Pomona Valley Hospital Medical Center: The Higher Billing Rate That Stayed

In its 2024 Medi-Cal overbilling settlement, Pomona Valley Hospital Medical Center agreed to pay nearly $2.1 million over allegations that it kept charging higher rates for discounted 340B drugs after a court’s temporary block on California’s pricing rule ended. The hospital bought the medication at a discount. The government said its billing failed to make the required move to what the hospital actually paid.

What Pomona Valley Disclosed

Pomona Valley found the overbilling through an internal audit and made voluntary disclosures in 2021 and 2023. The hospital determined that it had overcharged both governments funding Medi-Cal, the United States and California. It then cooperated with their investigation.

The U.S. Attorney’s Office for the Central District of California announced the settlement on February 2, 2024. The allegations covered drug billing from December 2016 through September 2021.

Medi-Cal is California’s Medicaid program. Here, the hospital’s own review brought the difference between its drug costs and its claims to federal and state authorities.

Usual and Customary Costs After the Court’s Block Ended

Pomona Valley allegedly continued billing its higher usual and customary costs when California required actual acquisition cost pricing. The difference was the amount attached to the drug claim: what the hospital ordinarily charged versus what it had paid to acquire the medication.

Under the federal program, manufacturers sell outpatient drugs to eligible health care organizations at substantially reduced prices. The economics of hospital drug margins depend on the gap between that purchase price and reimbursement. The Government Accountability Office explains that providers can generate revenue when insurance pays more than the discounted price they paid for the drugs.

That distinction is the center of Pomona’s case. California tied these Medi-Cal bills to actual acquisition cost. According to the Justice Department, a federal court temporarily blocked implementation of that requirement. Pomona billed its usual costs during that interruption. When the court lifted the block, the hospital allegedly failed to switch to acquisition cost pricing.

The purchasing benefit remained. The billing rate was supposed to change.

The payer matters. In its May 2015 overview of the drug-pricing program, MedPAC described Medicare paying the same outpatient drug rate to participating hospitals and other hospitals, even though participating hospitals bought the drugs at steep discounts.

California’s acquisition-cost requirement tied these Medi-Cal claims to the lower purchase price instead. For a hospital reimbursement team, that means the discount alone cannot tell the whole billing story. The payer’s rule determines what happens to the spread between the purchase price and the claim.

The Medi-Cal Payment Split

Pomona agreed to pay California $1,225,954 and the United States $873,730. The Justice Department put the underlying alleged overbilling at approximately $1.4 million. The hospital found and reported its own overbilling, yet still agreed to pay more than the alleged overcharge.

Federal and California taxpayers bore the alleged overcharge through Medi-Cal. The hospital had received the purchasing discount, while the public program allegedly kept paying the higher rate.

Why the MemorialCare Settlement Matters

MemorialCare had already settled allegations involving the same California pricing transition. On November 2, 2020, the same U.S. Attorney’s Office announced its agreement to pay $31,532,679. The alleged overbilling was $21,021,786.

Memorial Health Services, operating as MemorialCare Health System, disclosed the problem in October 2019 after an internal audit of its hospitals and pharmacies. As in Pomona, the government alleged that usual-cost billing continued after the court lifted its temporary block on acquisition-cost pricing.

The comparison is unusually direct. Both organizations found the issue themselves. Both faced allegations about the same change in what Medi-Cal allowed them to bill. Both agreed to payments larger than the alleged overbilling. That same missed transition appears in both settlement announcements.

When Drug Profits Reach Referring Physicians

A separate complaint about Methodist Le Bonheur Healthcare’s drug-profit arrangement with West Clinic shows why the destination of a drug margin matters too. The whistleblower alleged a chain running from discounted cancer drugs through a hospital-controlled pharmacy to payments for referring physicians:

The complaint alleged that sharing the profits induced cancer-patient referrals. In Pomona, the question was what the government paid for the drug. In the Methodist complaint, it was where the resulting profits went and what referrals they bought.

The Billing Decision an Insider Recognizes

For someone working in pharmacy purchasing, reimbursement or healthcare compliance, Pomona’s case turns on the connection between a drug’s acquisition cost and the amount billed to Medi-Cal. An insider may know how the higher rate stayed in use, who discussed the pricing change, and what happened when someone compared purchase costs with claims.

If you recognize that problem at your hospital, the useful conversation starts with what you saw happen to the billing. Our whistleblower experts connect your account with the claims and the hospital’s response to build the case with you. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know How the Price Stayed

If you know why your hospital kept billing Medi-Cal at the higher rate, speak with our whistleblower experts about those decisions. We build your strongest whistleblower case around the pricing, the claims and the people who knew, and bring in whistleblower lawyers who understand Medi-Cal drug reimbursement. We stay beside you through the case.