4 Central Coast healthcare providers pay $68 million for alleged Medi-Cal fraud

Jun. 29—The county-organized health system that manages Medi-Cal enrollees in Santa Barbara and San Luis Obispo counties and three Central Coast healthcare providers and will pay a total of $68 million to resolve allegations they submitted false claims to Medi-Cal, according to a news release from the California Department of Justice.

Four entities — the Santa Barbara San Luis Obispo Regional Health Authority, also known as CenCal Health; Santa Barbara's Cottage Health System and Sansum Clinic; and San Luis Obispo and Santa Barbara-based Community Health Centers of the Central Coast — entered settlement agreements with the United States and the state of California, the release said.

Settlement agreements were executed earlier in June. Late Wednesday, a federal judge unsealed the whistleblower case, naming the four entities, the release said.

Under the Affordable Care Act, Medi-Cal was widened to cover the previously uninsured "adult expansion" population, which includes adults between ages 19 and 64 without dependent children who have annual incomes up to 133% of the federal poverty level, the release said.

The expansion coverage was fully funded for the first three years, but if CenCal did not spend at least 85% of the funds it received for the adult expansion population on "allowed medical expenses," CenCal was required to pay back to the state the difference between 85% and what it actually spent, which California would in turn repay to the federal government.

The settlements resolve allegations that the four healthcare providers knowingly submitted or caused the submission of false claims to Medi-Cal for "enhanced services" supposedly provided to "adult expansion" Medi-Cal members, the release said.

Cottage submitted false claims between Jan. 1, 2014, and June 30, 2016, Sansum and CHC between Jan. 1, 2015, and June 30, 2016, and by certain other healthcare providers between Jan. 1, 2014, and June 30, 2016, the release said.

"Medicaid expansion funds must be used for their intended purpose of providing health care services to low-income individuals," Principal Deputy Assistant Attorney General Brian M. Boynton said. "When healthcare systems and providers knowingly misuse Medicaid funds, they will be held accountable."

The United States and California alleged that these payments were not "allowed medical expenses," and were predetermined amounts that did not reflect the fair market value of any of the "enhanced services" provided, finding some "enhanced services" were duplicates of services that were already required under Medi-Cal.

The United States and California further alleged the payments were unlawful gifts of public funds, which violates the California Constitution, the release said.

As a result of the settlements, CenCal will pay $49.5 million, Cottage will pay $9 million, Sansum will pay $4.45 million and CHC will pay $3.15 million to the U.S. government.

California will also receive payments totaling $1.85 million, the release said.

Civil settlements from the case include a resolution of claims brought under whistleblower provisions of the False Claims Act by former CenCal medical director Dr. Julio Bordas, the release said.

Any private party can file an action on behalf of the United States and receive part of the recovered funds — in Bordas' case, around $12.56 million, the release said.

"Medi-Cal is a lifeline that provides access to free or affordable healthcare services for millions of Californians and their families," California Attorney General Rob Bonta said in the release. "When any healthcare provider or agency defrauds the program, they break the public's trust and put their own bottom line before the patients who count on them for honest, quality care and services."

The United States previously settled similar allegations against Dignity Health, which operates Arroyo Grande Community Hospital, French Hospital Medical Center in San Luis Obispo and Marian Regional Medical Center in Santa Maria.

A settlement was also previously reached with Twin Cities Community Hospital and Sierra Vista Regional Medical Center, two subsidiaries of Tenet Healthcare Corp., relating to payments they received from CenCal under the adult expansion programs.

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