7 Lessons Learned from LVMC's $5M Settlement

The Lompoc Valley Medical Center (LVMC) is out $5 million from a recent false claims settlement—and there are several critical takeaways for revenue cycle leaders.

Healthcare leaders continue to fight against poor operating margins, reduced reimbursement, and inflated expenses, and at a time when budgets are tight, revenue cycle leaders are under more pressure than ever to streamline processes and ensure financial stability.

The recent settlement involving LVMC in California, where the hospital agreed to pay $5 million to resolve allegations of false claims violations, provides several critical takeaways for revenue cycle leaders that can’t be overlooked as organizations are already financially strained.

What happened?

LVMC was accused of violating the False Claims Act and the California False Claims Act via a whistleblower. The allegations revolve around the submission of false claims to California's Medicaid program, Medi-Cal.

The critical components of this settlement involve LVMC's alleged involvement in submitting false claims for enhanced services provided to Medi-Cal members between January 1, 2014, and June 30, 2016.

These services were not considered allowed medical expenses as per the contract between California's Department of Health Care Services and CenCal Health, the county-organized health system responsible for arranging healthcare services for Medi-Cal patients.

Additionally, it was claimed that the payments received by LVMC did not reflect the fair market value of the enhanced services or were duplicative of services already required by LVMC. The payments were also alleged to constitute unlawful gifts of public funds, violating the California Constitution.

In the end, LVMC agreed to pay $5 million to resolve the allegations.

How can you ensure it doesn’t happen to you?

Revenue cycle leaders play a pivotal role in ensuring the financial health and compliance of their organizations, and the LVMC settlement is proof noncompliance carries significant implications for an organization.

Luckily there are several takeaways revenue cycle leaders can implement to avoid the same outcome:

1. Financial impact: The $5 million settlement paid by LVMC underscores the financial consequences of non-compliance with healthcare regulations. Revenue cycle leaders need to be aware that these violations can result in substantial monetary penalties, potentially jeopardizing an organization’s financial stability.
2. False Claims Act: Understanding the False Claims Act is essential for revenue cycle leaders and their teams as violations can lead to severe penalties. It emphasizes the need for meticulous billing practices and adherence to regulatory guidelines.
3. Medi-Cal and Medicaid: As we know, each payer is different, so revenue cycle teams must be well-versed in the rules governing each individual payer (and in this case Medicaid) to ensure proper billing and compliance.
4. Contractual agreements: The allegations in the settlement highlight the importance of hospitals adhering to contractual agreements with government agencies and payers. Leaders need to oversee (or have a team that oversees) compliance with these agreements to avoid potential legal issues.
5. Market valuation of services: Leaders need to assess the fair market value of services provided by their institutions. Overcharging or providing services that are not considered allowed medical expenses can lead to legal and financial repercussions.
6. Gifts of public funds: Understanding the legal boundaries related to the use of public funds is crucial for organizations. If not someone from the revenue cycle, then an organization’s legal team must ensure that financial transactions involving government funds comply with relevant laws and regulations.
7. Whistleblower provisions: The involvement of a whistleblower in this case serves as a reminder that employees within healthcare institutions may report alleged violations. Revenue cycle leaders should implement robust internal compliance programs to detect and address potential issues before they escalate.

As mentioned, this settlement serves as a significant reminder of the legal and financial risks associated with non-compliance.

By bolstering compliance protocols, reviewing contractual agreements, assessing market valuations, and investing in education and technology, revenue cycle leaders can not only avoid legal pitfalls but also help to enhance the overall financial health of their organization.