Medi-Cal agency slept on 13 years of payments from Tulare’s hospital. Now it lost out on $5.5mil.

An eleventh-hour attempt to seek a $5.5 million creditor claim as Tulare’s public hospital seeks to wrap up its Chapter 9 bankruptcy was squashed by a Federal judge. Here’s how State of California officials fell 13 years behind.

As it navigates a lengthy bankruptcy proceeding following years of financial mismanagement, the local agency tasked with running Tulare’s lone public hospital beat back a hefty, seven-figure creditor claim waged by the State of California in U.S. Bankruptcy Court.

The claim, waged by California’s Department of Healthcare Services, initially arrived as the Tulare Local Healthcare District navigated its now four-year long Chapter 9 bankruptcy proceedings.


The state department initially placed a creditor claim on the local hospital agency for an “undetermined amount,” a statement from the district’s lawyer, Riley Walter, read.

Following approval of the plan by creditors, the state agency sought to amend its creditor claim for more than $5.5 million, calculating its claim on a 13-year review of accounting between the State of California and Tulare Regional Medical Center (now AdventistHealth Tulare).

At the center of the sizable claim was a reconciling of payments between Tulare Regional Medical Center and the Department of Healthcare Services for its supplemental reimbursement program for outpatient services for Medi-Cal patients.

The agency reconciles cost reports generated by service providers (in this case, rendered by Tulare’s healthcare district) against audited cost reports. Under or overpayments made through Medi-Cal are reflected in supplemental payments to or from the service providers.

“Though District submitted its reports annually, no reconciliation followed,” U.S. Bankruptcy Judge René Lastreto II wrote in his opinion.

Last month, Lastreto II denied the push by the California’s Medi-Cal administrator to beef up its claim from an unspecified amount to the $5.5 million in overpayments through the Medi-Cal program.

For Lastreto, Tulare’s hospital district complied with state and Federal rules to provide reports on its costs ascribed to Medi-Cal patients.

“These issues ultimately are not District’s nor its creditors’ responsibility,” he added. “The program is undoubtedly complex to administer. But it
is DHCS’s duty to annually reconcile cost information from filed hospital cost reports to the audited reports.”

Ultimately, the delays in reconciling costs proved to be prejudicial to the totality of the Tulare district’s bankruptcy plan and other creditors.

“DHCS reported no final reconciliations to [Tulare Local Healthcare District] for at least thirteen fiscal years,” Lastreto II wrote in his opinion denying the claim change. “This delay occurred though it is undisputed District timely provided cost reports for all those fiscal years. This tenacious reticence continued after the Chapter 9 case was filed. DHCS did not file their first motion to amend the claim until two years after the claim deadline.”

For Tulare Local Healthcare District chief Sandra Ormonde, the news eliminated another potential speed bump toward resolving the district’s financial woes brought on by its past management firm.

“The rulings means that the DCHS claim will not dilute what other creditors who timely filed their claims will receive under the plan,” she said in a statement.

Currently, three officials with the district’s past hospital management firm, Tulare Healthcare Conglomerate Associates, are scheduled to return to Tulare County Superior Court at the beginning of June over their litany of charges stemming from embezzlement, conflicts of interest, money laundering, and other financial crimes.

Tulare Healthcare Conglomerate chief Yorai “Benny” Benzeevi, is scheduled to set a hearing on June 2 to contest the legal sufficiency of the litany of white-collar criminal charges against him

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