Fate of False Claims Act rests in circuit courts, states
Fate of False Claims Act rests in circuit courts, states
Two Circuit Courts of Appeal are weighing constitutional challenges to the False Claims Act left unresolved by the Supreme Court earlier this year that could reign in the act's qui tam provisions. But even as those cases unfold, the number of states with even more burdensome False Claims Act legislation continues to grow. Experts say the outcome could have significant impact on qui tam enforcement in the health care arena for years to come.
While the largest recoveries involve cases where the government intervenes, qui tam relators — or whistle-blowers — can pursue claims even when the government does not intervene. "From the provider's perspective, it is one of the biggest abuses in the False Claims Act," says health care attorney Tom Crane of Mintz Levin in Boston. "The fundamental dynamic that is unfair for providers is the staggering leverage that the government has over providers," he contends.
Critics of qui tam enforcement of the False Claims Act say it violates the "take-care" clause by undermining executive branch control over litigation conducted on the government's behalf, as well the appointments clause, which requires that officers of the United States be appointed by the President, with the advice and consent of the Senate. "No matter what the outcome in the Tenth and Fifth Circuits, these challenges will certainly continue to be pressed until the Supreme Court ultimately settles the matter," predicts John Boese of Fried Frank in Washington, DC.
Earlier this year, the Court ruled that qui tam relators have standing to litigate the federal government's claims under the False Claims Act even when the government does not intervene. But the Court took no position regarding the "take-care" clause or the appointments clause. That threw those two issues back to the circuit courts. Last week, the Fifth Circuit reheard oral arguments regarding those two challenges; and this week, the Tenth Circuit is slated to hear oral argument on the same issues.
"These are important cases, but they affect a small category of cases," asserts Crane. "It is important to remember that this only applies to False Claims Act cases that are brought by whistle-blowers where the government has declined to intervene."
Crane cautions that even favorable rulings on those two issues will not change the basic landscape of the False Claims Act. "Nobody should think these cases are going to remove the importance of the False Claims Act as the primary tool in the enforcement armament against providers," he says.
More worrisome for compliance officers is a current trend at the state level. Boese notes that since Congress enacted amendments to the Federal False Claims Act in 1986, several states have passed their own false claims laws modeled closely on the federal law. Until last year, those four states were California, Florida, Illinois, and the District of Columbia. But since then, that list has grown to include Delaware, Hawaii, and Nevada. Worse yet, numerous other states are considering false claims legislation, Boese reports.
Last summer, Massachusetts became the latest state to enact qui tam provisions. However, while that law includes some provisions similar to the federal False Claims Act, it also includes a number of provisions that Boese says are even more "oppressive and plaintiff-oriented" than the federal law. "Potential liability under the False Claims Act can be enormous, but the Massachusetts state legislature has gone well beyond the federal False Claims Act's already-expansive reach," argues Boese, a leading expert in that area.
Boese says any contractors and health care providers that deal with the Massachusetts state government should carefully assess those relationships. "These entities need to be aware that if they do business with the state or its political subdivisions, their financial viability is at enormous risk," he asserts.
The Massachusetts False Claims Act not only creates two new causes of action. In addition to the seven that exist under the federal law, it also imposes false claims liability on a beneficiary of an inadvertent submission of a false claim, who subsequently discovers the falsity, but fails to disclose it to the state, according to Boese.
He says the Massachusetts law also allows liability to be imposed on corporations and other entities for the acts of their agents, regardless of whether the agent acted to benefit the principal, and regardless of whether the principal adopted or ratified that agent’s conduct. Likewise, defendants found liable under the Massachusetts law are liable for the state’s expenses, including attorney’s fees, experts’ fees, and costs of investigation and litigation, he adds. In addition, employers are prohibited from adopting policies or executing agreements that prevent employees from disclosing a false claim or assisting another in filing a qui tam action.
Subscribe Now for Access
You have reached your article limit for the month. We hope you found our articles both enjoyable and insightful. For information on new subscriptions, product trials, alternative billing arrangements or group and site discounts please call 800-688-2421. We look forward to having you as a long-term member of the Relias Media community.