California health-care hospital companies collectively pay $22.5 million to settle false claims allegations

by Ben Vernia | December 10th, 2022

On December 7, the Department of Justice announced that three hospital companies have agreed to pay $22.5 million to settle allegations that the hospitals submitted claims that were false under the Affordable Care Act. According to DOJ’s press release:

Dignity Health (Dignity), a not-for-profit health system that owns and operates three hospitals and one clinic in Santa Barbara County and San Luis Obispo County, California, and Twin Cities Community Hospital (Twin Cities) and Sierra Vista Regional Medical Center (Sierra Vista), two acute healthcare facility subsidiaries of Tenet Healthcare Corporation operating in San Luis Obispo County, California, have agreed to pay a total of $22.5 million pursuant to two separate settlements to resolve allegations that they violated the federal False Claims Act and the California False Claims Act by 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. Under contracts with California’s Department of Health Care Services (DHCS), if a California county organized health system (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 two settlements resolve allegations that Dignity, Twin Cities and Sierra Vista knowingly caused the submission of false claims to Medi-Cal for “Enhanced Services” that Dignity purportedly provided to the Adult Expansion patients of a COHS 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. The United States and California alleged that the payments were not “allowed medical expenses” permissible under the contract between DHCS and the COHS; were pre-determined amounts that did not reflect the fair market value of any Enhanced Services provided; and/or the Enhanced 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 the California Constitution.

As a result of the settlements, Dignity will pay $13.5 million to the United States and $1.5 million to the State of California, and Twin Cities and Sierra Vista will pay $6.75 million to the United States and $750,000 to the State of California.

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The government announced that the whistleblower will receive $3.9 million of the $20.25 million federal recovery (a 19.26% relator’s share).

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