In a decision last week in United States v. Scan Health Plan, 2:09-cv-05013-JFW (C.D. Cal. June 1, 2015), the United States District Court for the Central District of California ruled that a State of California Controller’s Office (SCO) audit concluding that Scan Health Plan “appeared to be receiving duplicative or overlapping payments” from Medicare and Medi-Cal for the same services, qualified as a public disclosure under the False Claims Act (FCA). In so ruling, the court held that the relator’s claim was at least partially based upon the audit, and, thus, he was not entitled to any portion of the existing settlement unless he could prove he was an original source under the FCA. This is particularly relevant as the relator’s allegations differed in some ways from the conclusions of the SCO audit.
The relator in this case was a former Scan employee who learned in 2006 and 2007, after he left the company, that Scan had potential overpayments from its Medi-Cal contract. The relator provided this information to a California state senator, who initiated the SCO audit. The SCO completed its audit, which included an interview of the relator, in 2008. The relator received a copy of the SCO audit prior to July 13, 2009, and sent that copy to the Office of Inspector General (OIG). On July 13, 2009, relator filed a qui tam complaint against Scan. In 2012, Scan settled a U.S. Department of Justice investigation for $322 million.
The relator filed a summary judgment motion seeking a determination the public disclosure bar did not apply (and thus that he would be entitled to a portion of the settlement)—he did not seek a ruling on whether he was an original source of the information. The government opposed the motion, arguing that the SCO audit was clearly a public disclosure on which the relator based his allegations.
The court agreed that the SCO audit met all of the requirements of the public disclosure bar. Most pertinently, the court agreed that the relators claim was “based upon” the audit despite the fact that the relator added an allegation of fraud, including that Scan was responsible for certain acts that the SCO audit had attributed to others. However, the judge ruled that because the relator’s complaint was “at least partially based upon the SCO Report, the additional fraud allegation does not support the conclusion that [relator’s] Complaint is not ‘based upon’ the SCO Report.”
After the ruling, the court held that the parties could have additional time to file cross-motions relating to whether the relator was an original source. In this case, the court has yet to determine whether the relator will be able to make any showing that he was an original source, and thus share in the already-determined settlement. However, the ruling demonstrates that adding a fraud allegation—regardless of small factual differences from any public documents—does not allow a relator to overcome the first step in the public disclosure inquiry. In such a situation, a relator must satisfy the second step—proving he was the original source—to be entitled to share in the recovery (or proceed with a case). This serves as a clear reminder that the FCA is not a free-for-all for opportunistic relators.