July 14, 2023. Eight years ago, a U.S. Attorney for the Southern District of Florida compared healthcare fraud schemes to “Whac-A-Mole.” His description is still unfortunately apt. Four California healthcare entities serving the San Luis Obispo area settled allegations of Medicaid expansion fraud with the United States and the State of California. We previously reported on a similar scheme in Ventura County, California that settled last year. The regional healthcare authority that facilitates California Medicaid services (Medi-Cal) called CenCal, nonprofit hospital network Cottage Health System (Cottage), nonprofit outpatient clinic Sansum, and nonprofit community health center Community Health Centers of the Central Coast (CHC) paid a collective $68 million to resolve allegations of submitting false claims to Medi-Cal and violating both the federal and California False Claims Acts. The former medical director of the county healthcare entity, CenCal, blew the whistle on this scheme. As a result of four successful qui tam lawsuits, the former medical director will take home $12.56 million of the federal settlement (approximately 19%) and will receive 25.45% of the settlements with Cottage, Sansum, and CHC under the California False Claims Act.
The California Attorney General described Medi-Cal as, “a lifeline that provides access to free or affordable healthcare services for millions of Californians and their families.” Under the Affordable Care Act, California expanded its Medicaid program eligibility requirements to cover adults with incomes up to 138% of the Federal Poverty Level in 2014. The “Adult Expansion” population is defined as “adults between the ages of 19 and 64 without dependent children with annual incomes up to 133% of the federal poverty level.” For the first three years of this program, the federal government fully funded coverage for the adult expansion group, and states along with county organized health systems (COHS) such as CenCal were contractually obligated by California’s Department of Health Care Services (DHCS) to spend at least 85% of those funds on “allowed medical expenses” for that group. If the COHS spent less than 85%, then they needed to return the remaining funds to the state, which would then remit the surplus to the federal government. The four healthcare entities in these settlements instead saw this 85% rule as a cash-generating scheme.
The whistleblower, the United States, and California alleged that the entities submitted false claims to Medi-Cal between January 2014 and June 2016. The claims held that adult expansion population members received “Enhanced Services” from the various healthcare entities, but the payments resulting from these claims were not “allowed medical expenses” per contracts with DHCS. The governments claimed that the payments were predetermined and did not reflect the services’ fair market value, or that they duplicated already required services. As with last year’s settlement of a similar scheme, the cherry on top was that the overpayments were considered “unlawful gifts of public funds,” contrary to the California Constitution.
The whistleblower in these cases understood the magnitude of the misuse of public funds. The U.S. Attorney for the Central District of California warned future fraudsters, “Health care systems and providers are on notice that the False Claims Act provides us with a powerful tool to ensure that taxpayer-funded health care programs are used for patient care, and not for furtive financial gain.”
If you would like to report Medicaid fraud taking place in California, you can contact the whistleblower attorneys at Tycko & Zavareei LLP. Eva Gunasekera and Renée Brooker are former officials of the United States Department of Justice and prosecuted whistleblower cases under the False Claims Act. Eva was the Senior Counsel for Health Care Fraud. Renée served as Assistant Director at the United States Department of Justice, the office that supervises False Claims Act cases in all 94 United States District Courts. Eva and Renée now represent whistleblowers. For a free consultation, you can contact Eva Gunasekera at [email protected] or contact Renée at [email protected] (tel.: 202-417-3664). Visit Tycko & Zavareei LLP’s website for whistleblowers to learn more at www.fraudfighters.net.