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July 29, 2014
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Dignity Health agrees to pay $1.55M in civil penalties to resolve controlled substances case


Dignity Health has agreed to pay the United States government $1.55 million to settle claims of deficiencies regarding the handling of controlled substances at its hospitals and clinics, U.S. Attorney Benjamin Wagner has announced. Dignity Health — California’s largest hospital provider and the country’s fifth largest health system, which includes Sierra Nevada Memorial Hospital and Dignity Health Medical Group-Sierra Nevada — will pay $1,250,000 immediately, and the remaining $300,000 will be deferred pending its compliance with a detailed action plan over the next two years.

The payment and action plan resolve the federal government’s claims that Dignity Health facilities in the Sacramento area failed to properly record hundreds of transactions involving controlled substances, in violation of the Controlled Substances Act, and had insufficient compliance procedures and controls regarding the distribution of controlled substances.

The Drug Enforcement Agency started investigating Dignity Health following reported losses of more than 20,000 tablets of hydrocodone from the outpatient pharmacy at St. Joseph’s Medical Center in Stockton in late 2010 and 2011, U.S. Attorney’s Office spokeswoman Lauren Horwood said in a press release. A 2011 audit conducted by the DEA at the pharmacy revealed significant shortages of a number of the controlled substances evaluated, including most strengths of hydrocodone, a Schedule III opioid analgesic narcotic sold in tablet form.

Hydrocodone is highly addictive and often diverted to the black market from legitimate sources, Horwood noted.

The DEA’s subsequent investigation reportedly revealed that several Dignity Health locations were failing to keep accurate records under the laws designed to safeguard the public against diversion of the most abused classes of legally manufactured and prescribed drugs.

“The abuse of hydrocodone and other painkillers has become an epidemic,” Wagner said. “The Controlled Substances Act created a ‘closed system’ of controlled substance distribution so the DEA can better monitor the movement of prescription drugs to end users. This system reduces the opportunity for diversion of drugs that can have a useful and legitimate medical purpose for those lawfully consuming them. Unfortunately, however, if hospitals and pharmacies are lax in their record-keeping or supervision of their drug-dispensing operations, opportunities arise for the diversion of powerful drugs to unintended users who may be injured by them. We will continue to work with our law enforcement partners to investigate and prosecute these cases.”

According to the settlement agreement, an audit conducted in September 2011 at St. Joseph’s in Stockton revealed variances in the counts for the majority of controlled substances evaluated. The investigation reportedly revealed “numerous” deficiencies in record-keeping, not only in Stockton, but also at other Dignity Health facilities in the DEA Sacramento District Office Area of Responsibility, including Mercy General Hospital, Mercy San Juan Medical Center, Dignity Health Medical Foundation and Woodland Healthcare.

Sierra Nevada Memorial Hospital and the two Dignity Health Medical Group clinic sites in Grass Valley are part of that area of responsibility; they were not listed in the settlement agreement as having deficiencies and it was not clear if deficiencies were found at any site in Nevada County. Representatives from the hospital did not return a call for comment Tuesday.

The action plan agreed to by Dignity Health is designed to advance the health system’s ability to meet its record-keeping requirements and its ability to detect and prevent diversion in its prescription drug- dispensing operations, according to Horwood.

Components of the action plan include annual external audits of 10 randomly chosen Schedule II-V controlled substances, to be paid for by Dignity Health, and with results to be reported to the DEA; keyless entry systems installed at Dignity Health locations to monitor and restrict access to areas containing controlled substances; twice-daily physical counts and monthly inventories of controlled substances to quickly identify discrepancies; monthly certifications that record-keeping requirements are met; and annual compliance training for Dignity Health employees who handle controlled substances.

“Healthcare providers have an obligation to protect public health,” said DEA Special Agent in Charge Jay Fitzpatrick. “Keeping accurate records and restricting access to controlled substances are key in fulfilling that responsibility. This significant civil penalty underscores DEA’s commitment in the fight against prescription drug abuse by holding companies accountable, regardless of their size.”

To contact City Editor Liz Kellar, email lkellar@theunion.com or call 530-477-4229.


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The Union Updated Jul 30, 2014 11:51AM Published Jul 31, 2014 06:25PM Copyright 2014 The Union. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.