Local hospitals to pay out millions for alleged false Medicaid claims
Twin Cities and Sierra Vista will pay $6.75 million to the federal government, $750,000 to the State of California
– Dignity Health, 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 and Sierra Vista Regional Medical Center, two acute healthcare facility subsidiaries of Tenet Healthcare Corporation operating in San Luis Obispo County, has 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.
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, if a California county organized health system did not spend at least 85% of the funds it received for the Adult Expansion population on “allowed medical expenses,” the health system 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 the health system 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; 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.
Tenet Health Central Coast sent the following 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.”
-Tenet Health Central Coast
Click here to read the full news release from the United States Department of Justice.
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