Breach of Contract FCA Violation.

PositionUnited States of America, et al. v. Molina Healthcare of Illinois, Inc., et al.

Byline: Derek Hawkins

7th Circuit Court of Appeals

Case Name: United States of America, et al., v. Molina Healthcare of Illinois, Inc., et al.,

Case No.: 20-2243

Officials: SYKES, Chief Judge, and WOOD and HAMILTON, Circuit Judges.

Focus: Breach of Contract FCA Violation

Sophisticated players in the healthcare market know that services come at a cost; providers charge fees commensurate with the services rendered; and payors expect to receive value for their money. There are many options from which to choose when designing a payment scheme, including fee-for-service, prepaid services using the health-maintenance organization model (HMO), and capitation payments, to name just a few. Each of these models attempts to balance expected services against expected costs.

The present case involves a capitation system, which is similar to the traditional HMO approach in which parties agree to a fixed per-patient fee that covers all services within the scope of a governing plan. Molina Healthcare of Illinois (Molina) contracted with the state's Medicaid program (which in turn is largely funded by the federal government, see Illinois Medicaid, to provide multiple tiers of medical-service plans with scaled capitation rates. Among those, the Nursing Facility (NF) plan required Molina to provide Skilled Nursing Facility (SNF) services. Molina itself, however, did not deliver those services; instead, it subcontracted with GenMed to cover this obligation. Molina received a general capitation payment from the state, out of which it was to pay GenMed for the SNF component. But little time passed before Molina breached its contract with GenMed and GenMed terminated the contract. After GenMed quit, Molina continued to collect money from the state for the SNF services, but it was neither providing those services itself nor making them available...

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