California county health system, health providers settle False Claims Act allegations for nearly $71 million

by Ben Vernia | August 19th, 2022

On August 18, the Department of Justice announced that a county health system in California and three health care providers had agreed to pay $70.7 million to settle whistleblowers’ allegations that the entities submitted false healthcare claims. According to DOJ’s press release:

Ventura County Medi-Cal Managed Care Commission doing business as Gold Coast Health Plan (Gold Coast), a county organized health system (COHS) that contracts to arrange for the provision of health care services under California’s Medicaid program (Medi-Cal) in Ventura County, California; Ventura County, which owns and operates Ventura County Medical Center, an integrated health care system that provides hospital, clinic, and specialty services; Dignity Health (Dignity), a not-for-profit hospital system that operates two acute care hospitals in Ventura County; and Clinicas del Camino Real Inc. (Clinicas), a non-profit health care organization located in Ventura County, have agreed to pay a total of $70.7 million pursuant to three separate settlements to resolve allegations that they violated the federal False Claims Act and the California False Claims Act by submitting or causing the submission of false claims to Medi-Cal related to Medicaid Adult Expansion under the Patient Protection and Affordable Care Act (ACA).

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. Pursuant to contracts with California’s Department of Health Care Services (DHCS), if a California COHS did not spend at least 85% of the funds it received for the Adult Expansion population on “allowed medical expenses,” the COHS 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 three settlements resolve allegations that Gold Coast, Ventura County, Dignity, and Clinicas knowingly submitted or caused the submission of false claims to Medi-Cal for “Additional Services” provided to Adult Expansion Medi-Cal members between Jan. 1, 2014, and May 31, 2015. The United States and California alleged that the payments were not “allowed medical expenses” under Gold Coast’s contract with DHCS; were pre-determined amounts that did not reflect the fair market value of any Additional Services provided; and/or the Additional Services were duplicative of services already required to be rendered. The United States and California further alleged that the payments were unlawful gifts of public funds in violation of Article IV, section 17 of the California Constitution.

As a result of the settlements, Gold Coast will pay $17.2 million to the United States; Ventura County will pay $29 million to the United States; Dignity will pay $10.8 million to the United States and $1.2 million to the State of California; and Clinicas will pay $11.25 million to the United States and $1.25 million to the State of California. 

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Contemporaneous with the False Claims Act settlement, the U.S. Department of Health and Human Services agreed to release its right to exclude Gold Coast and Ventura in exchange for their agreements to enter into five-year Corporate Integrity Agreements (CIAs). The CIAs require, among other things, that Gold Coast and Ventura County each implement centralized risk assessment programs as part of their compliance programs and each hire an Independent Review Organization to complete annual reviews. Gold Coast’s annual reviews will focus on its calculation and reporting of medical loss ratio data under Medi-Cal, while Ventura County’s annual reviews will target hospital claims submitted to Medicare and Medicaid, including claims submitted to Medicaid managed care organizations.

The case was brought by two executives of one of the providers, whose share of the recovery has not yet been determined.

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