Christus Health and Santa Fe hospital pay $12.2M to settle whistleblower lawsuit

SANTA FE, NEW MEXICO, September 1, 2017 – Christus Health and its Santa Fe hospital will pay $12.2 million to the federal government to settle a whistleblower case brought by Phillips & Cohen LLP that alleged Christus and the hospital manipulated federal funding for an indigent care program to boost their revenues.

The alleged scheme involved New Mexico’s Sole Community Provider Fund and Sole Community Provider Supplemental Payments programs and so-called “donations” St. Vincent Regional Medical Center made to Santa Fe County. The “donations” were made to cover the state’s share of funding needed to obtain federal matching funds from 2001 to 2009, according to the whistleblower’s “qui tam” lawsuit.

The Sole Community Provider programs use a combination of state and federal funds to pay hospitals the costs of treating those who are too poor to have medical insurance when there is only one hospital in the area or it’s an isolated area. In New Mexico, the state or local government must provide about $1 for every $3 the federal government pays. Hospitals draw lump sums from the programs on a quarterly basis.

“Medicaid regulations prohibit healthcare providers from donating funds for local and state governments to use as their contributions to the Sole Community Provider programs,” said Stephen S. Hasegawa, a whistleblower attorney with Phillips & Cohen. “The restriction on donations forces those governments to have a stake in the costs of healthcare for indigent patients, so that they keep an eye on expenditures.”

The whistleblower complaint says Christus and St. Vincent transformed “non-bona fide ‘donations’ to Santa Fe County into discretionary supplemental Medicaid payments” that both refunded St. Vincent in full for its so-called donations and paid St. Vincent “additional amounts of unwarranted federal funding that total approximately three times the amount of the hospital’s investment in such refunded ‘donations.’”

As a result, the complaint alleges, Christus and St. Vincent “knowingly claimed and received increases in discretionary Medicaid payments through those programs that they knew they were not properly eligible to receive.”

Phillips & Cohen filed the whistleblower lawsuit on behalf of Diana Stepan in federal district court in New Mexico in 2011. Stepan was the Indigent Health Care Administrator for Los Alamos County from 2002 to 2011. The federal government joined the case after investigating the allegations.

“Diana Stepan was a strong individual who stepped up despite the opposition she faced,” said Peter Chatfield, a whistleblower attorney with Phillips & Cohen. “She believed that rules should be followed and taxpayer funds protected.”

According to the whistleblower complaint, while working for Los Alamos County, Stepan came to realize that St. Vincent’s donations to Santa Fe County “were sham transactions designed and implemented specifically to bilk the federal treasury.”

Stepan died last year. Her estate will receive a whistleblower award of more than 18 percent of the government’s recovery, as provided under the False Claims Act, for the information and work Stepan and her attorneys provided to help recover funds for taxpayers.

“Senior Trial Attorney Elizabeth Rinaldo of the US Department of Justice and Assistant US Attorney Howard Thomas of the District of New Mexico drove the government’s investigation and played key roles in getting this settlement,” Hasegawa said. “We thank them on behalf of our client for their work on the case.”

The False Claims Act allows private individuals to sue entities that are defrauding the government and recover funds on the government’s behalf. Whistleblowers are rewarded with 15 percent to 25 percent of the amount recovered when the government joins the case.

The whistleblower’s complaint, US ex rel. Stepan v. Christus St. Vincent Regional Medical Center Corp. et al., Case No. 11-cv-00572, is posted on the Phillips & Cohen website.

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