Planned Parenthood accused of overcharging for contraceptives

Planned Parenthood affiliates in California may have overcharged the state and federal governments more than $180 million for birth-control pills, despite internal and external warnings that its billing practices were improper, according to a federal lawsuit filed by one of the agency’s former finance officials in Los Angeles.

In the lawsuit filed in U.S. District Court, P. Victor Gonzalez claims that he was fired in March 2004 as vice president of finance and administration after raising concerns about the “illegal accounting, billing and donations practices of Planned Parenthood.”

The alleged over-billings began in the late 1990s and continued until the state Legislature changed the law in 2004 to allow Planned Parenthood to bill at a higher rate for oral contraceptives, said Gonzalez’s lawyer, Jack Schuler.

State health officials have said they do not believe Planned Parenthood acted improperly because the organization was given contradictory guidance on billing from the state.

The lawsuit, originally filed under seal in 2005, seeks damages under the federal False Claims Act. It was made public for the first time this week.

“Contrary to their national reputation as a prominent charity organization and as a health care provider for reproductive services, there is probable cause to believe Planned Parenthood’s … California affiliates have systematically engaged in fraudulent overbilling against government funded programs,” the suit said.

Planned Parenthood Affiliates of California spokeswoman Ana Sandoval declined to comment, saying the organization had not yet seen the lawsuit.

The dispute involves the complicated and arcane reimbursement rules of public health programs run by the federal and state governments.

One federal program, in particular, allows health centers to buy common drugs from manufacturers at a reduced price. In return for the discount, the lawsuit says, such clinics must follow specific rules for seeking reimbursement. The billing manual for California’s Family Planning, Access, Care and Treatment program, for example, said that providers had to bill “at cost” for oral contraceptives.

Planned Parenthood, however, billed the government several times more than it paid for the drugs, the lawsuit alleges–seeking what is known as a “usual and customary” fee that takes into account the costs of storing the drugs and dispensing them.

According to documents provided to The Times by Gonzalez’s attorney, questions about Planned Parenthood’s billing practices were raised as early as 1997 by state Medi-Cal officials. In a series of letters, state officials told the organization’s California president Kathy Kneer that the way her affiliates were billing for oral contraceptives was incorrect.

Then in 2004 a state audit of Planned Parenthood of San Diego and Riverside Counties, one of nine affiliate in California, identified more than $5.2 million in over-billings during the 2003 fiscal year.

While that state review was underway, Gonzalez said, he performed his own audit of Planned Parenthood Los Angeles and found similar problems – $2.1 million in overpayments during a one-year period. He estimated that the agency made a profit of $100 per pill-using patient from the “birth control pill markup alone,” documents show.

Gonzalez said he tried to raise the issue with top officials internally. “It’s black and white,” he said in an interview. But the response was clear, he said: “They did not want to stop the overbilling at that point.”

All told, the lawsuit alleges overbilling across the state totals at least $180 million.

Schuler said his client intends to rely on internal Planned Parenthood communications showing that officials worked tirelessly to lobby state health officials to adopt the organization’s point of view and even halt the audits and change state rules to allow the higher charges. Those rules, in fact, were changed in 2004 to allow the higher reimbursement rate.

Despite their auditors’ findings, officials at the state Department of Health Care Services say they do not believe Planned Parenthood needs to repay any money already reimbursed by the state. If anything, agency director Sandra Shewry said, the state’s own rules were unclear.

“This was not easy,” said Shewry, who began reviewing the matter shortly after taking office in March 2004. “We had not been the kind of business partner that the state needs to be.”

charles.ornstein@latimes.com