UNITED STATES FILES SUIT AGAINST CALIFORNIA-BASED HEALTH PLAN FOR ALLEGED FALSE CLAIMS TO CALIFORNIA'S MEDICAID PROGRAM

The following information was released by the U.S. Department of Justice:

The United States has filed a complaint under the False Claims Act in a lawsuit against Local Initiative Health Authority for Inland Empire Health Plan doing business as Inland Empire Health Plan (IEHP), a California Local Initiative Health Plan based in Rancho Cucamonga, California. IEHP contracted with California's Department of Health Care Services (DHCS) to arrange for the provision of health care services to Riverside County and San Bernardino County residents under Medi-Cal, California's Medicaid program. The government's complaint alleges that IEHP violated the False Claims Act by making false statements to Medi-Cal and knowingly retaining overpayments.

"The Medicaid program provides critical health care services," said Deputy Assistant Attorney General Brenna Jenny of the Justice Department's Civil Division. "Today's complaint demonstrates our continued commitment to protect the integrity of the Medicaid program, and the taxpayer dollars that support it, from health insurers that knowingly seek to divert program funds for their own financial benefit."

"Today's lawsuit against IEHP shows our steadfast commitment to hold accountable insurers that brazenly compromise the Medicaid system," said Acting U.S. Attorney Bill Essayli for the Central District of California. "We will take every measure to restore integrity and accountability to the Medicaid system and ensure that patient care not financial gain is the primary focus of our health care system."

Beginning in January 2014, Medi-Cal was expanded to cover the previously uninsured "Medi-Cal Expansion" 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. Under its contractual arrangement with DHCS, IEHP received funding to serve the Medi-Cal Expansion population. If IEHP did not spend at least 85% of those funds on "allowed medical expenses," IEHP was required to pay back to the state the difference between 85% and what it actually spent. California, in turn, was required to return that amount to the federal government.

The United States' complaint alleges that IEHP developed schemes to misuse surplus Medi-Cal Expansion funding, falling into two broad categories: (1) sham incentive programs and (2) an extra-contractual retroactive rate increase. Through these schemes, IEHP misspent Medi-Cal Expansion funding for impermissible purposes, including spending on administrative expenses, other patient populations, and simply giving away federal funding in exchange for no value in return. The complaint further alleges that IEHP was motivated by a desire to conserve its other funding, thus enriching itself.

The complaint alleges that, to make the spending appear legitimate, IEHP deceived the state by making false statements which it knew would be relayed to the federal government about the nature, timing, and purpose of its payments to providers. For example, IEHP internally admitted it was giving providers "free money" but asserted to DHCS that the payments were part of a metric-based incentive program rewarding providers with good performance. IEHP also disguised payments for consultants and technology services as incentive payments by funneling those payments through providers and backdated spending to fall during earlier time periods. According to the United States' complaint, those payments allegedly were not "allowed medical expenses" permissible under the contract between DHCS and IEHP.

The United States' pursuit of this lawsuit illustrates the government's emphasis on combating healthcare fraud. One of the most powerful tools in this effort is the False Claims Act. Tips and complaints from all sources about potential fraud, waste, abuse and mismanagement can be reported to the Department of Health and Human Services, at 800-HHS-TIPS (800-447-8477).

This case is being handled by the Civil Division's Commercial Litigation Branch, Fraud Section and the U.S. Attorney's Office for the Central District of California, in coordination with the California Department of Justice and with valuable assistance from HHS-OIG and DHCS.

The United States is represented in this matter by Fraud Section Trial Attorney Mary Beth Hickcox-Howard and Assistant U.S. Attorneys S. Desmond Jui and Jack D. Ross for the Central District of California.

The claims asserted in the complaint are allegations only and there has been no determination of liability.