Hacienda Healthcare to pay Arizona $11M, former executives indicted

Two former executives for Hacienda Healthcare, the Phoenix facility where a nurse allegedly sexually assaulted and impregnated an incapacitated woman, have been indicted and the company has been ordered to pay Arizona $11 million to resolve its case.

Arizona Attorney General Mark Brnovich announced on Sept. 2 his office has reached a civil settlement with Hacienda Healthcare and two of its former executives, William Timmons and Joseph O'Malley, who are accused of improperly allocating direct and indirect costs, inflating reported expenses, and engaging in improper billing during 2013-18, which resulted in an overpayment of nearly $11 million from the Arizona Health Care Cost Containment System.

"What we’ve alleged is that there was excess money being used in false billing, inappropriate billing, not being returned to the state of Arizona," said Attorney General Brnovich.

Prosecutors allege Timmons and O'Malley used a company associated with Hacienda and located at the same address to buy supplies, which were resold to Hacienda at a 12.5% markup, including a delivery fee. They are also accused of reusing vials of a vaccine but billing insurance companies for a full vial.

Under the settlement agreement with the attorney general's office, Hacienda Healthcare agrees to repay the overpayment amount to AHCCS and a $1 million fine.

Hacidena's new chief executive, Perry Petrilli, said in a statement that “no one currently involved with Hacienda was aware” of the billing practices.

“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,” Petrilli said.

The organization will make an initial $7 million payment followed by monthly installments of $50,000.

“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.”

The Attorney General's Office says under the agreement, Arizona will not take any civil, criminal, or administrative legal action against Hacienda Healthcare for the covered conduct in the settlement unless there is a breach in the agreement.

Nathan Sutherland, the former nurse accused of sexually assaulting and impregnating the incapacitated woman in 2019, has pleaded not guilty to charges.

“As a result of some of that attention, that began a criminal investigation by our office, where we started looking at some of the finances and some of the reimbursements Hacienda was getting from the State of Arizona, so us taxpayers were basically subsidizing the lavish lifestyles of the CEO and CFO as a result of their overbilling," said Attorney General Brnovich.

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The Associated Press contributed to this report.