How the False Claims Act Impacts Healthcare Providers in California

Healthcare providers in California face significant legal risk under the False Claims Act (FCA), both at the federal and state levels. Whether you’re a hospital, clinic, physician, or ancillary provider, missteps—whether intentional or due to negligence—can lead not only to civil liability, but in some cases criminal exposure as well. Understanding how the FCA works, what kinds of conduct are prosecutable, and how California has layered in its own statutes is critical for protecting your practice. Learn more below, and contact the Law Offices of Art Kalantar in Los Angeles for strategic advice and effective representation from an experienced California healthcare criminal defense attorney.

What is the False Claims Act?

The federal False Claims Act prohibits anyone from knowingly submitting (or causing the submission of) false or fraudulent claims for payment to the federal government. It also covers fraudulent uses of funds, false records or statements to get claims paid, and certain schemes to avoid or reduce obligations to pay money to the government.

California has its own analogous laws. Chief among them is the California False Claims Act (Government Code § 12650 et seq.), which mirrors many federal provisions and allows the state to recover for similarly fraudulent claims. Other civil Medi-Cal fraud laws can be found in section § 12650 et seq. of the Business and Professions Code, and these laws can impose civil penalties for false claims or similar misconduct.

Types of Conduct That Trigger FCA Liability

Even well-meaning providers can find themselves in trouble under the FCA if they engage in certain problematic billing or reporting practices. Common violations include:

• Submitting claims for services not rendered.

• Upcoding (billing a more expensive service than what was provided) or unbundling.

• Certifying compliance with requirements (e.g., eligibility, medical necessity) when that compliance is false or not supported by documentation.

• False statements about cost reports, or misrepresenting how funds were used (for example, claiming funds were spent on “allowed medical expenses” when they were not).

• Engaging in illegal referral or incentive arrangements (which implicate anti-kickback laws) that lead to false claims.

Civil Impacts Under the FCA (Federal and California)

The civil side of the False Claims Act is often where providers see exposure first. Some key features to know include:

• Damages and Penalties: Under the federal FCA, a violator can be required to pay treble damages (three times the government’s loss), plus per‐claim civil penalties. Similarly, the California False Claims Act allows state governments to recover damages and imposes civil penalties.

• Qui Tam (Whistleblower) Actions: Private individuals (known as “relators” or whistleblowers) can bring actions on behalf of the government when they suspect false claims. If such an action succeeds, the whistleblower may receive a percentage of the recovery. This is true under the federal FCA and under the California False Claims Act as well.

• State & Federal Coordination: Many cases involve both federal and state FCA claims, especially where Medi-Cal funding is involved and overlaps with Medicaid/federal funding. Settlements may allocate portions to both the U.S. government and the State of California.

• Reputational and Contractual Damage: Even when criminal charges are not involved, civil findings or settlements can lead to provider exclusion from federal or state programs, loss of licenses or contracts, or damage to reputation that has financial consequences.

Criminal Impacts (Federal & State)

Though the FCA itself is primarily a civil law, the same conduct that triggers false claims liability may also implicate criminal offenses under statutes such as:

• Federal fraud statutes, including the Health Care Fraud Statute (18 U.S.C. § 1347), which make it a crime to knowingly and willfully execute a scheme to defraud a healthcare benefit program.

• Prosecution under anti-kickback laws, Stark Law violations, or false statements laws. These often require proof of intent, and when proven, criminal penalties can include monetary fines, restitution, and imprisonment.

On the California side:

• Violations related to Medi-Cal fraud may lead to criminal charges under state Penal Code and Welfare & Institutions Code provisions. Providers may be charged if there is evidence they knowingly and wrongfully submitted false claims or engaged in fraudulent conduct affecting Medi-Cal.

• California law also allows for civil penalties, but often criminal sanctions are possible for more egregious misconduct. Licensing and professional sanctions are also possible consequences.

Recent California Examples

Recent enforcement actions in California show how these laws are being used in the healthcare setting and how serious they can be:

• In 2022, three Southern California Medi-Cal providers (Dignity Health, Twin Cities Community Hospital, and Sierra Vista Regional Medical Center) agreed to pay $22.5 million in settlements involving allegations that they violated both the federal and California False Claims Acts by causing false claims in connection with the Medi-Cal Adult Expansion program.

• Another $70.7 million in settlements was secured against Gold Coast Health Plan, Dignity Health, Clinicas del Camino Real, Inc., and Ventura County Medical Center, involving false claims under both state and federal FCA laws.

These cases illustrate that both state and federal authorities are serious about enforcing these laws, especially in overlapping funding contexts like Medi-Cal/Medicaid expansion.

Civil Investigative Demands: A Powerful Tool to Investigate Healthcare Providers and Businesses

The False Claims Act authorizes the United States Department of Justice (DOJ) to issue Civil Investigative Demands (CIDs).  CIDs are a type of administrative subpoena. The CIDs require the recipient to produce documents that the DOJ contends are relevant to an investigation.

The DOJ does not have to ask a Court’s permission to issue a CID, but can ask a Court’s help in compelling a recipient of the CID to comply with its requirements. Noncompliance could lead to the DOJ seeking criminal contempt charges against the CID recipient.

A CID may only be served under the FCA prior to the filing of a lawsuit. Thus, receipt of a CID indicates the existence of an investigation, either directly by the DOJ or in relation to a qui tam action brought by a private relator. The documents sought pursuant to a CID can be expansive. Thus, the response could be costly and burdensome to a healthcare practice or business.

It is essential to promptly retain a knowledgeable healthcare attorney to contact the DOJ and properly respond to a CID. As in other legal matters, once mistakes are made, they may be difficult or impossible to correct.

What Healthcare Providers Must Do to Minimize Risk

Given the stakes, providers should take proactive steps:

1. Maintain Thorough Documentation
   Medical necessity, patient records, provider signatures, coding justification — everything should be clear and contemporaneous.

2. Review Contracts and Program Obligations Carefully
   Especially in managed care or programs requiring certain performance or expenditure levels (e.g., Medi-Cal Expansion or “Adult Expansion” programs), ensure you understand what expenditure is permissible and what constitutes an “allowed medical expense.”

3. Train Billing and Compliance Staff
   Make sure those responsible for coding, billing, submitting claims, and managing contracts understand both state and federal FCA requirements.

4. Implement Internal Audits & Self-Review
   Conduct periodic audits of claims submitted, documentation, and compliance with program requirements. Identify and correct errors before government investigators do.

5. Have a Response Plan and Legal Counsel
   If you receive a notice of investigation, it’s important to involve a healthcare defense attorney early. Knowing your obligations, preserving documents, and handling communications properly can greatly affect outcomes.

Contact Healthcare Criminal Defense Lawyer Art Kalantar in Beverly Hills

The False Claims Act remains one of the federal government’s most powerful tools to combat healthcare fraud, and California has adopted similarly strong statutes to protect its Medicaid/Medi-Cal programs. For healthcare providers, civil liability under the FCA can mean treble damages, per‐claim penalties, and involvement in qui tam lawsuits, while criminal exposure looms when intent or egregious misconduct is shown. The need for strong compliance programs, careful documentation, and early legal guidance cannot be overstated.

If you are a California provider concerned about potential exposure under the False Claims Act—whether in billing, contracting, or program compliance—or if you are under investigation or audit regarding FCA or analogous state claims, contact the Law Offices of Art Kalantar for immediate assistance and experienced legal guidance.