January 6, 2023

Medicaid Fraud: Three Health Care Providers Agree to Pay $22.5 Million

Three health care providers in California have agreed to pay $22.5 million pursuant to two settlement agreements in order to resolve claims that they violated the federal False Claims Act and the state False Claims Act by submitting false claims to Medi-Cal related to Medicaid Adult Expansion under the Patient Protection and Affordable Care Act. Beginning in January 2014, Medicaid in California was expanded to cover previously uninsured adults between the ages of 19 and 64 without dependent children and with annual income up to 133% of the federal poverty level pursuant to the Affordable Care Act. The federal government contracted with the state government to fully fund the state expansion coverage for the first three years of the program. In funding the program, if a county-organized health service did not spend at least 85% of the funds it received for the Adult Expansion population on allowed medical expenses, the county-organized health service was mandated to return the difference between 85% and what it actually spent to the state. The state was thereafter obligated to return the amount back to the federal government.

The hospitals and medical centers, owned by Dignity Health, a nonprofit health system, were alleged to have knowingly submitted false claims to Medi-Cal for “enhanced services” that Dignity purportedly provided to the Adult Expansion patients of a county-organized health service. The United States government and the state asserted that the payments were not “allowed medical expenses” permitted under the agreement between the federal government and the state department of health care services; 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 civil settlements here include the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act. Under the False Claims Act, a private party can file an action on behalf of the United States and receive a portion of any recovery. The investigation and resolution of this case reflect the government’s emphasis on cracking down on healthcare fraud. One of the most powerful tools available to the government is the False Claims Act.


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