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Preparing for the Wave of Whistleblower
Lawsuits
By Robert G. Homchick and Philip W. Clements
[March 1999]
Introduction
The stage is set. With the increase in federal funding for health
care fraud enforcement over the past three years and the heightened
awareness of the "whistleblower" or qui tam provisions
of the False Claims Act, 1999 may well be the year when a whistleblower
suit hits home. Understanding both the unique features of the False
Claims Act (FCA) - and how it is being used by regulators, entrepreneurial
attorneys and others - can help you prepare for, respond to (and
perhaps even avoid) such claims.
The False Claims Act
The Federal False Claims Act ("FCA") has emerged as the
weapon of choice in the government's war against fraud in the health
care industry. A provider or payor may violate the FCA if it:
- knowingly presents to the U.S. government a false or fraudulent
claim for payment;
- knowingly makes a false statement to obtain payment of a false
or fraudulent claim;
- conspires to defraud the government by inducing the payment
of a false or fraudulent claim; or
- knowingly uses a false record or makes a false statement to
conceal an obligation to pay or transmit money to the government.
The FCA allows for the recovery of treble damages, attorneys' fees,
plus a civil penalty of $5,000 to $10,000 per claim. Consequently,
liability under the FCA can be astronomical when based on "false
or fraudulent" claims submitted repeatedly over the course
of months or even years. An FCA violation may also be grounds for
exclusion from the Medicare and Medicaid programs.
Whistleblower Lawsuits
A unique aspect of the FCA is its qui tam or whistleblower provision.
This provision permits private individuals to initiate an FCA lawsuit
on behalf of the government. The FCA whistleblower - or "relator,"as
he or she is called - is then entitled to a percentage of any recovery.
The relator's percentage may vary from 10% to 30% depending upon
his or her level of involvement.
Although almost anyone can be a whistleblower, relators usually
fall into one of three categories: a disgruntled current or former
employee; a competitor; or a "professional" (a professional
whistleblower would be a company that combs through Medicare claims
data for atypical billing patterns, such as pneumonia upcoding).
If an FCA action is initiated by a relator, it will be filed under
seal. In other words, you may be a defendant in a qui tam lawsuit
and not have any way of knowing about it. This allows the government,
in theory, to have an opportunity to review the allegations and
investigate the claims before making a decision whether to take
over the case. In fact, an FCA case may be pending and an investigation
pursued for months (or even years) before the complaint is unsealed.
Health care organizations should be vigilant for signs indicating
that they may be under investigation. A subpoena or request for
records could indicate that a qui tam case has been filed. Once
an organization is aware of an investigation, it can start gathering
information to understand the nature and extent of any exposure
and begin preparing its defense. Davis Wright Tremaine's booklet,
"A Health Care Provider's Guide to Subpoenas, Audits and Search
Warrants" identifies several issues to consider when an organization
is the subject of a government investigation.
A New Cottage Industry
The risks of a FCA whistleblower lawsuit are being exacerbated
by advocacy groups promoting the use of the Act. Over the past few
years, several publications, websites and associations have been
established that are devoted to assisting actual or potential whistleblowers.
Health care industry employees may receive flyers or e-mails urging
them to consider whether they have any basis for asserting a qui
tam complaint on behalf of the United States government. It appears
that the prospect of multimillion-dollar recoveries under the FCA
has spawned a new cottage industry devoted to qui tam actions.
Adding Insult to Injury: Wrongful Discharge Cases with False Claims
Act Allegations
To make matters worse, attorneys who represent employees in discrimination,
harassment and other workplace claims are adding the FCA weapon
to their arsenal. Former and current employees are using the threat
of FCA claims to gain leverage in negotiations, and adding such
claims to their "wrongful discharge" lawsuits. The whistleblower
protection provisions of the FCA are another trap for the unwary.
The FCA specifically prohibits taking adverse action against an
employee based upon his or her whistleblower status or activities.
Once the false claims lion is out of the cage, it is difficult
to tame: qui tam actions are not subject to the same private settlement
rules as typical employee claims. If your organization is forced
to defend one of these hybrid beasts, you will need attorneys with
experience in both employment law as well as health care matters.
Compliance Programs: A Partial Solution Going Forward
If your organization is named as a defendant in a case currently
under seal, then a compliance program will not eliminate the lawsuit.
By going forward, however, an organization's risk under the FCA
may be reduced by implementing a compliance program, and it may
even allow you to negotiate a lower settlement amount with the government.
If one successfully incorporates appropriate training and monitoring
components, a compliance program should:
- decrease the number and frequency of inaccurate claims;
- increase the organization's odds of detecting errors before
the government does;
- encourage its employees to address problems internally, rather
than seeking outside assistance or intervention.
Summary
The qui tam provisions of the FCA have generated an increasing
number of whistleblower claims against health care entities. Both
in responding to an FCA claim and in taking steps to reduce one's
exposure, organizations need to consider a range of employment,
regulatory and litigation issues.
For further information or assistance regarding the FCA compliance
program and strategies for defending qui tam claims, contact Robert
G. Homchick at (206) 628-7676.
For further information on management training and responding to
whistleblower claims in wrongful discharge cases by employees, contact
Philip W. Clements at (206) 628-7634 or your usual Davis Wright
attorney.
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