Community Health filed a breach-of-contract lawsuit Wednesday seeking to recover nearly $10 million from Fresno physician group Santé Health System.
According to the complaint, Community alleges that Sante did not properly distribute or account for various grants as revealed in an independent audit.
Community awarded millions of dollars in grants between 2016-2019 that were intended to support local, charitable medical clinics and research.
In October 2017, Community entered into an agreement with Santé to provide millions in grant money.
Santé says it is the largest physician network in the Central Valley with over 1,500 providers that serve over 120,000 people.
In 2019, Sante asked Community to “substantially increase the grants” to cover fees for management services, the lawsuit said.
In response, Community began to question Santé’s structure and operations, and an independent audit from accounting firm Moss Adams LLP for fiscal year 2020 found that Santé misappropriated $9,887,811 of grant funds.
Community alleges that the grant awards to Santé were spent for purposes outside the scope of the grants, distributed for unincurred expenses, disbursed in excess of permitted expenditures and dispersed or retained by Santé after the grant periods expired.
“In the last month of the grant period alone, Sante disbursed $6.8 million in grant funds to medical providers before expenses were incurred in order to avoid having to return those funds to Community when the grant period expired on Aug. 31, 2020,” Community said in a statement.
Community sent a letter to Sante on Sep. 2 detailing the misuse of funds and requesting a refund, as it said is required by the grant agreements.
“Sante has admitted it has possession of grant funds that are due and owing back to Community, but has nonetheless refused to return the funds,” Community said
Specifically, Community said in the lawsuit that it learned that Santé was not operating medical clinics, enrolled in Medicare or Medi-Cal, offering genuine financial assistance to patients or engaged in substantial medical research or education.
Community states that it had concerns that Santé was not a medical foundation compliant with California Health and Safety Code.
In response to Community, Santé claims that Community severed the agreement over two years ago and breached the exclusivity provision in the contract in a way that Community is obligated to pay $5 million in liquidated damages.
Community seeks to have the nearly $10 million refunded and to have Santé cover the legal fees incurred from filing the lawsuit.
After the lawsuit was filed, Sante issued a statement defending its values and maintaining its innocence.
“Over the past 25 years, Santé Health System has proven to be a well-respected organization known for its professionalism and physician advocacy. We earned this reputation by being open, honest and working hard for the communities we serve,” Sante said.
“These values make us who we are, and we encourage fellow local healthcare leaders to follow these same principles as the work we are charged with is too important — our community deserves nothing less. While we are saddened to hear that there are those who would call into question our integrity, we are confident that any review will show who we are and our dedication to improve the quality of care and the accessibility of health services available to our local community.”