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Several Central Coast health care providers have agreed to pay a total of $22.5 million to resolve allegations that they violated federal and California law by causing the submission of false claims to Medi-Cal related to Medicaid Adult Expansion under the Patient Protection and Affordable Care Act (ACA).

Dignity Health, a not-for-profit health system that owns and operates three hospitals and one clinic in Santa Barbara and San Luis Obispo counties, entered into one agreement with the United States and the California. The second settlement agreement resolves allegations against Twin Cities Community Hospital and Sierra Vista Regional Medical Center, two acute healthcare facility subsidiaries of Tenet Healthcare Corporation operating in San Luis Obispo County.

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), if a California county organized health system (COHS) did not spend at least 85% of the funds it received for the Adult Expansion population on “allowed medical expenses,” the COHS 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 two settlements resolve allegations that Dignity, Twin Cities and Sierra Vista knowingly caused the submission of false claims to Medi-Cal for “Enhanced Services” that Dignity purportedly provided to the Adult Expansion patients of a COHS between February 1, 2015 and June 30, 2016, and that Twin Cities and Sierra Vista purportedly provided to such patients between January 1, 2014 and April 30, 2015.

The United States and California alleged that the payments were not “allowed medical expenses” permissible under the contract between DHCS and the COHS; 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 United States and California further alleged that the payments were unlawful gifts of public funds in violation of the California Constitution.

As a result of its settlement, Dignity will pay $13.5 million to the United States and $1.5 million to the State of California. Twin Cities and Sierra Vista have agreed to pay $6.75 million to the United States and $750,000 to the State of California.

The civil settlements include the resolution of claims brought under the qui tam, or whistleblower, provisions of the federal False Claims Act by Julio Bordas, the former medical director of the COHS that contracted with Dignity, Twin Cities and Sierra Vista for the provision of health care services under Medi-Cal. Under the act, a private party can file an action on behalf of the United States and receive a portion of any recovery. Mr. Bordas will receive $3.9 million as his share of the federal recovery.

The resolution obtained in this matter was the result of a coordinated effort between the United States Attorney’s Office; the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section; and the California Department of Justice. HHS-OIG and DHCS provided substantial assistance.