PHOENIX (3TV/CBS5) -- A grand jury has indicted Hacienda HealthCare’s former CEO Bill Timmons and former CFO Joseph O’Malley on several felony charges of fraud and racketeering after the facility allegedly overbilled the state millions of dollars between 2013 and 2018.
[READ ORIGINAL STORY: Woman in vegetative state gives birth at Hacienda Healthcare]
The healthcare facility first made headlines at the beginning of 2019 when a patient in a vegetative state was allegedly raped by a former nurse, then gave birth with no facility staff ever knowing she was pregnant.
According to the Arizona Attorney General’s Office (AGO), the Medicaid fraud investigation began around the same time in early 2019 after learning Hacienda failed to comply with terms of its contract with the state.
The investigation found that Hacienda improperly allocated costs, inflated reported expenses, and engaged in improper billing from 2013 to 2018, resulting in an overpayment of at least $10,895,648.25 to Hacienda from the Arizona Health Care Cost Containment System (AHCCCS.)
He wants charges brought against the facility where an incapacitated woman was sexually assaulted and later gave birth.
The AGO reached a settlement with Hacienda to pay back the funds, plus an additional fine of $1 million.
In the settlement agreement, Hacienda will pay an initial amount of $7 million in January 2021, followed by monthly payments of $50,000.
They will also pay the $1 million fine to the AGO and AHCCCS.
“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.”
"Although the $12 million repayment and fine included in the civil settlement represent an extreme financial hardship for the company, we agreed to it voluntarily because it’s the right thing to do – and because it gives Hacienda a chance to move forward honorably," current Hacienda HealthCare CEO Perry Petrilli said in a statement Wednesday afternoon. (Scroll to the bottom of this story for Petrill's full statement.)
According to the AGO, Hacienda ran an Intermediate Care Facility and was given $1,100 per day per patient.
The contract stated that if Hacienda received an overpayment, it would reimburse the Arizona Department of Economic Security’s Division of Developmental Disabilities (DES/DDD).
Even though the DES/DDD contract was only with Hacienda’s Intermediate Care Facility, investigators determined that 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.
According to the AGO, during the contract term, Timmons and 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 among affiliated programs and entities.
In January 2019, after Timmons resigned, O’Malley told 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.
Details in the indictment also show Timmons knowingly made bad-faith transactions with a health supply company to buy third-party medical supplies, and sell them at a 12.5% markup.
The indictment also shows that Timmons billed for multiple uses of the Synagis vaccine out of single-use vials and instructed his staff to do so. Hacienda ran several clinics in Arizona for high-risk infants to receive Synagis.
Last year, an Arizona’s Family investigation revealed employees were using leftover medication in vials on multiple infants, despite both the Synagis label and Centers for Disease Control and Prevention saying any remaining medication in a vial must be discarded. The indictment says Timmons was still billing insurance for entire vials, generating financial benefit.
"No one currently involved with Hacienda was aware of these alleged illegal actions, nor could anyone have been aware given the way these actions were recorded," Petrilli said.
Timmons resigned in January 2019 for reasons unrelated to the AGO investigation. O’Malley later resigned in March 2019, citing issues with the board of directors. A new administrative team took over Hacienda in March 2019.
Timmons faces three felony charges of fraudulent schemes and artifices and a fourth felony charge of illegally conducting an enterprise. O'Malley faces one felony count each of fraudulent schemes and artifices and illegally conducting an enterprise.
Two of the top former executives of Hacienda HealthCare were indicted on indicted on fraud charges and a mother of a patient there hopes justi…
Angela Gomez has a son who has been a patient at Hacienda for about seven years and says she didn't have a good feeling about him.
"I've only met Bill Timmons one time and I didn't get good vibes from him on the day that I met him. It was a real quick meet-and-greet, like, he didn't have time for me or didn't want to answer any of my questions," she said.
Gomez said she was shocked to hear Timmons and O'Malley were misusing funds.
"That's terrible. There just needs to be a checks and balances with auditors and even pop-in visits to see if everyone is doing their job financially and ethically," she said. "He needs to be held accountable for his wrongdoing."
STATEMENT FROM HACIENDA HEALTHCARE CEO PERRY PETRILLI
"Early in 2019, members of the Hacienda HealthCare Board of Directors were made aware that Hacienda had received improper overpayments from the State of Arizona. The Board took immediate action to investigate and fix this, including hiring forensic accountants to investigate the matter, implementing new procedures to ensure appropriate cost allocations and reaching out to the State to make repayment of wrongfully received funds.
"Current Hacienda leadership and staff cooperated fully with the Attorney General’s Office throughout its investigation into improper billing practices and financial wrongdoing by former Hacienda leaders. No one currently involved with Hacienda was aware of these alleged illegal actions, nor could anyone have been aware given the way these actions were recorded.
"Although the $12 million repayment and fine included in the civil settlement represent an extreme financial hardship for the company, we agreed to it voluntarily because it’s the right thing to do – and because it gives Hacienda a chance to move forward honorably. With a new management team and system in place, and new safeguards to protect residents and resources, our team has never been more committed to serving Hacienda’s residents with compassion and professionalism."