The Small Firm for Big Cases

Northern Arizona Healthcare, Flagstaff Medical Center and Health First Foundation – Northern Arizona Agree to Pay $4.5 Million to Settle False Claims Act Lawsuit

AUGUST 29, 2022, PHILADELPHIA, PA:  David J. Caputo, a founding partner of Youman & Caputo, LLC (, announced today that Northern Arizona Healthcare (“NAH”), Flagstaff Medical Center (“FMC”) and Health First Foundation – Northern Arizona (formerly Northern Arizona Healthcare Foundation) (“NAHF”) have agreed to pay a total of $4.5 million to settle allegations that a 2017 payment to FMC under the Medicaid Disproportionate Share Hospital (“DSH”) program violated federal law.

Mr. Caputo was lead counsel for the whistleblower who filed the lawsuit, Gregory Kuzma, and Nathan C. Zipperian of Miller Shah LLP ( was co-counsel.

“We thank our client for reporting his concerns in this case.  Very few people have the knowledge and the skill set to unpack the transactions that occurred here and to recognize the potential violation of federal law,” Mr. Caputo and Mr. Zipperian said in a joint statement.  “Our client has both, and, as a result, millions of dollars will be returned to the federal treasury.”


The lawsuit was filed under the federal False Claims Act, 31 U.S.C. §§ 3729-3733, in February 2018.  The False Claims Act authorizes private citizens to bring lawsuits (known as “qui tam” or “whistleblower” lawsuits) on the federal government’s behalf alleging that companies or individuals have defrauded the United States.  If the case is successful, the plaintiff (or “relator”) is entitled to a percentage of the government’s recovery.

The complaint in this case alleged a fraudulent scheme to secure an unlawful payment of federal Medicaid funds under the DSH “Pool 5” program.  The purpose of this Medicaid program is to help hospitals that serve a disproportionate share of uninsured patients provide services for which they are otherwise not paid.  Medicaid payments are financed jointly by the federal and state governments.  Under Arizona’s Medicaid program, a local public entity can fund the state portion of a DSH Pool 5 payment by transferring funds to the Arizona Health Care Cost Containment System (“AHCCCS”).  The public entity’s funds are then matched by the federal government at roughly a 2:1 ratio, and AHCCCS pays the total sum – the public entity’s funds plus the federal match – to the hospital as a DSH Pool 5 payment.

Federal law prohibits the local public contribution from being tied, directly or indirectly, to a donation by a healthcare provider to the public entity.  Such unlawful payments are called “non-bona fide provider-related donations.”  This prohibition is intended to prevent a hospital from, for example, donating the funds that the local public entity uses to secure the federal matching dollars that fund the federal portion of the DSH Pool 5 payment to the hospital.

The complaint in this case alleged that a Medicaid DSH Pool 5 payment to FMC in 2017 violated the federal prohibition against non-bona fide provider-related donations.  Specifically, the complaint alleged that a federal match of approximately $4.775 million was secured with a $2.2 million payment to AHCCCS by the Williams Hospital District of Coconino County (“WHD”) based on a promise by NAH, FMC and NAHF to fund construction of a new medical clinic building for WHD.  The complaint alleged an unlawful series of transactions whereby NAH and FMC provided funds to NAHF to make a $6 million grant to WHD, but the grant amounted to nothing more than returning WHD’s $2.2 million plus a portion of the federal matching funds that FMC received in the DSH Pool 5 payment.

WHD was not a defendant in the lawsuit.  Mr. Kuzma became aware of the transactions while working for the non-profit that operated the clinic in the WHD building.  He was familiar with the applicable federal regulations from work that he did while employed as NAH’s Chief Financial Officer from 2004 to 2014.

The federal lawsuit is captioned United States ex rel Gregory Kuzma v. Northern Arizona Healthcare Corporation et al., CV-18-08040 (D. Arizona), and was assigned to Senior United States District Judge David G. Campbell.  Additional details regarding the allegations in the case may be found in a January 2021 opinion from Judge Campbell denying the defendants’ motions to dismiss.

The complaint was initially filed under seal, as required by the False Claims Act, and then litigated by Youman & Caputo, LLC and Miller Shah LLP after the case was unsealed in February 2020 following a decision by the United States not to intervene in the case.  The False Claims Act permits whistleblowers to litigate cases on behalf of the government when the government declines to undertake the active prosecution of the case.  Since 1986, private citizen whistleblowers have recovered more than $3.5 billion on behalf of the United States in so-called “declined” cases.

Although the government did not intervene in the case, the United States Attorney’s Office for the District of Arizona, led currently by United States Attorney Gary M. Restaino, provided invaluable assistance during the course of the litigation after the case was unsealed.  Mr. Caputo and Mr. Zipperian specifically thank current Executive Assistant United States Attorney Diana Varela and Assistant United States Attorney J. Cole Hernandez for their efforts in this case.

Youman & Caputo, LLC represents government fraud whistleblowers nationwide.  The firm’s founding partners, Andrew S. Youman and David J. Caputo, have secured or helped secure more than 100 seven or eight-figure settlements or verdicts during their careers.  Mr. Caputo’s prior notable whistleblower cases include the largest United States False Claims Act recovery in Arizona history.

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