California hospital pays $2 million to settle whistleblower’s Medicare fraud case

April 26, 2007 – The Loma Linda Behavioral Medicine Center has paid the federal government slightly more than $2 million to settle a whistleblower (“qui tam”) case that alleged the Redlands, California, facility sought and received reimbursement from Medicare and the California Medicaid program, Medi-Cal, for costs that were unrelated to patient care.

The qui tam lawsuit said that the Loma Linda hospital filed false claims in its “cost reports” to Medicare and Medi-Cal from 1992 to 1996 with the help of a consulting firm, Healthcare Financial Advisors (HFA).

Loma Linda sought reimbursement for an employee assistance program for non-hospital employees, start-up costs on an abandoned project and other costs unallowable for Medicare reimbursement, the whistleblower lawsuit said.

“Essentially Loma Linda kept two sets of books to get more money from Medicare than they were entitled to receive,” said Peter W. Chatfield, a Washington, DC, attorney with Phillips & Cohen LLP, which represents the whistleblower.

HFA helped clients prepare duplicate cost reports, the qui tam lawsuit said. An inflated one was submitted to Medicare; a second one was kept for the hospital’s internal use. The internal cost report more accurately reflected the reimbursement the hospital should have received, the qui tam lawsuit said.

HFA, now owned by Certus Corp., was paid a percentage of the recoveries it generated for its clients through their cost reports.

Mark Razin, a former consultant affiliated with HFA, filed the original whistleblower lawsuit in 1998 in federal district court in Los Angeles, California. He alleged that a number of hospitals that worked with HFA defrauded Medicare and Medicaid.

The government investigated the Medicare and Medicaid fraud allegations and later joined the qui tam lawsuit. The U.S. Attorney’s office in Los Angeles is leading the government’s effort in the case.  Phillips & Cohen was assisted in the case by attorneys from the Washington, D.C., office of Heller Ehrman LLP.

Roughly $55 million has been returned to the U.S. Treasury as a result of Razin’s qui tam lawsuit. There were six previous settlements by various hospitals:

  • Lovelace Health System, a wholly owned subsidiary of Cigna Corp. based in Albuquerque, New Mexico, paid $24.5 million in 2002.
  • St. Joseph’s Hospital in Houston, Texas, paid the government $1.5 million in 2002.
  • Eisenhower Medical Center, located in Rancho Mirage, Calif., paid $8 million in 2005.
  • HealthSouth Bakersfield Rehabilitation Hospital in Bakersfield, Calif., paid $740,000 in 2005.
  • Jackson Memorial Hospital in Miami, Fla., paid $14 million in 2006.
  • St. Elizabeth Medical Regional Center in Lincoln, Neb., paid $4 million in 2006.

The False Claims Act permits private individuals to file qui tam lawsuits against companies that defraud the government. Liable companies pay as much as three times the government’s losses plus penalties for each false claim. When the government joins the case, whistleblowers are entitled to 15 percent to 25 percent of the government’s recovery.

Phillips & Cohen specializes in representing whistleblowers in qui tam lawsuits. For more information about Phillips & Cohen's record, see P&C's Successful Whistleblower Cases.