Attorney General Bonta Announces $68 Million Settlement Against Four Health Care Providers for Medi-Cal Fraud

OAKLAND — California Attorney General Rob Bonta, in partnership with the U.S. Department of Justice (USDOJ), announced four settlements totaling $68 million against three health care providers and a public health agency, all based in Central and Southern California. The agency is CenCal Health and the providers are Community Health Centers of the Central Coast (CHC), Cottage Health System (Cottage), and Sansum Clinic (Sansum). The settlement resolves allegations that CHC, Cottage, Sansum and CenCal Health submitted or caused the submission of fraudulent claims to Medi-Cal in violation of the state and federal False Claims Acts. The submissions are alleged to be part of an organized scheme to wrongfully retain federal funds that funded Medi-Cal’s Adult Expansion, a program to broaden Medi-Cal benefits that was made possible under the Affordable Care Act (ACA).

“Medi-Cal is a lifeline that provides access to free or affordable healthcare services for millions of Californians and their families,” said Attorney General Bonta. “When any healthcare provider or agency defrauds the program, they break the public’s trust and put profits 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.”

“Medicaid expansion funds must be used for their intended purpose of providing health care services to low-income individuals,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the U.S. Justice Department’s Civil Division. “When health care systems and providers knowingly misuse Medicaid funds, they will be held accountable.”

Pursuant to the ACA, beginning in January 2014, Medi-Cal was expanded to cover the previously uninsured “Adult Expansion” (AE) 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. The AE program was intentionally overfunded to provide a substantial cushion to cover any additional medical needs this newly insured population of patients might present. Through its contract with the California Department of Health Services (DHCS), CenCal Health agreed that if it did not spend at least 85% of what it received for the AE population on eligible services, the surplus funds would be returned to the Medi-Cal program. California, in turn, was required to return that amount to the federal government.

The four settlements resolve allegations that CHC, Cottage, Sansum and CenCal Health knowingly submitted or caused the submission of false claims to Medi-Cal for “additional services” provided to Adult Expansion Medi-Cal members. California and the United States alleged that the payments were not “allowed medical expenses” under CenCal health’s contract with DHCS, were predetermined 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. California and the United States further alleged that the payments were unlawful gifts of public funds in violation of the California Constitution.

The AE program was funded by the federal government. Thus, the bulk of the settlement amount will go to the federal government. California will receive a 10% share of the Medicaid recoveries because the case involves the California False Claims Act and the alleged fraud impacted Medi-Cal.

Specifically, CenCal Health will pay $49.5 million to the United States; CHC will pay $3.15 million to the United States and $350,000 to California; Cottage will pay $9 million to the United States and $1 million to California; and Sansum will pay $4.5 million to the United States and $500,000 to California. In total, California will receive $1.85 million.

This investigation was made possible through collaboration with the USDOJ and the United States Attorney’s Office for the Central District of California.

The California Department of Justice’s Division of Medi-Cal Fraud and Elder Abuse (DMFEA) protects Californians by investigating and prosecuting those who defraud the Medi-Cal program as well as those who commit elder abuse. These settlements are made possible only through the coordination and collaboration of governmental agencies, as well as the critical help from whistleblowers who report incidences of abuse or Medi-Cal fraud at oag.ca.gov/dmfea/reporting

DMFEA receives 75% of its funding from HHS under a grant award totaling $53,792,132 for federal fiscal year 2022-2023. The remaining 25% is funded by the State of California. The federal fiscal year is defined as through September 30, 2023.

The claims resolved by the settlement are allegations only, and there has been no determination of liability.

Copies of the settlement agreements are available here [1] [2] [3] [4].