A key weapon for government investigators
A key weapon for government investigators
What the False Claims Act means to you
One of the sharpest tools being used by federal inspectors and prosecutors in their battle to uncover and prevent Medicare fraud and abuse is the False Claims Act.
Also known as the whistleblower law, the False Claims Act basically rewards citizens who report fraudulent claims submitted by companies for goods or services provided to the federal government. If the government presses a case and wins, the whistle-blower can receive up to 25% of any monies recovered.
Expected increase in False Claims filings
Currently, the median False Claims-related award is $183,000. But with HCFA reporting nearly $23 billion in questionable and improperly documented Medicare billings last year, government officials expect to see a dramatic increase in False Claims filings.
Federal prosecutors also say the False Claims Act is an effective way to expand their investigative efforts, because it gives physicians and health care-related workers an incentive to report shady and outright fraudulent billing activities they might never be aware of.
In fact, the number of health care whistle-blower-related cases has jumped from 14 in 1992 to 200 in 1996. These lawsuits accounted for about half of the $274 million in health fraud funds recovered by the federal government during 1995-1996.
Despite its recent track record in ferreting out fraud, some fear that the lure of a big payday could also prompt present or former employees, competitors, or others with a grudge against a provider or health care organization to file marginal or unfounded accusations against them just to institute an investigation.
Given the growing importance of the False Claims Act to providers, Physician’s Payment Update has enlisted the help of Washington, DC, law firm Arent Fox Kinter Plotkin & Kahn in preparing these responses to the most frequently asked questions about the False Claims Act.
Q: What is the False Claims Act?
A: The False Claims Act provides for civil actions in order to recover damages and civil penalties for false claims made to the federal government.
The qui tam (Latin for those "who sue on behalf of the king as well as himself") part of the Act allow private citizens acting as whistleblowers to enforce the statutory requirements in order to benefit the federal government.
Q: What kind of activities are covered under the Act?
A:The False Claims Act covers fraud involving any federally funded contract or program, with the exception of tax fraud.
Q: What kind of actions justify a claim under the False Claims Act?
A: The elements of a claim are (1) that the claimant presented or caused to be presented to the U.S. government a claim for payment or approval; (2) that the claim was false or fraudulent; and (3) that the claimant knew that the claim was false or fraudulent or acted with reckless disregard of the truth or falsity of the claim. The claimant does not have to act with a specific intent to defraud in order to be liable, nor is proof of actual damages required.
Even if the claim is legitimate (i.e., payment for work actually and validly performed), it will still fall within the definition of a false claim if fraudulent information was used to secure the contract. Nor does a claim have to be made directly by the party contracting with the government if the third party knows that the party will submit the claim to the government for payment.
The U.S. Court of Appeals for the Washington, DC, Circuit recently held that false progress reports about the status and success of a project submitted in a government contract may be considered false claims under the False Claims Act. These reports are subject to triple damages if the progress reports caused the government to accept and pay for items it otherwise would not have.
Q: What are the potential damages if convicted under the Act?
A: Damages are triple the amount sustained by the government, plus the costs of investigating and prosecuting the action are awarded, together with civil penalties ranging from $5,000 to $10,000 per claim. For instance, say a claimant submits 3,683 Medicare reimbursement claims, and receives $130,719 in payment for them. A court later finds that the defendants "acted in reckless disregard of the truth or falsity of the information they submitted on the form" for each of the 3,683 claims. The court awards three times $130,719, which equals $392,157, and a civil portion penalty of $5,000 per claim (3,683 x $5,000), which totaled $18,415,000 for a total award of $18,807,157.
Q: Does a party have to "knowingly" submit a false claim to the government to be liable?
A: Under the Act, the government must establish that the defendant had actual knowledge of the false claim, acted in deliberate ignorance of the truth or falsity of the information, or acted in reckless disregard of the truth or falsity of the information. However, the Act is not intended to apply to situations where the defendant was merely negligent.
Q: What is a "relator"?
A: A relator is a private individual, usually an employee, who may bring a false claims action on behalf of the federal government.
Q: How much money can a relator receive for bringing a qui tam action?
A: If the government takes over the action from the qui tam relator, the relator may receive at least 15% but not more than 25% of the damages. If the government does not proceed with the case, the relator can still sue. If the relator chooses to sue, he can receive between 25% and 30% of the proceeds if the court rules that the claim was fraudulent.
Q: What statutory requirements must a relator comply with in order to pursue a qui tam action?
A: A relator must file the complaint under seal with the court and it must remain under seal until the government decides to intervene and assume control, or declines to do so. The objectives behind this requirement are: (1) to allow the government to consider intervention without public knowledge; (2) to allow time for a government investigation of the defendant; and (3) to protect the defendant’s reputation while the government investigates the merits of the claim.
Q: What remedies does a contractor have if the relator fails to comply with the statutory requirements?
A: If the relator fails to comply with the filing requirements or discloses the existence and substance of the lawsuit, either to the defendant or to any third party such as the media, prior to government intervention, the defendant may ask the court to dismiss the lawsuit. For instance, courts have dismissed cases when the relator has failed to file under seal or failed to postpone service on the defendant until after the seal is lifted, even when the service was not deliberate, but occurred due to the negligence of the relator.
Q: What can health care providers do to protect themselves from liability associated with a false claims action?
A: Under Section 3729(a) of the False Claims Act, if a corporation becomes aware that information regarding its own submission of a potentially false claim has been given to the government, the corporation may decide voluntarily to disclose information that forms the basis for a false claim action.
Q: How does this voluntary disclosure protect you?
A: Voluntary disclosure may limit a contractor’s liability in several ways. First, a relator may bring an action based only upon disclosed information if the relator was the original source of the information.
In other words, the relator must have personal knowledge of the false claim that was not discussed with others and is independent of the public disclosure.
Second, voluntary disclosure may result in a reduction of the damages. For instance, if the person who submitted the false claim gives the government all the information they have about the claim within 30 days of discovering the error, if there was not already an investigation into the claim, and if the provider cooperates with any subsequent investigation, the court can choose to impose double damages instead of treble.
Q: What are the risks associated with voluntary disclosure of facts that may form the basis of a false claims action?
A: The contractor runs the risk that all of the requirements of Section 3729(a) will not be met. Thus, a volunteer may not benefit from disclosure, yet might likely disclose to the government damaging evidence and possibly waive certain defenses.
Additionally, voluntary disclosure will require conducting an internal investigation. However, any individual considering an internal investigation should be aware of some of the associated potential pitfalls.
These problems include: the expense of the investigation; the disruption of work schedules; adverse impact on employees; maintaining an attorney-client privilege (both vis-a-vis company employees and the government); and ensuring that disclosures revealed during the investigation are accurate to prevent further false claims charges.
Q: What types of internal compliance procedures should a health care provider implement if he or she becomes aware of conduct that may violate the False Claims Act?
A: After becoming aware of questionable conduct, you will want to develop and implement compliance procedures to avoid future recurrences. For instance, you may want to start a hotline for employees to report information that could possibly lead to a false claims actions.
Once aware of information that the government or relator may later claim forms the basis for a false claim action, you can then determine what strategy to employ, and whether and when voluntary disclosure should be made.
Providers also may want to conduct an internal investigation that focuses on the allegations of potential wrongdoing. In conducting this investigation, you should obtain an unbiased, critical analysis from an outside source of what happened, who was involved, and how and why it happened. Document reviews and employee interviews are the main sources of this information. It is important to involve outside counsel at this stage due to the sensitivity of the issues, and the need to protect confidentiality.
Q: Are employees who report potential corporate wrongdoing protected by the False Claims Act?
A: Under recent court decisions, if an employer knows one of its employees is considering or has filed a claim, it is generally considered unlawful to take retaliatory action such as firing or demoting that worker.
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