States jump on False Claims Act bandwagon

Many state qui tam statutes have even more bite than the federal law, experts say

Hospitals and other health care providers long threatened under the federal False Claims Act now face another threat: A growing list of states have already enacted or are considering enacting their own civil False Claims Acts modeled on the federal law. The statutes include steep penalties, triple damages, and whistle-blower provisions.

"The next great wave of whistle-blower lawsuits is going to be at the state level, not at the federal level," predicts health care attorney Charles Murdter of Davis Wright Tremain in Seattle. "The federal False Claims Act has been enormously lucrative for many relators, and given that there are a variety of state contracts that federal statutes do not reach, it only makes sense for the states to jump on board."

"This is a way for states to capture what they perceive to be lost revenue," says Murdter. The federal contribution to Medicaid empowers whistle-blowers to bring False Claims Act cases based on Medicaid fraud; however, those recoveries have been limited to the dollar loss that the federal government suffers. "This is now a way to get the full monte," he says.

The principal thrust of law enforcement under the false claims act in the health care arena continues to be at the federal level, agrees Bob Fabrikant, a health care attorney in Chicago. But he also believes more states are recognizing that the application of False Claims Act statutes is a very lucrative area.

California enacted its own qui tam false claims law in 1987, and Florida followed suit in 1994. Other jurisdictions whose false claims statutes have qui tam provisions now include Illinois, Nevada and the District of Columbia.

In addition, Texas, Louisiana, and Tennessee have qui tam laws dealing with health care false claims, and North Carolina has a health care False Claims Act modeled after the federal law but without a qui tam provision.

California and Florida have begun to generate significant recoveries. That may explain why Colorado, Missouri, New York, Washington, Pennsylvania and Massachusetts all have current qui tam laws pending and why false claims legislation was also introduced last year in Connecticut and Texas.

San Francisco health care attorney Mark Kleiman says this trend is likely to be self-perpetuating. "Typically, the attorneys general in various states will listen more closely to one another than they will to the Justice Department, and as increasing numbers of states begin to report positive experiences with their own false claims statutes, that gets the attention of people in other states," he says.

Kleiman notes that California just raked in close to $200 million under its statute. "I can tell you that when someone reports they put $200 million back in the coffers of state government, attorneys general in other states sit up and pay attention," he asserts.

But that is not the only factor, argues Kleiman. States themselves have been the targets of qui tam actions in the past, but if that threat is lifted, states will be increasingly comfortable with qui tam provisions, he explains. A Supreme Court decision that would give states just that protection is expected this spring.

Fabrikant points out that some of these proposed or existing laws include provisions that impose even greater liability than under the federal False Claims Act.

For example, the bill introduced in Colorado would require losing defendants to pay not only the relator’s attorneys’ fees but the state's legal bills, as well.

Similarly, while federal Stark self-referral rules have language that prohibits a provider from "knowingly and willfully" accepting or offering an inducement to procure referrals, the state false claims statute in California does not include that phrase.

"That means the state law in California is not a specific intent statute," Kleiman asserts. "We don't have to prove under state law that a doctor or hospital knew it was a kickback; all we have to show is that they did the act, and that is a much easier standard to prove."

That is not specific to the qui tam statute, but rather a piece of anti-kickback legislation imbedded in state law, Kleiman explains. However, it is the state False Claims Act that allows states to use that legislation, he adds. "Each state qui tam statute makes local state laws governing health care much more relevant in these situations," Kleinman says.

The take for whistleblowers also varies among states. In California, it is more generous than in Texas. Illinois mirrors the federal statute but Florida does not.

"There are little idiosynchracies in each of the individual state statutes," concludes Kleiman. "But the basic principle, which is that state governments have signed on to the idea of giving people who come forward an incentive, is the unifying thread."