Oroville Hospital, located in Oroville, California, has agreed to pay $10.25 million to resolve allegations of submitting false claims to Medicare and Medicaid. The settlement addresses multiple allegations, including the submission of medically unnecessary inpatient hospital admissions, a kickback scheme involving physicians, and the use of incorrect diagnosis codes to obtain excessive reimbursement. The payment is split, with $9.52 million going to the federal government and $731,046 to the State of California.
Oroville Hospital is a general medical and surgical facility with up to 133 beds, serving residents of Butte County and Northern California. The hospital’s healthcare professionals are dedicated to providing care, focusing on helping patients recover quickly and ensuring a smooth transition back to their homes.
The U.S. Department of Justice (DOJ) alleged that Oroville Hospital submitted claims for inpatient hospital stays that were not medically necessary, billing Medicare and Medicaid for more expensive services when outpatient care or observation status would have been sufficient. Additionally, the DOJ found that the hospital incentivized physicians to admit patients by offering financial bonuses based on the volume or value of their admissions. This kickback arrangement, according to the allegations, compromised medical decision-making, leading to unnecessary admissions.
Another key element of the case involved Oroville Hospital allegedly submitting false claims with diagnosis codes for systemic inflammatory response syndrome (SIRS), a condition that can be used to justify higher reimbursement rates. These erroneous codes resulted in inflated payments from Medicare and Medicaid.
“This settlement is a reminder that improperly billing federal health care programs not only wastes taxpayer money but also undermines the integrity of the healthcare system,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the DOJ’s Civil Division. “We will continue to pursue those who seek to profit at the expense of public resources.”
U.S. Attorney Phillip A. Talbert for the Eastern District of California also emphasized the detrimental effects of kickback schemes on medical decision-making. “Hospitals that engage in these illegal schemes betray the trust of their patients and the communities they serve. This resolution underscores our commitment to protecting public healthcare programs and ensuring patient well-being remains the top priority,” Talbert said.
As part of the settlement, Oroville Hospital entered into a five-year Corporate Integrity Agreement (CIA) with the Department of Health and Human Services (HHS) Office of Inspector General (OIG). The CIA requires the hospital to implement robust compliance measures, including risk assessments, internal reviews, and the use of an independent review organization to assess the medical necessity of certain claims submitted to Medicare.
HHS-OIG Special Agent in Charge Steven J. Ryan warned that fraudulent billing practices divert taxpayer funds intended for those who truly need medical care. “When providers engage in improper financial arrangements, they undermine the integrity of medical decision-making and put public health programs at risk,” Ryan said. “We will continue to work with our law enforcement partners to protect these vital programs.”
The settlement also resolves claims brought under the qui tam provisions of the False Claims Act by whistleblower Cecilia Guardiola, who will receive approximately $1.7 million from the federal settlement amount. Under the False Claims Act, private individuals can file lawsuits on behalf of the U.S. government and receive a share of any recovered funds.
The resolution was the result of a coordinated investigation by the DOJ’s Civil Division, the U.S. Attorney’s Office for the Eastern District of California, the California Department of Justice’s Division of Medi-Cal Fraud and Elder Abuse, and various HHS-OIG units.
