California False Claims Act Whistleblower Receives $12 Million


On June 29, the Department of Justice announced that three California healthcare providers and a county organized health system (COHS) agreed to pay $68 million to resolve allegations that they violated the False Claims Act (FCA) and California False Claims Act. 

The organizations involved in the large settlement are CenCal, a county organized health system in Santa Barbara and San Luis Obispo that contracts through California’s Medicaid program (Medi-Cal); Cottage Health System (Cottage), a non-profit hospital network; Sansum Clinic (Sansum), a non-profit outpatient clinic; and Community Health Centers of the Central Coast (CHC), a non-profit community health center. The United States and California justice department’s alleged that CenCal, Cottage, Sansum, and CHC violated the FCA and California False Claims Act by submitting claims for “Enhanced Services” from Medi-Cal for services that were not eligible. CenCal will pay $49.5 million, Cottage will pay $9 million, Sansum will pay $4.5 million, and CHC will pay $3.15 million to the United States. California will receive additional payments totaling $1.85 million.

Former medical director of CenCal, Julio Bordas, blew the whistle on the county health system by filing a civil suit under the qui tam provision of the FCA. Qui tam claims enable private citizens to file lawsuits on behalf of the government if they know of an individual or company defrauding the government. Qui tam whistleblowers are eligible to receive between 15 and 30% of the government’s recovery. Mr. Bordas will receive approximately $12.56 million as his share of the federal recovery.

“Medicaid expansion funds must be used for their intended purpose of providing health care services to low-income individuals,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “When health care systems and providers knowingly misuse Medicaid funds, they will be held accountable.”

“These historic settlements demonstrate our steadfast efforts to eradicate fraud involving Medicaid Adult Expansion,” said U.S. Attorney Martin Estrada for the Central District of California. “Health care systems and providers are on notice that the False Claims Act provides us with a powerful tool to ensure that taxpayer-funded health care programs are used for patient care, and not for furtive financial gain.” 

“Federal health care programs are an important resource for millions of Americans to receive medical care,” said Special Agent in Charge Timothy B. DeFrancesca of the Department of Health and Human Services Office of Inspector General (HHS-OIG). “HHS-OIG will continue to ensure that federal health care funds are used as intended and protected from fraud, waste, and abuse.”

“Medi-Cal is a lifeline that provides access to free or affordable healthcare services for millions of Californians and their families,” said California Attorney General Rob Bonta. “When any healthcare provider or agency defrauds the program, they break the public’s trust and put their own bottom line before the patients who count on them for honest, quality care and services. I am grateful to the Justice Department for its extensive efforts throughout the course of this investigation. The California Department of Justice and our law enforcement partners will continue to hold accountable those who defraud the Medi-Cal program, and protect those it serves.”

In recent weeks, the U.S. Supreme Court has issued two decisions in False Claims Act whistleblower cases. On June 16, the Supreme Court issued an 8-1 ruling in United States, ex rel. Polansky v. Executive Health Resources, Inc. The decision grants the DOJ the authority to dismiss qui tam whistleblower lawsuits in cases in which it chose not to intervene.

On June 1, the U.S. Supreme Court issued an unanimous decision in U.S. ex rel. Schutte v. SuperValu Inc. The decision, heralded as a major victory by whistleblower advocates, overturns U.S. Court of Appeals rulings which allowed fraudulent companies to escape liability under the False Claims Act if they could prove their fraudulent actions could be based on a “reasonable interpretation of the law” regardless of whether or not the company intended to commit fraud.

Further Reading:

California County Organized Health System and Three Health Care Providers Agree to Pay $68 Million for Alleged False Claims to California’s Medicaid Program

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