(Story updated at 6:20 p.m. Eastern Time.)
He lost his position with his employer, spent six years in court and says he can't begin to quantify the emotional toll the case has taken on him.
But Jim Swoben, the whistle-blower whose case led to a whopping $320 million settlement between the government and SCAN Health Plan in 2012, is not entitled to any of that cash, a federal judge ruled Friday.
Some say it's a decision that could lead to fewer whistle-blowers bringing cases in healthcare.
U.S. District Court Judge John Walter ruled Friday that Swoben was not the original source of the information contained in the lawsuit he filed against SCAN in 2009. That ruling followed an earlier decision in June that the information in Swoben's lawsuit had already been publicly released before he filed his suit.
Swoben, a former data encounter manager at SCAN, alleged that SCAN received duplicative or overlapping payments from Medicare and Medi-Cal between 1985 and 2008 and then hid those overpayments from the state of California. SCAN did not admit to any wrongdoing as part of the settlement.
Swoben said he first brought his concerns to SCAN as an employee. He said he was then reassigned but refused the reassignment, ending his employment there.
He brought his information to then-California State Sen. Alan Lowenthal, who referred the matter to the State of California Controller's Office. In response, the controller's office issued a report concluding that SCAN seemed to be generating unusually high profits because its contract reimbursement rates with the California Department of Health Care Services were high.
That report was then sent to the state's department of healthcare services, Lowenthal and Swoben. Swoben then filed his false claims lawsuit against SCAN in July 2009.
The court ruled in June that because the controller's report was released to Swoben before he filed his lawsuit, the information in his lawsuit was already publicly available. In False Claims Act cases, whistle-blowers must have insider knowledge.
The court then turned, most recently, to the question of whether Swoben was an original source of the information in deciding whether he should get any cash. To be an original source, a whistle-blower must have “direct and independent knowledge of the information on which the allegations are based” and voluntarily provide the information to the government before filing a lawsuit.
The judge, however, decided Friday that Swoben didn't meet those requirements because he learned some of the information secondhand, didn't plead specific enough facts in his complaint and, as encounter data manager at SCAN, couldn't have had access to the financial data necessary to discover the alleged fraud.
“Although a [whistle-blower] need not be the original source of every element of his claim, a [whistle-blower] must do more than apply his expertise to publicly disclosed information,” Walter wrote. “Thus, secondhand information may not be converted into direct and independent knowledge because the plaintiff discovered through investigation or experience what the public already knew.”
Swoben said he was shocked by the judge's ruling. In typical federal False Claims Act cases, whistle-blowers are entitled to 15% to 30% of whatever the government is able to recover.
“I knew a lot, and that's why I went to my state senator,” Swoben said. “They're saying that's not original source, that somehow I couldn't have known these things, and it's not their responsibility to pay me. It's like telling Sherlock Holmes he wasn't a witness to the crime so he couldn't figure out what the crime was.”
Swoben said he regrets coming forward and would advise others thinking of blowing the whistle, especially on managed care plans, to re-think doing so.
“Essentially, at least in the managed-care area, the Justice Department represents the health plans essentially as their clients,” Swoben said, noting that Medicare Advantage plans are essentially government contractors because they provide Medicare coverage. “The health plans are an extension of the federal government.”
Attempts to reach the Department of Justice for comment were not immediately successful Monday. Attempts to reach the California Attorney General's Office for comment also were not immediately successful Monday.
The state of California, however, said in a recent court filing, “The governments have noted that Swoben's complaints, information, and [whistle-blower] action did not help the governments to achieve the Medi-Cal settlement recovery from which Swoben desires a share.”
Thom Mrozek, a spokesman for the U.S. Attorney's Office for the Central District of California, also noted that the basis of the Medi-Cal settlement was different than any of the allegations made by Swoben in his original complaint.
"None of this has anything to do with any level of gratitude we might have for Mr. Swoben," Mrozek said in an email. "And this is not the appropriate forum for us to engage in such a discussion. We have been in regular contact with his attorneys."
But those who fight for and on behalf of whistle-blowers agree that the ruling seems out of line with the spirit of the False Claims Act.
Swoben's case is an example where the letter of the law doesn't always square with the intent of it, said Patrick Burns, co-director of the Taxpayers Against Fraud Education Fund, a not-for-profit funded by whistle-blowers and law firms that represent them.
“In the real world, this fraud would never have come to light and the recovery would never have happened without the whistle-blower,” Burns said.
Burns said he understands the judge's legal reasoning, but the case raises potential questions for policymakers.
“You get into an interesting predicament here where you have essentially told somebody that if they go to the government or a lawmaker before they file a case, they may in fact cut themselves out of the award, and I think it's a reasonable public policy question to ask is that the message we want to send whistle-blowers,” Burns said.
Precedent says the False Claims Act is supposed to be interpreted and applied as broadly as possible to protect taxpayer dollars, said Justin Berger, a whistle-blowers attorney at Cotchett Pitre and McCarthy in California, who was not involved in Swoben's case. Berger called the court's rulings Friday and in June a “tough, narrow, strict reading.”
“I think it ultimately has a chilling effect on whistle-blowers, which is not the purpose of the law,” Berger said.
Not everyone, however, agrees. Kirsten Mayer, a partner at Ropes and Gray who defends healthcare companies in False Claims Act suits, said the judge's ruling seemed to be a fairly straightforward application of the requirements to qualify as an original source under the parameters of the False Claims Act at the time.
Mayer also noted that the False Claims Act was amended under the Affordable Care Act, so that the requirements are now a bit different for whistle-blowers to qualify for cash. For one, state reports, such as the one released in Swoben's case before he filed suit, are no longer considered public disclosures of information. Also, to be considered an original source, a whistle-blower no longer has to have independent and direct knowledge of fraud. Instead, a whistle-blower must now have independent knowledge of fraud that materially adds to any publicly disclosed allegations, Mayer said.
She said even under the new version of the law, Swoben still might not have qualified as an original source though a judge probably wouldn't have been able to rule the information he provided had already been publicly released before he filed his lawsuit.
Mayer said she doubts the ruling will discourage future whistle-blowers from coming forward, especially as they increasingly bring allegations over actions that took place after the changes to the False Claims Act.
“I think at the end of the day, a court decision that's interpreting an older version of the statute and will eventually no longer be applicable to live cases is not going to dissuade someone who would otherwise be interested in filing a [whistle-blower] complaint from doing so,” Mayer said.
Swoben, 60, of Long Beach, Calif., said he plans to appeal. But he said he's lost his faith in the system.
At one point, before the $320 million settlement was finalized, California offered Swoben $28 million as his share of the recovery on the condition he'd agree not to seek money from the federal side of the settlement as well, he said. But he turned it down, saying it seemed unfair. At the time of the settlement, it was the largest recovery ever obtained from a single Medi-Cal provider.
Swoben also did win some money from SCAN as part of a separate $3.8 million settlement with the federal government over allegations he brought against SCAN that it inflated Medicare Advantage patient risk scores, which reflect patients' health, to get more money from Medicare. But Swoben said after lawyer's fees and taxes, he ended up with only about $200,000.
“I would say to the other whistle-blowers even thinking about this, unless they're retiring, they shouldn't do it,” Swoben said.
