| San Diego Union-Tribune
State and federal agents on Tuesday raided the offices of the Borrego Community Healthcare Foundation, a nonprofit provider with clinics in Riverside, San Diego and San Bernardino counties that last year billed more than $300 million in medical, dental and other services to the U.S. government.
Dozens of agents turned up at the organization’s Borrego Springs administrative offices first thing in the morning, seizing computers and boxes of medical records and interviewing employees who were not alerted to the search in advance.
Investigators also closed off the Borrego Medical Clinic a few miles to the southeast of the downtown Borrego Springs area, carting away files and other material.
Separate search warrants were executed at the foundation’s administrative offices in Kearny Mesa and at the El Cajon headquarters of Premier Healthcare Management, a management services company that provides billing and other services to the nonprofit.
FBI spokeswoman Davene Butler acknowledged warrants were served at four locations in Borrego Springs, El Cajon and San Diego on Tuesday, but she said there was little she could say about the case.
“I can confirm that the FBI is conducting enforcement activity at those locations,” Butler said by email. “No further information is available as the court documents are sealed at this time.”
Known locally as Borrego Health, the nonprofit has clinics in the Coachella Valley in Cathedral City, Desert Hot Springs, Palm Springs, Indio and Thermal.
It was unclear if the multiple search warrants were related to news stories and inquiries about the medical and billing practices exercised by the foundation.
According to its most recent public tax filing, which covers the period from July 1, 2018, to June 30, 2019, the organization reported some 1.3 million patient visits and collected more than $335 million in revenue for the year.
The FBI was joined in executing the multitude of warrants by agents of the California Department of Justice, which regulates nonprofit organizations in the state. The press office for Attorney General Xavier Becerra declined to discuss the warrants Tuesday.
“To protect its integrity, we are unable to comment on a potential or ongoing investigation,” the office said in a statement.
The foundation issued a brief statement in response to the criminal investigation.
“Borrego Health remains committed to its goal of improving the health of under-served populations in our service areas by delivering high quality and compassionate care,” it said. “Borrego Health intends to continue its full cooperation with all government inquiries.”
Nick Priest, Premier Healthcare Management’s chief executive, said he had been in touch with the state Department of Justice but had not expected the search of his company offices Tuesday.
He said he was scheduled to meet with investigators and representatives from Borrego Health on Monday night but the healthcare provider withdrew his invitation to the discussion.
“We weren’t expecting the authorities to serve a warrant, and it came as a great surprise to us, but we are cooperating fully,” said Priest, whose father, Daryl Priest, owns several companies that have built and leased office space to Borrego Health.
“It is our belief that they are investigating a specific dental office’s billing practices,” Nick Priest added in his statement. “We are eager to complete the investigation and hope that this does not cause us irreparable reputational harm.”
Rapid expansion after 2004
The Borrego Medical Clinic was opened in the 1980s as a satellite facility of the Scripps Health empire, but it was costly to run. The Borrego Community Healthcare Foundation was established in 1990 to assume operation of the center, state and federal tax records show.
In 2004, a former Port of San Diego police officer named Bruce Hebets joined the organization and began a rapid expansion.
What had been a remote healthcare provider operating a single clinic for less than $1 million a year grew into a multi-county organization that now operates some 40 facilities in San Diego, Riverside and San Bernardino counties.
Over the past five years, the foundation reported almost $1 billion in revenue, most of it from government reimbursements, records show.
Local newspaper’s reports raised questions
The search warrants come months after a series of reports published by the Borrego Sun weekly newspaper that raised questions about Borrego Health’s medical services, management practices, governance structure and business practices.
“We’ve been investigating these clinics since 2014, and it’s taken a lot of hard work to get to the point where we are now,” said Patrick Meehan, the Borrego Sun publisher. “It’s just morally wrong, all this money being wasted on salaries and expenses and not being put into the clinic.”
According to its latest IRS tax filing, Borrego Health collected just over $338 million in the year ended June 30, 2019. It also reported $332 million in expenses and total assets of $94.5 million.
The document also shows more than 220 employees are paid more than $100,000 a year and dozens of Borrego Health workers are related to senior officers or directors.
It also shows that Hebets was paid $1.9 million for the year, even though he died in January 2019.
Meehan is among a group of Borrego Springs community leaders working to wrest control of the local medical clinic away from the foundation.
“The whole object was from the beginning to have a good functioning clinic and to stop people from moving out of town because the medical facility was so terrible,” Meehan said. “Hopefully this means it will all be cleaned up.”
Borrego Health officials have said that they do not agree with everything the newspaper reported, but they are working on improving their organization’s practices and internal controls.
CEO, CFO removed this month
So far this month, the Borrego Health board terminated its chief executive officer and chief financial officer and voted to remove two directors. In the spring, senior managers also let go of a number of employees, including a popular nurse who served the Borrego Springs community for years.
Rita Anderson, who was in charge of purchasing and contracts for14 years, was among those terminated by Borrego Health in April. She said she was surprised to learn that the FBI and state police had opened a criminal investigation into her former employer — but not really.
“My phone started ringing just after 9 a.m.,” she said. “I was in shock. This is the stuff that only happens in movies.”
Anderson said she thought “something was wrong” in the organization for a long time. “They just kept getting bolder and bolder as time went on, with extravagant spending and bringing relatives on board,” Anderson said.
Public records show Borrego Health reported more than 400,000 medical visits and more than 800,000 dental visits in the year ended June 30, 2019.
The organization is what’s known by the U.S. Department of Health and Human Services as a Federally Qualified Health Center, or an FQHC, a federal designation that allows the foundation to collect a higher reimbursement than other providers of medical and dental services covered by Medicare.
Borrego Health bills itself as the largest and fastest-growing FQHC in the United States.
Premier Healthcare Management was hired to process its patient visits and provide other management services to the foundation. It was paid $25 per invoice, Borrego Health directors said, meaning it collected more than $20 million a year.
Premier Healthcare was formed by Daryl Priest in 2016, according to the California Secretary of State’s Office.
Priest owns several other companies that constructed clinics for Borrego Health. He now leases at least three facilities to the foundation, including medical centers in El Cajon, Barstow and San Bernardino.
Internal records from Borrego Health that were reviewed by The San Diego Union-Tribune show that the nonprofit pays millions of dollars a year in rent to companies controlled by Daryl Priest.
The Barstow clinic, for example, costs the foundation $89,000 a month — more than $1 million annually — for a building that the San Bernardino County assessor valued at $2.6 million.
Neither Borrego Health nor Daryl Priest responded to questions about the lease arrangements.
Several Coachella Valley residents serve on Borrego Health’s board, including Neftali Galarza, a candidate for the Coachella City Council who is director of community outreach for the California Alliance for Renewable Energy Solutions, and Jenna LeComte-Hinely of Indio, who is CEO at HARC, Inc. (Health Assessment and Research for Communities).