The United States has joined a whistleblower action against North East Medical Services (NEMS), a federally-qualified health center (FQHC).  The lawsuit alleges 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.

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.

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.

NEMS allegedly 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.

The whistleblower lawsuit was filed by Loi Trinh and Ed Ta-Chiang Hsu under the qui tam provisions of the False Claims Act.  The False Claims Act allows private persons to file actions to provide the government information about wrongdoing.  Under the statute, if it is established that a person has submitted or caused others to submit false or fraudulent claims to the United States, the government can recover treble damages plus $5,500 to $11,000 for each false or fraudulent claim filed.  If the government is successful in resolving or litigating its claims, the whistleblower who initiated the action can receive a share of between 15 percent to 25 percent of the amount recovered.

If you believe that your employer is making false claims to Medicare, Medicaid, or another government health care program, then you should consult with an experienced lawyer immediately.  To schedule a free initial consultation by telephone or in person, call my office today at (212) 601-2728 or click here to communicate with me via email.

John Howley

New York, New York

Sources:  Department of Justice press release;

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