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Central California medical provider Clinica Sierra Vista (CSV), which serves customers in Kern, Fresno, and Inyo Counties, has agreed to resolved its violations of the California False Claims Act and the federal False Claims Act. for nearly $26 million settlement.  CSV is a non-profit Federally Qualified Health Center (“FQHC”) that provides primary and preventive care serves to primarily low-income individuals and families.

CSV is designated as an FQHC by virtue of its receipt of a federal “health center” grant authorized under Section 330 of the Public Health Services Act.

The conditions of Section 330 grants include requirements that the health center be located in a medically- underserved area, it serves anyone regardless of the ability to pay for those services and that it participate in its state Medicaid program which, in California, is the California Medical Assistance Program (“Medi-Cal”)

At the end of each FQHC’s fiscal year, FQHCs must file a “Federally Qualified Health Center (FQHC)/Rural Health Clinic (RHC) Prospective Payment System (PPS) Reconciliation Request.” The total amount of Medi-Cal interim payments and third party payments received by the FQHC, e.g. Medicare, Managed Care Organization (MCO), and other party third party payments, if applicable, is reviewed against the number of visits for which the FQHC was reimbursed by the Medi-Cal Program at its Prospective Payment System (PPS) rate.

In 2019, CSV informed the Government that, as part of an internal investigation commissioned by its new Chief Executive Officer and approved by CSV’s Board of Directors, CSV had identified potential violations of the False Claims Act, 31 U.S.C. §§ 3729-3733, and the California False Claims Act, Government Code section 12650, et seq., and expressed its intent to voluntarily self-disclose information known by CSV about the potential violations.

CSV’s voluntary self-disclosure revealed certain CSV executives, including its founder and former CEO, and former Chief Financial Officer, (i) submitted false information in its annual reconciliation reports by omitting Medi-Cal Managed Care and third-party capitated payments it had received, and (ii) knowingly failed to correct this information after it later knew or should have known that the information was false and resulted in uncorrected, significantly higher wrap around payments from DHCS than CSV would have been entitled to had it submitted accurate reconciliation requests.

According to reports by the news outlet recently appointed CEO Dr. Olga Meave said in a statement Thursday the settlement will not impact CSV “operations, patients or team members” because Clinica set aside money and planned for its financial future during the three years the case took to resolve. She added the nonprofit takes pride in its values of responsibility, transparency and integrity and looks to move forward focused on providing high-quality care.

New leadership is in place at CSV and the organization has taken many steps since 2018 to ensure a reporting error like this does not happen again, including instituting a new compliance program and hiring an external accounting firm to perform annual audits under the rigorous Single Audit Act,” Meave stated.

CSV founder Steve Schilling, who served as CEO during the period investigators referred to in the settlement agreement, said Thursday he had heard nothing about the settlement or the investigation. He said reconciliation was for years a back-and-forth conversation between CSV and the Medi-Cal program, such that the nonprofit always kept millions of dollars in reserve in case the government ever concluded afterward that Clinica had been overpaid and money needed to be returned.

I don’t think anybody’s intending to defraud anybody,” he added. “Nobody was personally benefiting from that.”