3 Providers Will Pay $22.5M to Settle Medi-Cal False Claims Allegations

Prosecutors say the settlements resolve allegations of an 'organized scheme to wrongfully retain federal funds.'

Dignity Health and Tenet Healthcare Corporation subsidiaries will pay California and the federal government a combined $22.5 million to settle separate false claims allegations made for Medi-Cal "enhanced adult services," state and federal prosecutors announced.

Named in the settlement were Dignity Health's three hospitals and one clinic in Santa Barbara County and San Luis Obispo County and Tenet subsidiaries Twin Cities Community Hospital and Sierra Vista Regional Medical Center in San Luis Obispo.

Prosecutors say the settlements resolve allegations that Dignity, Twin Cities, and Sierra Vista ran an "organized scheme to wrongfully retain federal funds" from Medi-Cal's Adult Expansion program. California will get $2.25 million of the settlement.

The California Department of Health Care Services requires a California county organized health system to spend at least 85% of the funds it received for the Adult Expansion population on "allowed medical expenses." If not, they provider was required to pay back to the state the difference between 85% and what it spent. California, in turn, was required to return that amount to the federal government.

The two settlements resolve allegations that Dignity, Twin Cities and Sierra Vista knowingly submitted false claims to Medi-Cal for "enhanced services" provided to the expansion patients between Feb. 1, 2015, and June 30, 2016, and that Twin Cities and Sierra Vista purportedly provided to such patients between Jan. 1, 2014, and April 30, 2015, prosecutors say.

Prosecutors say the payments were not "allowed medical expenses" permissible under the contract; were pre-determined amounts that did not reflect the fair market value of any enhanced services provided; and were duplicative of services already required.

"Every day, Medi-Cal provides support for Californians in need of essential healthcare, and when companies take advantage of this system at the expense of patients, they must be held accountable," says California Attorney General Rob Bonta. 

Dignity will pay $13.5 million to the United States and $1.5 million to California, and Twin Cities and Sierra Vista will pay $6.75 million to the United States and $750,000 to California.

"These healthcare providers siphoned critical Medicaid funding for their own gain instead of using it to provide health care services to patients most in need," U.S. Attorney Martin Estrada for the Central District of California says. "These major settlements demonstrate our commitment to hold accountable healthcare providers that seek to exploit the Medicaid program and harm the American taxpayer."

The settlements were brought under the whistleblower provisions of the California False Claims Act by Julio Bordas, the former medical director of CenCal, which entitles him to 10% of the recovery – at federal cost – in cases involving allegations of losses to the Medicaid program.

Dignity Responds

Dignity issued the following statment on the settlement:

"On Dec. 7, the Department of Justice issued a press release announcing a settlement regarding alleged improper Medi-Cal claims submitted over seven years ago in connection with the Medicaid Adult Expansion under the Patient Protection and Affordable Care Act. During the period Dignity Health d/b/a Marian Regional Medical Center and French Hospital Medical Center, provided critically necessary population health management, patient navigation, homeless outreach, and health education programs and related services to this newly-eligible adult Medi-Cal population, in their spoken languages, in Santa Barbara and San Luis Obispo Counties.

Dignity Health provided these services in accordance with a previously established program and agreement and in addition to the underlying services agreements between the providers and co-defendant Santa Barbara San Luis Obispo Regional Health Authority (d/b/a CenCal Health), the county organized health system responsible for administering the Medi-Cal program in Santa Barbara and San Luis Obispo Counties. Under the program, Dignity Health submitted to CenCal Health detailed monthly reconciliation statements and annual reports, and was paid by CenCal in accordance  with the agreements.

As such, Dignity Health received fair market value compensation from CenCal for services actually provided to this vulnerable population, and maintains all reimbursements were properly received.

Dignity Health entered into the settlement agreement with the United States and State of California to resolve the matter without the expense of litigation, and without admitting any liability."

Tenet Responds

Tenet Healthcare Corporation issued the following statement:

"We stand behind the efforts of our team to serve the Medi-Cal population in San Luis Obispo and Santa Barbara counties, California. Sierra Vista Regional Medical Center and Twin Cities Community Hospital strongly deny the allegations but resolved this matter to avoid the expense and distraction of further litigation. The hospitals used the Medi-Cal funds received from CenCal Health to serve Medi-Cal beneficiaries as intended.

Sierra Vista and Twin Cities remain committed to full compliance with all California and federal healthcare program requirements. Our hospitals and dedicated care teams remain committed to providing high quality care to Medi-Cal patients in our community."