O.C.- Based Health Care Organization Agrees to Pay Over $31.5 Million to Settle Claims It Overbilled Medicaid for Prescription Medication

LOS ANGELES – Memorial Health Services, a Fountain Valley-based non-profit healthcare 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 Justice Department announced Nov. 3.

The settlement agreement resulted from a voluntary disclosure made Oct. 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.

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.

The settlement agreement states, from Dec. 2016 to Oct  2019, Memorial Health improperly charged higher “usual and customary” costs, rather than lower “actual acquisition costs,” as required under the 340B Drug Pricing Program. This 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.

Memorial Health ultimately overbilled the United States and California $21,021,786 and the $31.5 million settlement represents 1.5 times the alleged overbilling, the agreement states. Memorial Health has agreed to pay the United States $12,613,071.60 and California $18,919,607.40 to resolve the allegations, bringing the total settlement amount to $31,532,679.

After making its voluntary disclosure, Memorial Health cooperated with the federal and state authorities’ investigation.