Protection Against False Claims Act Lawsuits


Six ways to reduce compliance-related risks

Last December, the Department of Justice released its annual report on False Claim Act legal actions; the news for hospitals and other healthcare providers is, once again, rather grim.

Though the overall numbers were down from 2014, the DOJ still secured more than $3.5 billion in settlements and judgments from civil cases alleging fraud and false claims. Most importantly, more than half the settlements, or $1.9 billion, came from companies and individuals in the healthcare industry.

The charges ranged from allegedly providing unnecessary or inadequate care, to paying kickbacks to healthcare providers, and overcharging for goods and services paid for byMedicare, Medicaid and other federal healthcare programs.

Especially noteworthy is the fact that most false claims actions were filed under the act’s whistleblower, or qui tam, provision, which allows individuals, often former employees, to file lawsuits alleging false claims on behalf of the government.

Reduce Risks

Is there a way for healthcare providers to buck the qui tam trend and protect themselves from an FCA investigation and/or lawsuit? While there’s no sure-fire remedy, the six steps below will not only reduce compliance-related risks, but also provide a strong legal defense should a suit be filed.

Step 1. While plaintiff’s attorneys closely following FCA enforcement trends, providers should, too.

Keep track of FCA-related healthcare news, especially reports issued by the DOJ and other government bodies. Also follow healthcare industry publications and websites covering the latest FCA issues–the hot topics, if you will.

For example, last December’s DOJ report points out hospitals were involved in nearly $330 million in FCA settlements and judgments in 2015. According to the report, a cardiac nurse and healthcare reimbursement consultant filed a qui tam suit against hundreds of hospitals that were allegedly implanting cardiac devices in Medicare patients contrary to criteria established by the Centers for Medicare and Medicaid Services.

The department settled with nearly 500 hospitals for a total of $250 million in recoveries, including $216 million last year. Other major settlements involved violations of the Stark Law, which prohibits certain financial relationships between hospitals and doctors that could improperly influence patient referrals.

Step 2. Make major cases like these part of your compliance policy review. How do they impact compliance measures you have in place? What changes, if any, should be made to strengthen the policy and provide greater internal oversight going forward? Are there pending cases that could further alter the compliance landscape?

Step 3. If your review raises legal questions, or if your compliance team finds regulatory language unclear, seek clarification. It’s important that your team fully understands its responsibilities. This may require professional assistance, especially because the language used in government regulations is often difficult to understand.

Seeking clarification is especially beneficial if there’s a problem down the road. The fact you sought legal counsel and/or advice from the government demonstrates you take compliance seriously and tried to follow the law. This can be the difference between liability and a dismissal or defense judgment in an FCA suit.

Consider a case involving a large dialysis services and equipment provider. In a drawn-out, $83 million whistleblower action initiated by a former employee and a former contractor in 2005, the government charged the company incorporated a separate supply provider as a subsidiary to take advantage of a Medicare rule that allowed supply companies to bill at a higher rate provided they did not deliver the treatment themselves.

A lower court fined the company $83 million for violating the FCA, despite the fact that the company not only sought legal advice on the matter, but also ran the proposal by a Medicare official and openly disclosed its business structure to government regulators. Finally, in late 2013, a federal appeals court overturned a lower court’s ruling, basing its decision on the fact the company had consulted lawyers on the arrangement’s validity and the government had raised no concerns in subsequent inspections, or in response to disclosures.

The Sixth Circuit panel ruled the defendants “consistently sought clarification on the issue, followed industry practice in trying to sort through ambiguous regulations and were forthright with government officials over (the company’s) structure.” In other words, the court said, following the most profitable interpretation of a regulation is okay when it is a reasonable interpretation and the provider tried to ensure its actions were within the law.

Step 4. Remain especially vigilant for potential qui tam issues. If there’s a credible suggestion that there may be an internal compliance issue, whether it’s an anonymous email or an employee coming forward with something that might be a problem, investigate immediately. The importance of a quick response and thorough investigation cannot be overstated. Again, it demonstrates your company takes the regulation(s) seriously and you’re attempting to play by the rules

From an FCA perspective, this is more important than ever; under a new 60-day repayment rule issued by the Centers for Medicare & Medicaid Services (CMS) in February, a provider may now be held liable under the FCA if it receives a warning and fails to investigate and return an overpayment in a quick and reasonable manner.

Step 5. Reward whistleblowers. A reward program that encourages employees to voice concerns without fear of retribution creates a positive and proactive compliance atmosphere throughout the company. Make that an integral part of your employee handbook and new-hire orientation program. If an employee alerts you to something that turns out to be a serious compliance oversight, make sure their effort is properly recognized company-wide.

Step 6. Pay close attention to your exit interview policy. When an employee is leaving, always ask if he or she is aware of any compliance issues. This accomplishes two things: First, it demonstrates to regulators you’re taking your compliance obligation seriously; second, it reduces qui tam-related risks. If a former employee re-emerges as a whistle-blower, evidence the employee stated there were no problems can help undermine any FCA claim.

Stay Alert

Keep in mind fiscal 2015 was the fourth year in a row the DOJ exceeded $3.5 billion in cases under the False Claims Act (FCA), and that the government’s total recoveries since January 2009 now stand at a staggering $26.4 billion.

It’s imperative, therefore, that hospitals and other healthcare providers do their best to stay on top of regulatory issues and trends; review and update employee and FCA compliance policies; and seek clarification on policy language whenever questions arise.

Doing so may not keep the DOJ from showing up unexpectedly someday, but it will surely place you on the highest possible legal ground should the unthinkable occur.


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About Author

Rosemarie 'Mo' Blase

Attorney with Dowd Bennett, LLP, focusing on complex civil litigation and appeals. Along with a variety of other matters, she has helped defend clients in a number of False Claims Act cases in district courts and Courts of Appeal throughout the country.

Lisa S. Hoppenjans

Associate Lisa S. Hoppenjans' litigation practice includes complex civil and appellate litigation, as well as internal investigations. She has represented clients in a diverse array of matters, including actions under the False Claims Act, contract disputes, and employment discrimination and trade secrets claims.

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