Phoenix, Arizona - Attorney General Mark Brnovich announced his office reached a civil settlement with Hacienda Healthcare Inc., (Hacienda) where it will pay the State more than $11,000,000 to resolve its case with the Arizona Attorney General’s Office (AGO). By signing the settlement agreement, Hacienda accepts responsibility for the below conduct, but it does not exonerate any former officers in the ongoing AGO criminal indictment.
A Medicaid fraud investigation initiated by the AGO determined that former officers with Hacienda improperly allocated direct and indirect costs, inflated reported expenses, and engaged in improper billing during 2013-2018, resulting in an overpayment of at least $10,895,648.25 from the Arizona Health Care Cost Containment System (AHCCCS) to Hacienda.
“This settlement provides a pathway for Arizona to recover funds misused for years by Hacienda,” said Attorney General Mark Brnovich. “While our office is limited in what we can say about ongoing criminal cases at this time, I can assure Arizonans that the individuals who perpetuated this fraud will be appropriately prosecuted.”
Settlement agreement details include:
- Settlement Amount: Hacienda agrees to repay AHCCCS an overpayment in the amount of $10,895,648.25.
- Hacienda will deliver an initial payment of $7,000,000 followed by monthly installments of $50,000.
- Fine Amount: Hacienda will pay a $1,000,000 fine to be allocated to the AGO and AHCCCS Office of the Inspector General.
- The State agrees not to take any civil, criminal, or administrative legal action against the entity Hacienda for the covered conduct in the settlement unless there has been a breach in the settlement agreement.
Hacienda’s former Chief Executive Officer (CEO) William Timmons and Chief Financial Officer (CFO) Joseph O’Malley were recently indicted by a State Grand Jury.
All defendants are presumed innocent until found guilty in a court of law.
Assistant Attorneys General Scott Blake and Sean Coll are prosecuting the cases. Financial Remedies Section Chief Tom Rankin worked on the settlement agreement with Hacienda.
The AGO launched a criminal investigation into Hacienda’s finances in early January 2019 after learning the institution failed to comply with its contract terms.
During 2013 to 2018, the Arizona Department of Economic Security’s Division of Developmental Disabilities (DES/DDD) contracted with Hacienda to provide medical and behavioral health services to members of AHCCCS. Hacienda ran an Intermediate Care Facility and was contracted to receive a certain amount of money ($1,100) per day per patient. The contract stated if Hacienda received an overpayment, Hacienda would reimburse DES/DDD. Even though Hacienda operated several facilities, the DES/DDD contract was only with its Intermediate Care Facility. During the same time period, Hacienda had other contracts with the State for programs for which it also received per diem reimbursement based of the number of individuals served.
The State alleges that during the time period of 2013-2018, Hacienda engaged in improper billing, inflated reported expenses, and misallocated direct and indirect costs. Administrative salaries resulted in the largest misallocation of funds pursuant to the contract. Even though the DES/DDD contract was only with Hacienda’s Intermediate Care Facility, investigators determined Hacienda used the money to pay for a large portion of costs at its other facilities. Any money given under the contract that exceeded the direct costs and allowed indirect costs associated with the operation of the Intermediate Care Facility should have been reimbursed back to the State.
During the contract term, Hacienda’s Chief Executive Officer (CEO) William Timmons and Chief Financial Officer (CFO) Joseph O’Malley regularly met and provided Hacienda’s Board of Directors with financial data regarding the entity’s performance but not about how costs were allocated between affiliated programs and entities.
In January 2019, O’Malley disclosed to Hacienda’s Board of Directors that costs had not been allocated correctly over the course of the DES/DDD contract and that he and Timmons were aware of this. Timmons resigned in January 2019 for reasons unrelated to the AGO investigation. O’Malley later resigned in March 2019. A new administrative team took over Hacienda in March 2019.