Health plan pays record settlement


A Long Beach health plan agreed to pay $320 million to resolve allegations that it was overpaid by the state’s Medi-Cal program going back to 1985, government officials said.

Federal officials called the settlement from SCAN Health Plan the largest of its kind from a single provider in Medi-Cal, the state’s Medicaid program for the poor and disabled.

Separately, the United States attorney’s office in Los Angeles said SCAN paid an additional $3.8 million to settle a whistle-blower’s allegation that the nonprofit company was overpaid by Medicare because of withholding of information about patients’ diagnosis codes.


Medi-Cal is a joint state-federal program. Under the settlement announced Thursday, California will receive $190.5 million and the federal government will get $129.4 million.

SCAN said it did not admit any wrongdoing in settling both the Medi-Cal and Medicare allegations. SCAN serves more than 127,000 people in the state and 3,000 in Arizona.

Susan Hershman, an assistant U.S. attorney on the case, said the state was responsible for the Medi-Cal payment errors and prosecutors didn’t find any evidence SCAN was at fault in that regard.

“We did not develop any evidence that SCAN participated in the setting of the rate or that SCAN ever knew the rates exceeded the legal cap set by state statute and regulations,” Hershman said. “It was a mistake by the state of California.”

State officials disagreed with that characterization. They said SCAN failed to provide contractually required financial information to the Department of Health Care Services, hampering its ability to identify the errors and adjust the rates.

“This settlement is a victory for the Medi-Cal beneficiaries we serve,” said Toby Douglas, director of the California Department of Health Care Services.

“We will continue our ongoing efforts to strengthen programs that protect the integrity of Medi-Cal.”

Some of the overpayments were related to long-term care patients SCAN treated at their homes. Federal officials said the state mistakenly reimbursed SCAN as though those patients were in a nursing home, where the cost of care is higher.

A second error involved Medi-Cal paying SCAN for certain nursing home patients even though the company wasn’t obligated to continue providing services to them.

SCAN said it decided to refund the overpayments once it learned of the state’s errors.

“We’re pleased that we can now focus our undivided attention on our core mission and passion: serving our members,” Chris Wing, SCAN’s chief executive, said in a statement.

“We played no role in how the state set rates for the population at issue, and we were previously unaware

of the mistake the state made.”

William Hanagami, a Woodland Hills attorney representing the company whistle-blower, James Swoben, said he disputed the notion that SCAN wasn’t aware of the overpayments by Medi-Cal.

“SCAN knew about the excessive profits and failed to provide data to Medi-Cal,” Hanagami said. “Had they done that, the state would have seen these rates are too high.”

Swoben, a former SCAN employee, filed his whistle-blower suit in 2009.

Hershman, the federal prosecutor, said SCAN used an outside company to review the billing codes submitted to Medicare for some of its patients. But she said the company submitted information related only to higher scores and didn’t pass along data indicating lower payments.

“It generated scores that were a little higher than SCAN was due,” she said.

Hershman said it hasn’t been determined what portion of the $3.8-million federal settlement that Swoben, the whistle-blower, may receive.

Glenn Ferry, another federal investigator, said the government will continue to probe “new ways managed healthcare organizations may attempt to game” the system.