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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 11, 1998
Medaphis Corporation
(Exact name of registrant as specified in its charter)
DELAWARE 000-19480 58-1651222
(State or other jurisdiction of incorporation) Commission File Number (IRS Employer Identification Number)
2700 CUMBERLAND PARKWAY
SUITE 300
ATLANTA, GEORGIA 30339
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 444-5300
NOT APPLICABLE
(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events
The Company has previously disclosed an investigation being conducted by
the United States Attorney's Office for the Central District of California
concerning the billing and collection practices in two offices of the Company's
wholly owned subsidiary, Medaphis Physician Services Corporation ("MPSC"),
which offices are located in Calabasas and Cypress, California (the "Designated
Offices") (the "California Investigation"). Medaphis first became aware of the
California Investigation on June 13, 1995, and the Company subsequently has
made periodic disclosures concerning the status of the California Investigation,
including most recently in the Company's Form 10-K for the fiscal year ended
December 31, 1997, which was filed with the Securities and Exchange Commission
on February 2, 1998 (the "1997 10-K").
Investigations such as the California Investigation can be initiated
following the commencement of qui tam litigation which is commenced under
applicable state and federal statutes and is maintained under court seal without
disclosure to the defendant. Under the applicable statutes, the United States
and the State of California may elect to intervene fully or partially in qui tam
litigation, and proceed with the action. The United States typically will
provide a defendant with the opportunity to enter into settlement negotiations
prior to the intervention of the United States in the matter. An application by
the United States to partially lift the seal in qui tam litigation in order to
make disclosure of the complaint available to the defendant often precedes such
settlement discussions.
On February 6, 1998, on application of the United States, the United States
District Court for the Central District of California issued an order partially
lifting the seal on the qui tam suit entitled "United States of America and
State of California, ex rel. [Relator I and Relator II] v. Compmed Corporation,
Medaphis Corporation, Does 1 to 200, Inclusive," Civil Action No. 94-8158 LGB
(kx). On February 11, 1998, the United States provided Medaphis with a copy of
the Complaint, Substitution of Attorney,and Order which prohibited the Company
from making any use of the Complaint, including any public disclosure, other
than for the purposes of settlement negotiations, without further order of the
Court. On February 12, 1998, upon the joint application of Medaphis and the
United States, the Court issued an order modifying its February 6, 1998 order to
allow Medaphis to make public disclosures concerning the Complaint and its
contents to the extent that Medaphis determined such disclosures were required
by applicable securities laws, provided that such disclosure did not reveal the
Relators' identities.
According to the Complaint, filed December 20, 1995 by the Relators and
which contains allegations raised by them, the action is to recover civil
penalties on behalf of the United States and the State of California arising
out of alleged false claims presented by the defendants on behalf of their
clients for payment under various state and federal insurance programs. As
previously disclosed in the 1997 10-K, no charges or claims by the government
have been made. The Complaint includes causes of action under the federal
False Claims Act, 31 U.S.C. sec. 3729 et seq., and the California False Claims
Act, Cal. Gov't Code sec. 12650 et seq. The Complaint also includes causes of
action relating to Medaphis's termination of Relator II, including a count
under the state and federal whistleblower protection statutes. The Complaint
alleges overpayments of approximately $20,500,000 together with treble damages
and additional penalties based on statutory civil penalties. The Complaint
alleges that at least 50,000 separate false claims were filed under federal
programs and at least 8,000 separate false claims were filed under state
programs. The Complaint also alleges unspecified compensatory, general and
punitive damages on behalf of Relator II on his or her employment claims. The
allegations in the Complaint are limited to the office of Compmed (acquired by
Medaphis) in Culver City, California. Medaphis believes that this Complaint
relates to and concerns the California Investigation.
Medaphis is engaged in discussions with the United States, and intends to
pursue settlement discussions with the United States, the State of California,
and the Relators. There can be no assurance that the Complaint will be resolved
promptly or that the Complaint will not have a material adverse effect upon the
Company.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: February 12, 1998
MEDAPHIS CORPORATION
By: /s/ Randolph L.M. Hutto
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Randolph L.M. Hutto
Executive Vice President
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