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Press Release

Health Care Provider Agrees to Pay $5 Million for Alleged False Claims to California’s Medicaid Program

For Immediate Release
Office of Public Affairs

Lompoc Valley Medical Center (LVMC), a California Health Care District that operates multiple health care providers, including a hospital and several clinics, in Lompoc, California, has agreed to pay $5 million to resolve allegations that it violated the False Claims Act and the California False Claims Act by causing the submission of false claims to California’s Medicaid program (Medi-Cal) related to Medicaid Adult Expansion under the Patient Protection and Affordable Care Act (ACA).

Pursuant to the ACA, beginning in January 2014, Medi-Cal was expanded to cover the previously uninsured “Adult 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 contracts with California’s Department of Health Care Services (DHCS), Santa Barbara San Luis Obispo Regional Health Authority, doing business as CenCal Health (CenCal), arranges for the provision of health care services as a county organized health system under Medi-Cal in Santa Barbara County and San Luis Obispo County, California, by contracting with providers such as LVMC to provide health care services to Medi-Cal patients. Under its contractual arrangement with DHCS, CenCal received funding to serve the Adult Expansion population.  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. California, in turn, was required to return that amount to the federal government.

The settlement resolves allegations that LVMC knowingly caused the submission of false claims to Medi-Cal pursuant to agreements executed by LVMC with CenCal for “Enhanced Services” that LVMC purportedly provided to Adult Expansion Medi-Cal members between Jan. 1, 2014, and June 30, 2016. The United States and California alleged that LVMC claimed and received payments pursuant to those agreements that were not for “allowed medical expenses” permissible under the contract between DHCS and CenCal; were pre-determined amounts that did not reflect the fair market value of any Enhanced Services provided by LVMC; and/or the Enhanced Services were duplicative of services already required to be rendered by LVMC. The United States and California further alleged that the payments were unlawful gifts of public funds in violation of the California Constitution.

This settlement brings the United States’ total recovery in the matter to $95.5 million. CenCal, Cottage Health System, Sansum Clinic and Community Health Centers of the Central Coast previously paid $68 million, and Dignity Health and Twin Cities Community Hospital and Sierra Vista Regional Medical Center, two subsidiaries of Tenet Healthcare Corporation, previously paid $22.5 million, to settle similar False Claims Act allegations. 

“The Medicaid program provides critical health care services to those most in need,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “We will hold providers accountable when they knowingly divert Medicaid funds from their intended purpose.”

“This resolution underscores our steadfast resolve to hold accountable health care providers that seek to undermine the integrity of the Medicaid program,” said U.S. Attorney Martin Estrada for the Central District of California. “We will ensure that the nearly $100 million recovered in this case remains in government health care programs, and not in the hands of unscrupulous health care systems and providers.”

“Federal health care programs are intended to ensure that millions of Americans have access to high quality, medically necessary care,” said Special Agent in Charge Timothy B. DeFrancesca of the Department of Health and Human Services Office of Inspector General (HHS-OIG). “Protecting federal health care funds from fraud, waste, and abuse is at the center of HHS-OIG’s mission, and we are committed to ensuring that these valuable resources are available to patients as intended.”

“Medi-Cal supports millions of Californians by providing for the critical healthcare they rely on every day,” said California Attorney General Robert Bonta. “When providers misuse Medi-Cal funding, they siphon away much-needed resources from vulnerable, deserving patients.  My office always stands ready to partner with the U.S. Department of Justice to hold such perpetrators accountable.  The California Department of Justice is committed to protecting the integrity of the Medi-Cal program against those who may seek to abuse it.”

The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act by Julio Bordas, CenCal’s former medical director. Under the act, a private party can file an action on behalf of the United States and receive a portion of any recovery. The qui tam case is captioned United States and State of California ex rel. Bordas v. Lompoc Valley Medical Center, et al., No. 15-cv-09834 (C.D. Cal.).  Dr. Bordas will receive approximately $950,000 as his share of the federal recovery.

The resolution obtained in this matter was the result of a coordinated effort between the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section, the U.S. Attorney’s Office for the Central District of California, and the California Department of Justice, with assistance from HHS-OIG and DHCS.

The investigation of this matter 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).

Trial Attorneys Mary Beth Hickcox-Howard and Tiffany L. Ho of the Civil Division’s Commercial Litigation Branch, Fraud Section and Assistant U.S. Attorney Jack D. Ross for the Central District of California handled this case.

The claims resolved by the settlement are allegations only and there has been no determination of liability.

Updated October 6, 2023

Topics
False Claims Act
Health Care Fraud
Press Release Number: 23-938