Four Central Coast healthcare organizations paid $68 million to settle claims of alleged Medi-Cal fraud, the Department of Justice announced June 29, the result of a whistleblower case that originally implicated the organizations.
The department alleged that the organizations violated the False Claims Act and the California False Claims Act by submitting or causing the submission of false claims to Medi-Cal, a California health coverage program generally tailored to those in low-income brackets.
The four organizations are CenCal Health, a nonprofit that contracts with the state to administer Medi-Cal benefits through providers in San Luis Obispo and Santa Barbara counties; Sansum Clinic, a nonprofit outpatient provider in San Luis Obispo and Santa Barbara counties; Cottage Health, a nonprofit hospital network operating in Santa Barbara County; and Community Health Centers of the Central Coast (CHC).
CenCal will pay most of the $68 million — $49.5 million. Cottage will pay $9 million, Sansum $4.5 million, and CHC $3.15 million. A majority of the funds will go to the federal government. The state of California will receive $1.85 million.
Pursuant to the ACA, beginning in January 2014, Medi-Cal was expanded to cover the previously uninsured “Adult Expansion” population – adults between the ages of 19 and 64 without dependent children with annual incomes up to 133% of the federal poverty level. The federal government fully funded the expansion coverage for the first three years of the program. Under contracts with California’s Department of Health Care Services (DHCS), if CenCal did not spend at least 85% of the funds it received for the Adult Expansion population on “allowed medical expenses,” CenCal was required to pay back to the state the difference between 85% and what it actually spent. California, in turn, was required to return that amount to the federal government.
The U.S. and the state of California alleged, the release said, that the payments were not allowed medical expenses, were pre-determined amounts that did not reflect fair market value or the services were duplicative of services already required to be rendered. The U.S. and California alleged that the payments were unlawful gifts of public funds, in violation of the California Constitution, the release continued.
The whistleblower, Dr. Julio Bordas, was CenCal’s former medical director. Dr. Bordas will receive approximately $12.56 million as part of his share of the federal recovery, the release said.
Under the False Claims Act, whistleblowers are encouraged to file false claim lawsuits on behalf of the government. Whistleblowers, part of a 1986 strengthening of the law by Congress, are entitled to a portion of the recovery.
These whistleblower claims, called qui tam, represent a significant percentage of False Claims Act cases that are filed, according to the Department of Justice.
“Medi-Cal is a lifeline that provides access to free or affordable healthcare services for millions of Californians and their families,” said California Attorney General Rob Bonta. “When any healthcare provider or agency defrauds the program, they break the public’s trust and put their own bottom line before the patients who count on them for honest, quality care and services. I am grateful to the USDOJ for its extensive efforts throughout the course of this investigation. The California Department of Justice and our law enforcement partners will continue to hold accountable those who defraud the Medi-Cal program, and protect those it serves.”
The U.S. previously settled similar claims against Dignity Health and Twin Cities Community Hospital and Sierra Vista Regional Medical Center relating to payments the organizations received from CenCal under the Adult Expansion Program, the release said.
Read the full Department of Justice release here.
