Lawsuit Against North East Medical Services

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(Press Release from U.S. Department of Justice)

The United States has joined a whistleblower action pending in the Northern District of California against the federally-qualified health center (FQHC), North East Medical Services (NEMS), alleging that the center under-reported income it received from a managed care organization in order to artificially inflate reimbursements it received from the California Medicaid program, the Justice Department announced today. North East serves the San Francisco Bay area.

FQHCs are “safety net” community clinics certified under federal law and licensed under state law to provide medical care to poor and under-served populations. As such a health center, North East Medical Services is entitled to special payments from the California Medicaid program (Medi-Cal) that are significantly more generous than typical Medicaid payments.

However, in order to receive these additional payments, NEMS must submit annual reports to Medi-Cal stating the total amount it actually received during the preceding year from any source for treating Medi-Cal enrollees. Medi-Cal then subtracts that amount from the amount that NEMS is entitled to receive as an FQHC and pays NEMS the difference. The government alleges that NEMS significantly under-reported payments it received from a managed care organization for treating Medi-Cal beneficiaries in order to artificially inflate the payments it received from Medi-Cal.

“As health care costs continue to rise, it is more important than ever that health care providers report accurate information to federal and state health care programs,” said Stuart Delery, Acting Assistant Attorney General for the Justice Department’s Civil Division. “The Department of Justice is committed to cracking down on improper accounting practices such as those alleged in this case, which undermine the integrity of these health care programs and increase the costs of health care for the rest of us.”

“Filing claims that imp roperly inflate reimbursement amounts means there are less funds available for people in need,” said Melinda Haag, U.S. Attorney for the Northern District of California. “My office views the actions this defendant allegedly committed as a serious breach of the responsibilities healthcare organizations owe to people in need of medical care and also to the taxpayers who fund these programs. We are committed to doing everything in our power to protect the integrity of the healthcare system.”

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