OAKLAND – California Attorney General Rob Bonta, in partnership with the U.S Department of Justice announced two settlements totaling $22.5 million against three Southern California providers for submitting fraudulent claims to Medi-Cal in violation of the state and federal False Claims Acts. The providers are 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 healthcare facility subsidiaries operated by Tenet Healthcare Corporation (Tenet Hospitals) in San Luis Obispo, California. The settlements resolve allegations that Dignity, Twin Cities, and Sierra Vista caused the submission of false claims to Medi-Cal, as part of an organized scheme to wrongfully retain federal funds which funded Medi-Cal’s Adult Expansion, a program to broaden Medi-Cal benefits which was made possible under the Affordable Care Act (ACA). Today’s settlement totals $22.5 million, with California receiving $2.25 million.
“Every day, Medi-Cal provides support for Californians in need of essential healthcare, and when companies take advantage of this system at the expense of patients, they must be held accountable,” said Attorney Rob General Bonta. “I want to express my gratitude to the United States Department of Justice and the United States Attorney’s Office in Los Angeles for their extensive efforts throughout the course of this investigation. The California Department of Justice will continue to prosecute corporations that seek to abuse the Medi-Cal system for their own benefit.”
“When health care providers misuse Medicaid funds, they undermine the integrity of the Medicaid program and waste taxpayer funds,” said Deputy Assistant Attorney General Michael D. Granston of the Justice Department’s Civil Division. “These settlements demonstrate the Department’s continued commitment to prevent providers from inappropriately using Medicaid or other federal health care programs for their own financial gain.”
“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,” said U.S. Attorney Martin Estrada for the Central District of California. “These major settlements demonstrate our commitment to hold accountable health care providers that seek to exploit the Medicaid program and harm the American taxpayer.”
“Bad actors who target and exploit Medicaid for unlawful profit drain the program of much-needed funds intended to support the health and safety of our nation’s individuals who need these resources the most,” stated Special Agent in Charge Timothy B. DeFrancesca for the Department of Health and Human Services. “HHS-OIG readily applies our investigative aptitude to, with our law enforcement partners, pursue providers suspected of defrauding this and other federal health care programs.”
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 percent 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. In order to provide Medi-Cal services in Santa Barbara and San Luis Obispo County, the California Department of Health Services (DHCS) contracted with Dignity, Twin Cities, and Sierra Vista through the County Organized Health System, CenCal Health (CenCal). Under this contract, Dignity, Twin Cities, and Sierra Vista agreed that if they did not spend at least 85% of what they 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 two settlements resolve allegations that the providers knowingly caused the submission of false claims to Medi-Cal for “Enhanced Services” provided to Adult Expansion Medi-Cal members. The settlements allege Dignity provided services to Adult Expansion patients from February 1, 2015, to June 30, 2016, and that Twin Cities and Sierra Vista did so from January 1, 2014 to April 30, 2015. California and the United States alleged the payments were not “allowed medical expenses” under CenCal’s contract with DHCS, 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 allege 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.
The settlements include the resolution of claims brought under the qui tam or whistleblower provisions of the California False Claims Act (CFCA) by Julio Bordas, the former Medical Director of CenCal. Under those provisions, a private party can file an action on behalf of California and receive a portion of any recovery. Under the CFCA, California is entitled to 10% enhanced recovery – at federal cost – in cases involving allegations of losses to the Medicaid program.
California was named alongside the United States in the underlying qui tam complaint and this investigation was made possible through collaboration with the United States Department of Justice 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 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 October 1, 2022, through September 30, 2023.