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Deficit Reduction Act of 2005
New Policies and Employee “Education” Requirements About False Claims Recovery and Whistleblower Protections
By Robert G. Homchick, Mary E. Drobka, David Marshall and Lisa Hayward
[April 2006]
The Deficit Reduction Act (DRA) signed into law by the president on Feb. 8, 2006 contains a surprise. This Act includes a section entitled “Employee Education About False Claims Recovery” that imposes significant obligations on most of the provider community to adopt personnel policies specifically describing the federal False Claims Act and any similar state statutes as well as related whistleblower protections. It also requires that these policies be referred to in the organization's employee handbook. Employers who fail to implement the required policies and update their handbooks may be ineligible for Medicaid payments.
The Specifics
Under the DRA, as of Jan. 1, 2007, entities receiving or making $5 million or more in payments under a state Medicaid plan will not be entitled to payment for services unless they establish written policies for employees, contractors and agents detailing: (1) the federal False Claims Act provisions; (2) the administrative remedies for false claims and statements; (3) any state laws relating to civil or criminal penalties for false claims and statements; and (4) the whistleblower protections under such laws.
The DRA also mandates that by 2007, the entity’s policies and procedures for detecting and preventing fraud and abuse of government health care programs, as well as the policies referenced above, be included in employee handbooks. Although the new Act does not detail what must be included in an entity’s policies and procedures to detect and prevent fraud, clearly any existing compliance programs must be described for employees (and, presumably, for Medicaid auditors checking on compliance with the new Act) in an employee handbook.
In Addition to Existing Requirements . . .
The new policies and handbook provisions required under the DRA add an educational component to the False Claims Act that appears intended to aid the federal government in identifying violations through an entity’s employees, contractors and agents. All these individuals associated with entities covered by the Act will need to not only receive a summary of what the federal (and any applicable state) False Claims Act prohibits, but also a description of the whistleblower provisions in these statutes.
A Solution?
Entities making or receiving more than $5 million in Medicaid payments will need to either create new policies or overhaul existing policies to include the components mandated by the DRA and reference these policies and procedures in their employee handbooks. All this needs to be done by Jan. 1, 2007.
It may also be advisable to determine, early-on, whether any internal complaint procedures accurately reflect current practices and what processes would best serve the entity’s goals, while meeting all legal requirements. It would appear from this new law that, at least as to complaints of waste, fraud and abuse, the internal complaint policies must reference the ability of the employee or agent to take complaints about the entity to the federal government. At present, there is no guidance from the government as to how detailed these policies or the handbook summaries must be. Hopefully, by year’s end there will be more guidance available. In the meantime, if you have questions about these new requirements or if you would like assistance in reviewing or updating your policies or employee handbook, please contact any of the authors of this Advisory or your usual DWT contact.
For more information, please contact:
Authors:
Robert G. Homchick, Seattle, (206) 628-7676, roberthomchick@dwt.com
Mary E. Drobka, Seattle, (206) 628-7645, marydrobka@dwt.com
David Marshall, Bellevue, (425) 646-6137, davidmarshall@dwt.com
Lisa Hayward, Seattle, (206) 628-7666, lisahayward@dwt.com
Other DWT Contacts:
Kathleen H. Drummy, Los Angeles, (213) 633-6870, kathydrummy@dwt.com
M. Steven Lipton, San Francisco, (415) 276-6550, stevelipton@dwt.com
Kent B. (Bernie) Thurber, Portland, (503) 778-5202, berniethurber@dwt.com
This Health Law Advisory is a publication
of the Health Law Group of Davis Wright Tremaine LLP. Our purpose
in publishing this Advisory is to inform our clients and friends
of developments in health care law. It is not intended, nor
should it be used, as a substitute for specific legal advice
as legal counsel may only be given in response to inquiries
regarding particular situations.
Copyright 2006, Davis Wright Tremaine
LLP.
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