Attorney General Becerra Announces $18.9 Million California Settlement with Memorial Health Services

Settlement comes after Memorial Health self-disclosed overcharging the Medi-Cal program 

SACRAMENTO — California Attorney General Xavier Becerra today announced a $31,532,679 settlement with Memorial Health Services that was reached after the health system self-disclosed that it overcharged Medi-Cal for a period of three years. From December 2016 to May 2019, Memorial Health submitted claims to Medi-Cal for outpatient prescription drug reimbursements that were higher than the actual cost the company paid for the drugs. Of the total $31,532,679 settlement, 40 percent, or $12,613,071.60 will go to the federal government and 60 percent, or $18,919,607.40, will go to California. The Medi-Cal program will receive $12,613,071.60 and $6,306,535.80 will go into the State’s General Fund.

Today’s settlement was negotiated by the California Department of Justice’s Division of Medi-Cal Fraud and Elder Abuse (DMFEA), along with the Civil Fraud Section of the United States Attorney’s Office, and the U.S. Department of Health and Human Service’s Office of Inspector General.

“Today’s settlement was the result of Memorial Health coming forward, doing the right thing, and alerting the authorities of their error,” said Attorney General Becerra. “The money from the settlement will go back where it belongs: to California’s residents, particularly low-income families and children who rely on Medi-Cal for their healthcare coverage.”

“Hospitals and pharmacies that participate in the 340B Program are expected to provide low-priced drugs to vulnerable patients without overcharging the federal or state government,” said United States Attorney Nick Hanna. “While we commend Memorial Health for making a voluntary disclosure of its overbilling, we expect health care entities that participate in the 340B Program to do so fairly, honestly and in full compliance with the law.”

In October 2019, Memorial Health self-disclosed to the United States Office of the Inspector General that its hospitals and pharmacies improperly billed Medi-Cal for reimbursement in the amount of $21,021,786. Memorial Health submitted its reimbursement claims under the 340B Drug Pricing Program, a program that provides prescription drug discounts to providers that serve vulnerable patient populations. The hospital system billed Medi-Cal for outpatient drugs at its usual and customary rate rather than the required lower actual acquisition cost, or the actual price Memorial Health paid for the prescription drugs.

Through DMFEA, the Attorney General’s office works to protect Californians by investigating and prosecuting those who perpetuate fraud on the Medi-Cal program. DMFEA also investigates and prosecutes those responsible for abuse, neglect, and fraud committed against elderly and dependent adults in the state. DMFEA regularly works with whistleblowers, the California Department of Health Care Services, and law enforcement agencies to investigate and prosecute.

A copy of the settlement agreement is available here.

The DMFEA receives 75 percent of its funding from the U.S. Department of Health and Human Services under a grant award totaling $33,829,000 for Federal fiscal year 2019-20. The remaining 25 percent, totaling $11,379,000 for fiscal year 2019-20, is funded by the State of California. The Federal fiscal year is defined as October 1, 2019, through September 30, 2020.