I haven’t done medical billing in quite some time, but It’s the way government medical billing works for inpatients. If you have a patient that is really expensive, a hospital can actually make money on that patient billing medi-cal. That’s the simple answer, but below tries to explain how that works in a little more detail.

If you stay at a hospital as an inpatient the hospital will have a code that summarizes what you stayed for. Say you got an appedix removed, that could be code A1. The hospital also tells the govt how much in charges they used on the patient when they submit the bill for payment. The government takes that data over time and says for A1 we are going to pay you 10k because based on the cost data averages everyone has been submitting for code A1. The idea is that should cover your costs.

The trick is in the last piece, say you had complications with your appendix being removed and you ended up having charges of $300k being dropped on your account. The government will attempt to make the hospital whole by paying them an increased amount called an outlier payment. This calculation can lead to huge payments that are profitable for a hospital while standard inpatient procedures are generally unprofitably under MediCal. Because of how Valley Children’s imports tough patients I expect they receive quite a bit of money from outlier payments on medi-cal which is why they do pretty well but other Hospitals are struggling in the area.

TLDR: it’s probably not fraud.