False Claims Act cases likely to expand, experts say

The health care industry is anxiously awaiting decisions on cases before the Fifth Circuit and the U.S. Supreme Court challenging the constitutionality of whistle-blowers suing on behalf of the government when the government opts not to intervene. Beneath the surface, experts say the potential applications of qui tam suits continue to grow.

"This is not something that is going to go away," asserts Bob Homchick, a health care attorney with Davis Wright Tremain in Seattle. "As long as the False Claims Act remains in its current form, it will remain the weapon of choice in health care fraud enforcement," he contends.

The constitutionality of qui tam enforcement has been widely debated since the amendments to the False Claims Act in 1986 significantly expanded the rights and powers of whistle-blowers. Five different circuits over the last 13 years have held that the statute was constitutional until the Fifth Circuit ruled it was not, creating a conflict in the circuits.

In the Fifth Circuit case, U.S. ex. Rel. Riley vs. St. Luke’s Episcopal Hospital, a three-judge panel ruled that the statute is unconstitutional to the extent that it permits an individual from pursuing a qui tam action when the government opts not to intervene. Following that decision, the Supreme Court heard the same issue as part of a pending suit, the Vermont Agency of Natural Resources vs. U.S. ex. Rel. Stevens.

Most observers predict the Supreme Court will opt not to rule on the broad constitutional issue confronting the court, but is more likely to rule on the more narrow issue of states’ rights.

Meanwhile, Homchick predicts qui tam cases will continue to burgeon. "I base that not only on the raw economics of this act, but also the expanding array of relators that are emerging," he says.

While the "paradigm whistle-blower" will likely continue to be a disgruntled current or former employee who decides that it is better to talk to the government than his or her supervisor, Homchick sees a new breed of qui tam relators emerging. "When you look at some of the recent settlements you see that employees are certainly not alone," he points out.

For example, the relator in this year’s record-setting $486 million Fresinius settlement was a competing infusion therapy provider, notes Homchick. In the recent cardiac investigational device lawsuits, the relator was a sales representative for one of the cardiac device manufacturers. And in the pneumonia upcoding cases, the relator is a data miner firm.

Perhaps most disturbing of all, Homchick says, is the potential qui tam relator who was actually hired to design or implement a compliance program, but suddenly determines that the information gathered is more profitably put to use in litigation.

On top of all that, Homchick says hospitals should brace for a potential flurry of False Claims Act cases based on the anti-kickback statute and technical violations of the Stark self-referral laws.

"The other hot area now is quality issues," Homchick adds. He says that under Medicare managed care, several U.S. Attorney’s offices are pursuing inadequate or inappropriate care under the False Claims Act. Already, there have been several settlement agreements in the long-term care industry based on that theory, he reports.