Accidents happen.

The Senior Care Action Network  (SCAN), a health plan that serves 127,000 Medicare Advantage patients in California, voluntarily kicked back $327 million to the state after an audit by the state Controller’s office uncovered overpayments to the HMO that stretched back years.

The Long Beach-based organization settled with the state, but admitted no wrongdoing. In fact, it had not actually been accused of any wrongdoing by the state or U.S. Department of Justice investigators.

“The United States did not develop any evidence that SCAN participated in the setting of the capitation rates that exceeded the legal cap, or that SCAN knew that the rates exceeded the legal cap,” U.S. Attorney Andre Birotte, Jr. wrote in a letter acknowledging the settlement and expressing appreciation for SCAN’s participation in the investigation.

The investigation by the Controller laid partial blame for the $327 million oversight at the government’s feet. “The Controller determined the department’s flawed methodology for setting contract rates resulted in SCAN receiving exorbitant profits, costing the State hundreds of millions of taxpayer dollars,” according to a two-year-old press release posted on the Controller’s website when the investigation had just been completed.

But, although the HMO was not formally accused of any wrongdoing, the press release included a line from a letter Controller John Chiang sent to SCAN Executive Director David Schmidt implying that the organization was not necessarily a hapless bystander. “At a time when the only source of healthcare for one out of every six Californians is threatened by the budget ax, SCAN has fleeced the State of an amount that would keep many vital services from being cut or eliminated,” Chiang wrote.

The Controller also noted that SCAN had filed paperwork with the California Department of Public Health that was sufficiently “deficient in its contractual reporting obligations” and expressed concern that the shortcoming hadn’t raised red flags at the agency.

The state investigation began in 2008 after state senators Alan Lowenthal and Elaine Alquist complained to the Department of Health Care Services about SCAN service rates and passed along a whistleblower complaint from a former SCAN employee.

The whistleblower alleged that SCAN exaggerated how sick its Medicare Advantage patients were in order to boost their government reimbursements. SCAN did not admit any wrongdoing in that case and it’s settlement was included as part of the larger case.

–Ken Broder

To Learn More:

Health Plan Pays Largest-Ever Settlement to Medi-Cal Authorities (by Christina Jewett, California Watch)

Special Evaluation of SCAN Health Plan (Department of Health Care Services) (pdf)

Health Plan Prepared to Pay to Resolve Medicare, Medi-Cal Fraud Probes (by Christina Jewett, California Watch)

Audit of SCAN (California State Controller’s Office) (pdf)

Controller Seeks Recovery of Health Care Overpayments (California State Controller’s Office)