Facts

18 providers of mental health services alleged approximately $25 million in damages for unreimbursed service, involving the Los Angeles County (county) Dept. of Mental Health (DMH) and the state of California (state).

The dispute arose as a result of the modification of DMH's information technology system. The system was modified in order to comply with federal HIPAA requirements.

The county filed a cross-claim against the state, asserting indemnity, contribution, and other claims.

PLAINTIFFS' CONTENTIONS:
The providers alleged that DMH breached its contractual obligations by failing to timely and accurately process claims for reimbursement to the state, which resulted in the denial of claims.

DEFENDANT/CROSS-CLAIMANT'S CONTENTIONS:
The county contended that the responsibility for failed payment was shared by the providers and the system's designer, Sierra Systems.

Result

The parties reached a settlement consisting of a $5,808,417 cash payment, forgiveness of Cash Flow Advances, acceptance of $3 million payment to the county by the state, and ancillary payments $2,122,000 to two plaintiffs on collateral claims. The settlement was the result of lengthy negotiations, a comprehensive "Collaborative Claiming Process," sessions before a Superior Court settlement judge, and extensive settlement discussions.

Other Information

At the time of the settlement, the county had expended $859,824 in attorney fees and $49,122 in costs.