Fountain Valley-based Memorial Health Services paying $31.5 million to settle drug overbilling case
Memorial Health Services, a Fountain Valley-based nonprofit health care organization, has agreed to pay more than $31.5 million to resolve allegations that it overbilled Medicaid for prescription medication purchased and reimbursed under a federal drug pricing program, the U.S. Department of Justice announced Monday.
The settlement agreement is the result of a voluntary disclosure made in October 2019 by Memorial Health, which under the name MemorialCare Health System operates Long Beach Memorial Medical Center, Miller Children’s and Women’s Hospital and Orange Coast Memorial Medical Center, according to the DOJ.
After an internal audit, Memorial Health determined that its hospitals and pharmacies overbilled the United States and California, which jointly fund Medicaid — known in California as Medi-Cal — a program that helps lower- income people with their medical costs, DOJ officials said.
According to the settlement agreement, from December 2016 to October 2019, Memorial Health improperly charged higher “usual and customary” costs, rather than lower “actual acquisition costs,” as required under the 340B Drug Pricing Program. The federal program requires drug manufacturers to provide outpatient medication to eligible health care organizations at significantly reduced prices.
The overbilling allegedly resulted from Memorial Health billing for its usual costs following a federal court’s temporary stay of the implementation of the California law requiring 340B providers to bill Medi-Cal at actual acquisition cost rates. But once a court lifted the temporary ban, Memorial Health failed to implement actual acquisition cost pricing, according to the DOJ.
“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 U.S. 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.”
California Attorney General Xavier Becerra said the settlement was the result of Memorial Health “coming forward, doing the right thing, and alerting the authorities of their error. 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.”
Memorial Health ultimately overbilled the United States and California over $21 million, and the $31.5 million settlement represents 1.5 times the overbilling, the agreement said.
Memorial Health agreed to pay the United States $12.6 million and California $18.9 million to resolve the case, bringing the total settlement amount to more than $31.5 million. After making its voluntary disclosure, Memorial Health cooperated with the federal and state investigation, the DOJ said.
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