Health care whistleblower suits expected to increase.

  "There is no kind of dishonesty into which otherwise good people more
easily and frequently fall than that of defrauding the government."
--Benjamin Franklin

Recoveries under the False Claims Act (FCA) have increased the U.S. Treasury's coffers by over $15 billion since the 1986 amendments.

The act allows private individuals to sue on behalf of the government and recover a portion of the award. In 2005 alone, whistleblowers were awarded over $166 million. (1)

Not without controversy, whistleblower suits have become a multi-billion dollar industry and will continue to increase in number and size. U.S. Attorney General Alberto R. Gonzales has made the fight against health care fraud one of the Department of Justice's (DOJ) top priorities. (2)

The government views curtailing health care fraud as vital to saving lives, stopping physical harm, and replenishing an increasingly strained health care payment system. (3)

History

The FCA dates back to the times of the Civil War when dishonest suppliers were caught selling sawdust instead of gunpowder to the Union military. It is also known as the "Lincoln Act," "Informer's Act," or the "Qui Tam statute," short for qui tam pro domino rege quam pro se ipso in hac parte sequitur (from a Latin phrase meaning he who brings a case on behalf of our lord the King, as well as for himself).

Qui tam suits remained relatively dormant until the uncovering of massive defense fraud in the 1980s. In 1986, Senator Charles Grassley, R-Iowa, authored amendments enabling private citizens to bring suits. Of note is that the individual does not need to be harmed by the fraud.

The private person, or "relator," brings a lawsuit on behalf of the United States when the private person has information that the named defendant has knowingly submitted or caused the submission of false or fraudulent claims to the United States Government. (4)

So what's in it for the relator? If the suit is successful, he or she may receive anywhere from 15 to 30 percent of the government's total recovery. Relators have recovered over $1 billion since 1986. (4)

Filing a claim is not without risk however. While the FCA also prohibits an employer from harassing or retaliating against an employee for attempting to uncover or report fraud on the federal government, the majority of relators leave their employment after initiating a suit. Moreover, most whistleblowers find themselves unemployable in their respective industry.

The anti-retaliation provision in the act that provides for "all relief necessary to make the employee whole," including reinstatement, back pay, two times the amount of back pay, litigation costs and attorney fees. Awards are often viewed by the relator as a retirement funding tool or "forced buyout."

Scope of recovery

False Claims Act recoveries since the 1986 amendments now total over $15 billion and are increasing yearly. In the first quarter of this year, over $1 billion was recovered, with a majority of cases involving the health care sector.

Fourteen pharmaceutical fraud cases have settled and returned over $3.44 billion to the U.S. government. More than 150 other cases involving 500 drugs are currently under investigation. Recent cases include:

* A $704 million settlement with Serono, a Swiss biotech firm for the illegal sales and marketing of an anti-AIDS wasting drug

* A $124 million settlement with Tennessee-based King Pharmaceuticals for Medicaid rebate underpayments and overcharges. (5)

The Taxpayers Against Fraud Educational Fund predicts that at least one or two large pharmaceutical cases will be settled sometime in the next nine months. (6)

In addition, the introduction of Medicare Part D will most likely spur further qui tam actions.

In addition to pharmaceuticals, health care providers and hospitals have been prime sources of recovery. Tenet Healthcare is involved in Medicare "outlier" payments investigation. Tenet is known to have reserved over a billion dollars in expectation of a settlement in this case.

Dialysis centers are in the headlines, too. One large case, against Gambro, has already been settled for $325 million. Investigations against Fresenius, DaVita, Renal Care Group, and Quest Diagnostics continue. (7)

Anatomy of a qui tam suit

The FCA has a very detailed process for the filing and pursuit of these claims. (8) The qui tam complaint must be filed "in camera," which means that all records relating to the case are kept on a secret docket by the clerk of the court.

Copies of the complaint are given only to the local United States Attorney, and to the assigned judge of the U.S. District Court. The complaint and supporting documents remain under seal for a period of at least 60 days and are extended at six-month intervals.

It is important to note that the employer will have no knowledge of the suit at this time. With multiple six-month renewals the time interval is often extended multiple years.

The FCA requires the DOJ to diligently investigate the allegations of violations in the filed complaint. The investigation is performed by multiple law enforcement agencies. Investigative techniques include subpoenas for documents or electronic records, witness interviews, compelled oral testimony from individuals or organizations and consultations with experts. If there is a parallel criminal investigation, search warrants and other criminal investigation tools may be used to obtain evidence.

At the conclusion of the investigation, the DOJ must either intervene, decline to intervene, move to dismiss the complaint or settle with the defendant. If the choice is to intervene in one or more counts of the pending qui tam action, the government then participates as a plaintiff.

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Less than 25 percent of filed qui tam actions result in an intervention on any count by the DOJ. If the government declines to intervene, the relator may prosecute the action on behalf of the United States, but the United States is not a party to the proceedings apart from its right to any recovery. This option is frequently used by relators and their attorneys.

However if the government declines to intervene, the result is often dismissal of the qui tam action early on. In addition, the government may move to dismiss the relator's complaint, either because there is no case or because the case conflicts with significant statutory or policy interests of the United States.

The final option is for the government to enter into settlement negotiations with the defendant prior to the intervention decision.

Intervention by the DOJ in a qui tam case is not undertaken lightly due to the extensive amount of resources needed to prosecute these complex health care cases. The decision by the DOJ to intervene in a case does not necessarily mean that it will endorse, adopt or agree with every factual allegation or legal conclusion in the relator's complaint.

The number of cases the DOJ joins is a function of the strength of the cases filed by relators and the investigative results in those cases and has been in the range of 20 to 25 percent.

Few cases declined by the government produced significant recoveries. The government's return on investment is estimated to be $13 for every $1 invested in False Claims Act health care investigations and prosecutions.

Trends

The DOJ has clearly placed qui tam litigation as a top priority in combating health care fraud and abuse.

In response to a series of questions from Grassley, Paul McNulty, the acting Deputy Attorney General clarified the government's priorities and directions in qui tam litigation. (9)

The DOJ has increased staffing dedicated full-time to investigating and litigating False Claims Act cases. In addition, funding has been allocated to increase training and coordination between Washington and the U.S. Attorney offices with the establishment of databases for investigative and litigative functions.

McNulty said, "I can assure you that the department will continue to develop these cases, work proactively with our law enforcement partners to foreclose future fraud schemes, and diligently investigate allegations brought to us by qui tam relators as we proceed together in the fight against health care fraud." (9)

Furthermore, the amounts of recovery have not gone unnoticed by the states and local governments. The trend is for state and local governments to enact their own FCA modeled after the federal statute. To date, 13 states have legislation similar to the federal False Claims Act. Several states have introduced FCA legislation in their 2006 sessions.

So where does this leave the health care executive?

Prevention is clearly the key by complying with federal and state laws and regulations. A well-structured compliance program that is routinely audited and reviewed serves as the best defense.

Health care organizations must act on anonymous reporting in a non-retaliatory manner to promote a culture of compliance. In spite of this, employees with knowledge of fraud will continue to file suits in hope of the large rewards.

Christopher Spevak, MD, MPH, MBA, JD, is the physician director of government relations for the MidAtlantic Permanente Medical Group and a clinical associate professor of anesthesia at Georgetown University Medical Center. He may reached at 202-210-1989 or [e-mail].

Disclaimer

This article contains the advice, opinions, statements and views of the author and does not necessarily represent the advice, opinions, statements or views of Georgetown University Medical Center, the Mid-Atlantic Permanente Medical Group, PA or its physicians. The content of this article is provided solely for informational purposes: it is not intended as and does not constitute legal advice. The information contained herein should not be relied upon or used as a substitute for consultation with legal, accounting, tax, career and/or other professional advisors.

References

1. False Claims Act Cases: Government Intervention in Qui Tam (Whistleblower) Suits. Accessed March 7, 2006. http://www.usdoj.gov/usao/pae/Documents/fcaprocess2.pdf.

2. Information on False Claims Act Litigation: Briefing for Congressional Requesters December 15, 2005, GAO-06-320R, Accessed March 7, 2006 http://www.gao.gov/new.items/d06320r.pdf.

3. Health and Human Services Office of the Inspector General Website. Accessed March 7, 2006. http://www.oig.hhs.gov/

4. U.S. Department of Justice, Office of Justice Programs Bureau of Justice Statistics, Accessed March 7, 2006. http://www.ojp.usdoj.gov/bjs/

5. U.S. Department of Justice Press Room. Accessed March 7, 2006. http://www.usdoj.gov/03press/index.html

6. Project on Government Oversight. Accessed March 7, 2006. http://www.pogo.org/.

7. Taxpayers Against Fraud. Accessed March 7, 2006. http://www.taf.org/.

8. The National Health Care Anti-Fraud Association. Accessed March 7, 2006. http://www.nhcaa.org/home/index.cfm.

9. Responses to Senator Charles Grassley Questions for Paul McNulty. Accessed March 7, 2006. http://www.taf.org/mcnultyresponsetograssley.pdf.

Christopher Spevak, MD, MPH, JD

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