Feb. 2—Clinica Sierra Vista will pay almost $26 million to resolve Medi-Cal overpayments the nonprofit itself flagged in 2019 after finding fault with a practice the founder and former CEO defended Thursday as a give-and-take negotiation.

California Attorney General Rob Bonta and U.S. Attorney Phillip A. Talbert said in a joint news release the Bakersfield-based nonprofit chain of health clinics agreed to pay the money after investigators found Clinica underreported Medi-Cal income between 2010 and early 2017, allowing it to collect government reimbursements it was not entitled to.

Former CSV executives "knowingly failed to correct this information after it later knew or should have known that the information was false and resulted in uncorrected, significantly higher wrap around payments from (the California Department of Health Care Services) than CSV would have been entitled to had it submitted accurate reconciliation requests," the release stated.

Recently appointed CEO Dr. Olga Meave said in a statement Thursday the settlement will not impact CSV "operations, patients or team members" because Clinica set aside money and planned for its financial future during the three years the case took to resolve. She added the nonprofit takes pride in its values of responsibility, transparency and integrity and looks to move forward focused on providing high-quality care.

"New leadership is in place at CSV and the organization has taken many steps since 2018 to ensure a reporting error like this does not happen again, including instituting a new compliance program and hiring an external accounting firm to perform annual audits under the rigorous Single Audit Act," Meave stated.

CSV founder Steve Schilling, who served as CEO during the period investigators referred to in the settlement agreement, said Thursday he had heard nothing about the settlement or the investigation. He said reconciliation was for years a back-and-forth conversation between CSV and the Medi-Cal program, such that the nonprofit always kept millions of dollars in reserve in case the government ever concluded afterward that Clinica had been overpaid and money needed to be returned.

"I don't think anybody's intending to defraud anybody," he added. "Nobody was personally benefiting from that."

The settlement was negotiated after state and federal investigators looked into the matter and confirmed Clinica's own initial assessment that laws were broken. The state will receive $15.59 million and the federal government $10.39 million.

Clinica has experienced administrative turbulence for years. Meave's permanent appointment in November made her CSV's third CEO in about 2 1/2 years.

According to the settlement agreement, CSV sent a letter to government officials April 12, 2019, saying it had identified potential violations of state and federal false-claims acts during an internal investigation that had been commissioned by the then-CEO and approved by the board of directors.

The resulting government inquiry found that, during each fiscal year from 2010-11 to 2014-15, top executives including CSV's founder omitted information about Medi-Cal managed care and third-party capitated payments the organization had received, according to the agreement.

It added that, in fiscal 2015-16 and 2016-17, CSV turned in false information in reconciliation requests by including some but not all Medi-Cal managed care and third-party payments it had received. The agreement said the underreporting allowed CSV to receive significantly higher wrap around payments from the state than it should have.

Bonta said in Thursday's news release taking advantage of Medi-Cal harms patients across the state who rely on the program for health-care services. He said the money will be returned to where it belongs: the Medi-Cal program and the communities it serves.

"I commend the new management at Clinica Sierra Vista for coming forward, and for working with us and our partners to resolve their violations," Bonta stated.

Talbert joined Bonta in encouraging agencies to self-report reporting violations and work cooperatively to eliminate fraud.

Schilling, who left Clinica in January 2018, said he was unsure how hard his successor worked to justify Medi-Cal revenue paid to CSV.

The way the annual reconciliation process went, he said, was that CSV would file cost reports and Medi-Cal would review them. Sometimes the program would disallow claims and CSV accepted that, he said, and "sometimes we would argue with them that they would disallow claims we felt were correct."

CSV's claims were always reviewed by internal and external auditors, he said, adding no one intended to misrepresent how much the nonprofit was entitled to receive. He noted that although sometimes CSV had to repay money to the Medi-Cal program, sometimes it went the other way.

Schilling noted in an email that CSV had set aside more than $76 million in reserve in 2018 for the very purpose of repaying Medi-Cal money, if necessary. There was never a question overbilling, he wrote, but instances did arise of Clinica receiving more capitation revenue from Medi-Cal health plans than the nonprofit was ultimately entitled to keep.

"It was always somewhat of a ... common, back-and-forth relationship (between) the state of California ... and the providers," Schilling said.

The head of Kern County's Medi-Cal managed care plan, Kern Health Systems CEO Emily Duran, said her organization is not party to the agreement, or involved with the settlement. She characterized the settlement as strictly involving a reconciliation process.