SLO County hospitals pay $22.5 million for allegedly filing false Medi-Cal claims

Dignity Health and Tenet Healthcare Corp. paid $22.5 million to the state of California and United States government for knowingly filing false Medi-Cal claims through their Central Coast healthcare facilities, according to the United States Attorney’s Office.

The settlements were between the state and federal government and nonprofit health system Dignity Health, which operates French Hospital Medical Center in San Luis Obispo and Arroyo Grande Community Hospital, and Tenet Healthcare Corp., which operates Twin Cities Community Hospital in Templeton and Sierra Vista Regional Medical Center in San Luis Obispo.

The settlements resolve the allegations that the healthcare systems violated federal and state law by submitting fraudulent claims to Medi-Cal related to the Medicaid Adult Expansion under the Affordable Care Act (ACA), according to a news release from the United States Department of Justice (DOJ).

The settlements resolve the claims but are allegations and do not point to liability, the release said.

Dignity Health will pay $13.5 million to the United States and $1.5 million to the California government as part of the settlement and Twin Cities and Sierra Vista will pay $6.75 million to the federal government and $750,000 to the state, the release said.

“These health care providers siphoned critical Medicaid funding for their own gain instead of using it to provide health care services to patients most in need,” United States Attorney Martin Estrada said in the release. “These major settlements demonstrate our commitment to hold accountable health care providers that seek to exploit the Medicaid program and harm the American taxpayer.”

Beginning in January 2014, the ACA expanded Medi-Cal to cover the “adult expansion” population — adults aged 19 to 64 without dependent children with incomes up to 133% of the federal poverty level, according to the release. This population was not insured under Medi-Cal before the ACA expansion.

The federal government funded the expansion coverage for the first three years and under contracts with California’s Department of Health Care Services (DHCS), if a county-organized health system in California did not spend at least 85% of the funds it received to cover the adult expansion population on “allowed medical expenses,” the health system was required to reimburse the difference between the 85% allocation and what was actually spent to the state.

The state government will then reimburse the federal government that amount, according to the DOJ.

By settling the fraud claims, Dignity, Twin Cities and Sierra Vista resolve the allegations that the health systems knowingly filed false claims to Medi-Cal under the “enhanced services” umbrella.

Dignity allegedly filed the false claims between Feb. 1, 2015 and June 30, 2016, and Twin Cities and Sierra Vista allegedly filed claims pertaining to these patients between Jan. 1, 2014 and April 30, 2015, the release said.

The United States and California governments argued the payments were not considered “allowed medical expenses” under the contract between the California Department of Health Care Systems and the county-operated health system, were predetermined amounts not reflective of the market value of the services provided, and the enhanced services were duplicative.

The state and federal governments argued these payments were unlawful gifts of public funds that violated the state constitution.

SLO County Dignity Health, Tenet Health respond to allegations of Medi-Cal fraud

Both health systems accused of Medi-Cal fraud shared statements on the United States Attorney’s Office allegations with the Tribune.

“Dignity Health provided these services in accordance with a previously established program and agreement, in addition to the underlying services agreements between the providers and co-defendant Santa Barbara San Luis Obispo Regional Health Authority (doing business as CenCal Health), the county-organized health system responsible for administering the Medi-Cal program in Santa Barbara and San Luis Obispo Counties,” Dignity Health spokesperson Sara San Juan wrote in an email.

“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 that all reimbursements were properly received. Dignity Health entered into a settlement agreement with the United States and State of California to resolve the matter without the expense of litigation, and without admitting any liability,” Dignity Health said.

Tenet Health Central Coast issued a similar 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.

Starting in 2014, the federal government provided incentives to states to encourage the adoption of Medicaid expansion under the Affordable Care Act. States then offered incentives to managed health plans like CenCal Health to administer their state-specific Medicaid programs. In turn, health plans contracted with providers like Sierra Vista and Twin Cities to care for the newly eligible Medicaid expansion members.

In late February of 2015, CenCal presented to the hospitals the ‘ACE Program’—a reimbursement model for the services provided to Medicaid expansion members. The hospitals had no input as to the terms of the program.

The hospitals provided the services to the expansion members and were paid in accordance with the ACE Program contracts with CenCal. Years later the government decided they did not approve of the method CenCal chose to administer the expansion funds and sought to recoup those funds from CenCal and multiple participating providers in San Luis Obispo and Santa Barbara Counties. We strongly disagree with any assertion that the hospitals misused the funds in any way or received any improper benefit.

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

Whistleblower in SLO County Medi-Cal fraud receives a portion of recovered funds

The whistleblower in this case was Julio Bordas, the former medical director of the county-operated healthcare system that contracted with Dignity, Sierra Vista and Twin Cities to provide health services under the Medi-Cal contract, the release said.

Bordas will receive $3.9 million for alerting the authorities under the federal False Claims Act, which allows a private party to receive a share of the federal recovery, according to the release.

The False Claims Act is one of the tools the government uses to curb healthcare fraud. Tips and complaints about potential fraud, waste, abuse and mismanagement can be reported to the Department of Health and Human Services at 800-HHS-TIPS.