private health plans known as Medicare Advantage Organizations, or MAOs.

The Justice Department said requiring diagnosis codes ​helps ensure that the Centers for Medicare & Medicaid Services pays MAOs ‌such as Kaiser's more money for sicker patients.

Kaiser's alleged improper activity included having doctors "mine" patients' medical histories for potential diagnoses to add to medical records, and linking bonuses to meeting diagnosis goals. The alleged wrongdoing occurred between 2009 and 2018.

“Fraud on Medicare costs the public billions annually, so when a ⁠health plan knowingly submits false information to ​obtain higher payments, everyone - from beneficiaries to ​taxpayers - loses," Craig Missakian, the U.S. Attorney for the Northern District of California, said in a statement.

The settlement resolves claims by ‍former Kaiser employees ⁠Ronda Osinek, a medical coder, and James Taylor, a doctor who oversaw risk adjustment programs and coding governance.

They will receive about $95 million from ⁠the settlement, the Justice Department said.

The False Claims Act lets whistleblowers sue on behalf ‌of the government, and share in recoveries.

(Reporting by Jonathan Stempel in ‌New York; Editing by Matthew Lewis)