[co-author: Stephanie Kozol]
California Attorney General Rob Bonta, in partnership with the Department of Justice, announced two settlements with providers for Medi-Cal (California’s Medicaid program), following allegations under state and federal false claims acts that the providers submitted fraudulent claims to the government from 2014 through 2016. Consequently, Dignity Health, Twin Cities Community Hospital, and Sierra Vista Regional Medical Center agreed to pay a total of $22.5 million to resolve the investigation. The settlement also resolved a whistleblower complaint against the providers, and the whistleblower will receive $3.9 million for his role in uncovering the alleged fraud.
The alleged fraud arose out of a 2014 Affordable Care Act (ACA) expansion to provide health care coverage to a population of low-income adults. Under the expansion, the government provided more funds to the providers than it anticipated that the providers would need to support the program in its initial stages. The providers were required to return surplus funds to the state of California if they did not spend at least 85% of the funds to support increased coverage for this population. The government alleged that Dignity, Twin Cities, and Sierra Vista submitted receipts for incurred expenses in excess of the amounts authorized under the ACA and/or duplicative services already rendered (i.e., overbilling) in efforts to avoid returning the unspent public funds.
The investigations into and settlements with the health care providers highlight two growing risks for businesses that contract with federal and state governments.
- A recent uptick in state false claims prosecutions, suggesting that state attorneys general are expanding their toolbox and exercising authority via powerful state false claims statutes, which not only penalize alleged wrongdoers, but also often provide punitive or treble damages to the states.
- An increasing threat to government contractors. With the potential for substantial rewards, whistleblowers are increasingly incentivized to come forward with information often not available to regulators to substantiate potentially damaging claims against a business.
Why This Matters
Whether concerning tax fraud, securities fraud, cybersecurity misrepresentations, or other types of misconduct, we expect a new wave of state false claims cases, potentially spurred by whistleblower action, to surface over the next few years.
