U.S., California reap $70.7 million in Medicaid fraud settlements

The California flag flies above City Hall in Santa Monica, California February 6, 2009. REUTERS/Lucy Nicholson
  • Settlements center on federal funds for 2014 Medicaid expansion
  • Allegations stem from whistleblower lawsuit

(Reuters) - A county-managed health plan and three health care providers in Ventura County, California, have agreed to pay a total of $70.7 million to the state and the federal government to settle claims that they overbilled the state's Medicaid program.

Three separate settlements, announced Thursday, resolve claims that the defendants submitted improper bills for patients covered by the state's 2014 Medicaid expansion under the Affordable Care Act in order to avoid returning funds to the federal government.

The county's Gold Coast Health Plan will pay $17.2 million to the federal government, and the county itself, which operates the health system Ventura County Medical Center, will pay $29 million. Non-profit hospital operator Dignity Health will pay $10.8 million to the federal government and $1.2 million to California, and non-profit community health center operator Clinicas del Camino Real will pay $11.25 million to federal government and $1.25 million to the state.

"Medicaid is a taxpayer-funded program that exists to help patients afford health care, and it never should be used to line the pockets of health care providers through fraudulent schemes," said Acting U.S. Attorney Stephanie Christensen for the Central District of California in a statement.

Clinicas CEO Gagan Pawar said in a statement that the health center did not believe it had done anything wrong, but settled the case to avoid costly litigation.

Ashley Humes, a spokesperson for the county, said the county had worked with authorities to resolve the case and that the settlement would not impact future operations.

Dignity Health said it continues to deny the allegations.

The settlements stem from a whistleblower lawsuit brought by Gold Coast's former controller, Atul Maithel, and its former director of member services, Andre Galvan in Los Angeles federal court in 2015. Gold Coast is a so-called County Organized Health System, a feature of California's Medicaid program in which some counties operate managed care organizations for Medicaid beneficiaries.

California's Medicaid expansion was fully funded by the federal government. Under the program, if providers did not spend at least 85% of the funding for the expansion on allowed medical expenses for expansion beneficiaries, they were required to return the difference to the state, which would then return it to the federal government.

The whistleblowers alleged that Gold Coast allowed the providers to bill for services that were unnecessary, duplicative or never provided in order to reach the 85% threshhold and avoid returning any funds.

They brought their case under the federal False Claims Act, which allows individuals to sue on behalf of the government and receive a portion of the recovery if successful, as well as under a similar California law. Both the federal and state governments intervened in the case.

The whistleblowers will receive 18.5% of the federal settlement payments, and 24% of the state payments, according to the settlement agreements.

The case is United States ex rel Maithel et al, U.S. District Court, Central District of California, No. 2:15-cv-07760.

For the whistleblowers: Robert Nelson of Lieff Cabraser Heimann & Bernstein

For the United States: Trial Attorneys Alison Rousseau and Mary Beth Hickcox-Howard of the U.S. Department of Justice Civil Division and Assistant U.S. Attorney Jack Ross of the Central District of California

For California: Senior Assistant Attorney General Nicholas Paul

For Gold Coast: Charles Stevens and Winston Chan of Gibson, Dunn & Crutcher

For Ventura County: Lloyd Bookman and Jordan Kearney of Hooper, Lundy & Bookman

For Clinicas: Jennifer Scott of Kronick Moskovitz Tiedemann & Girard

For Dignity: Daniel Cody of Jones Day

Our Standards: The Thomson Reuters Trust Principles.

Thomson Reuters

Brendan Pierson reports on product liability litigation and on all areas of health care law. He can be reached at brendan.pierson@thomsonreuters.com.