False Claims Act threat moves to states and localities

State false claims/qui tam laws often are more potent than their federal counterpart

Most health care providers are aware of the liability risks associated with the federal False Claims Act (FCA). What many don’t know is what FCA expert John Boese calls "a rapidly growing movement among state and local governments" to enact similar laws.

"The growing trend toward enacting state and local false claims laws merits close attention for a number of important reasons," says Boese, of the Washington, DC, law firm Fried Frank.

The first reason is that experience with the oldest state FCA law, the California False Claims Act, which was enacted in 1987, shows these laws "have teeth," he says. In fact, reportedly, more than 130 qui tam actions are pending under the California FCA, which already has yielded a number of multimillion-dollar settlements, Boese says.

"This is definitely a significant development," says William Saraille, a health care attorney with Arent Fox in Washington, DC. "It is a trend that has more than caught hold at the state level and is quite literally sweeping across the country."

Saraille says this trend is especially significant because the new laws provide states with much greater capacity to work independently of the federal government in connection with Medicaid issues and, in many cases, with respect to private-payer issues. The latter is true because many of the statutes are not limited to Medicaid funds but also apply to private-payer relationships, he explains.

Saraille says that another important difference is the standing that whistle-blowers often have under the state statutes. "That increases dramatically the potential range of plaintiffs," he asserts.

On the federal side, whistle-blowers are increasingly important in setting the health care enforcement agenda. "To add this additional avenue, particularly in the context of private-payer relationships, is going to be a very significant development over the long term," Saraille contends.

Last month, Virginia became the 12th state to enact a qui tam false claims law modeled on the federal FCA. California, Florida, Illinois, the District of Columbia, Nevada, Hawaii, Delaware, Massachusetts, and Tennessee also have qui tam false claims laws closely modeled on the federal FCA, notes Boese, while Louisiana, Tennessee and Texas have qui tam false claims laws that apply only to health care claims.

But it doesn’t stop there. Boese says a recent search revealed false claims bills pending in at least 11 other states — Alaska, Connecticut, Kansas, Maryland, Mississippi, Missouri, New Jersey, New York, Oklahoma, Pennsylvania, and Washington.

"This development is especially significant because, as drafted, these bills apply to an expansive range of business activity," Boese says. "Many of these bills contain oppressive damages, penalties, and attorneys’ fees provisions that could result in liability even greater than that which could be imposed under the Federal False Claims Act."

To date, health care providers have paid out the lion’s share of the more than $5.2 billion to settle suits filed by private citizens under the federal FCA. But, as Boese points out, that does not include money paid to settle suits litigated by the Department of Justice without the assistance of whistle-blowers, much less the significant amounts paid to settle whistle-blower retaliation claims and the plaintiffs’ attorneys’ fees.