In fiscal year 2014, the Department of Justice (DOJ) racked up nearly $5.7 billion in settlements and judgments resulting from civil cases of fraud against the government. Of that number, $2.3 billion was recovered from false claims investigations and lawsuits involving federal healthcare programs.
While the False Claims Act (FCA) has been in effect since the Civil War, alterations to the law in the 1940s had rendered it largely ineffective. That changed in 1986 with amendments to the FCA that encouraged more individuals to step forward and report fraud through qui tam lawsuits. Although the modern incarnation of the FCA has been in effect for nearly three decades, it was a 2009 amendment passed by Congress – the Fraud Enforcement and Recovery Act (FERA) – that greatly ramped up DOJ activities. In fact, more than half of all dollars recovered since 1986 have happened in the past five years.
Leading the way with the largest recoveries are the healthcare and financial industries. Brian Roark, a member at Bass, Berry & Sims PLC and head of the firm’s Healthcare Fraud Task Force, said the increased enforcement in the healthcare space keeps his team very busy.
“The FCA is the federal government’s primary civil enforcement tool. It’s how they recover money in fraud cases,” he said. “The government continues to increase the resources it directs toward healthcare fraud detection and enforcement,” he continued. “Therefore, hospitals and other healthcare providers are under more scrutiny than ever.”
Roark, who also teaches healthcare fraud as an adjunct professor at Vanderbilt Law School, added this attention isn’t surprising on two fronts – 1) healthcare spending represents a large portion of government outlay, and 2) the return on investment is noteworthy when comparing resources spent to recoveries gained.
“As what the federal government pays for healthcare continues to grow, in particular with the passage of the Affordable Care Act, the federal government has made clear that it will continue to make healthcare fraud enforcement a top priority,” Roark said of the first point. As for the second issue, he added, “The government estimates it returns over $7 for every $1 it invests in healthcare fraud enforcement.”
A significant part of the enforcement efforts comes from qui tam cases, which allow private individuals to bring civil claims on behalf of the government. Whistleblowers, also known as relators, have a financial stake in the recovery efforts. Changes made to the FCA in 2010 that make it easier to file qui tam cases and harder to get those cases dismissed have led to a spike in qui tam cases, with more than 700 filed last year alone.
“Since a private individual can bring these qui tam cases, it allows a current employee, former employee, competitor, business associate or a patient to file,” explained Roark. “Then, the federal government has to investigate the allegations and see if they think it merits moving forward … but, even if the government declines to take the case, the individual can maintain it on his or her own.” He added that on average, the government intervenes in approximately 20 percent of the qui tam cases that are filed.
Historically, Roark noted, if the government declined intervention, individuals often would drop the case at that point. Now, however, the stakes are so high that individuals and law firms, often working on contingency, are willing to proceed on their own. And, Roark continued, there is little downside for the individuals filing such actions unless the suit is proven to have been frivolous.
Roark said the whistleblower stands to collect up to 25-30 percent of the total recovery in these cases. A relator and his or her representing law firm look to be awarded $2.5-$3 million in a $10 million fraud allegation. Last year, Franklin-based Community Health Systems paid out nearly 10 times that amount to settle seven qui tam cases stemming from allegations regarding inpatient billings from 2005-2010.
“Our firm has seen a huge increase in FCA cases we work on compared to five or 10 years ago,” Roark said. He added, this increase has “led to more hospitals and healthcare providers having to respond to government investigations and having to defend these qui tam lawsuits.”
Even if innocent of willful fraud, the process is costly and time consuming. “You can’t be held civilly liable for a mistake or even negligence,” said Roark. “You have to show a company knowingly submitted false claims.” The three indicators of ‘knowing submission’ are: actual knowledge, deliberate ignorance, or reckless disregard.
However, he continued, there are certainly gray areas that need to be better delineated, especially regarding under what circumstances providers can be held liable under the FCA for failing to return known overpayments to the government. For example, Roark asked, is there an obligation to audit? If a provider doesn’t conduct audits and is accidentally … but wrongly … charging for services, could that be considered deliberate ignorance? If a hospital finds a biller has consistently coded a procedure incorrectly and doesn’t document set steps to re-train that employee, is that reckless disregard? The hope is the Centers for Medicare & Medicaid Services will better define what actions could be linked to liability in a final rule expected later this year.
The financial impact isn’t the only worry in such cases, though. Roark said he is also seeing heightened efforts by the government to hold defendants criminally liable in certain circumstances. “In late 2014, the DOJ announced that every qui tam lawsuit that is filed is going to be reviewed by the DOJ to see if a criminal investigation should be opened,” he said. “A trend is an increase in the number of parallel proceedings in the healthcare fraud space,” he added of the simultaneous review by both civil and criminal specialists within the Department of Justice.
“Due to the increase in government enforcement activities, providers need to undertake efforts to be prepared in the event they are investigated. They need to proactively respond to issues or problems as they arise,” Roark stated.
“If a provider receives a subpoena or civil investigative demand or is otherwise contacted by the government about a healthcare fraud matter, it’s important to engage counsel promptly to conduct whatever internal investigation is necessary to be able to respond to the government’s inquiry,” he continued. “Government investigations should never be taken lightly.”
Related Links:
CMS Medicare Fraud & Abuse Prevention, Detection & Reporting
