False Claims Act.ppt by shenreng9qgrg132


									www.bakerdaniels.com                                                   www.bakerdaniels.com

                          False Claims Act

                       Healthcare and Life Sciences Practice

                        Indiana │Chicago │Washington, D.C. │ Beijing
• The False Claims Act (“FCA”) is the
  government’s primary litigation tool for
  combating fraud.

• The FCA empowers both the U.S. Attorney
  General and private persons to institute civil
  actions to enforce the Act against anyone that
  commits fraud by submitting false or fraudulent
  claims to the federal government. 31 U.S.C. §
  3730.                                             2
•   Passed in 1863 during the Civil
    War to address fraud in military
    procurement contracts.

•   Also known as “Lincoln’s Law” or
    Qui Tam Statute.

•   Has undergone two substantial
    amendments by Congress, the
    last one in 1986 in response to
    Department of Defense scandals.
                 Powerful Weapon
In fiscal year 2003, the federal government
recouped a record $2.2 billion in fraud
lawsuits and investigations.

   75% increase over FY 2002.

   $1.7 billion recovered for health care fraud

   $1.48 billion collected from qui tam suits

  Department of Justice, Nov. 10, 2003, Press Release.
Whistleblower Recoveries

Taxpayers Against Fraud Education Fund, 2004.
           2004 FCA Recoveries

• Total recovery for FY 2004: $667,782,529

• Realtor's share: $108,571,026

• Decline from FY 2003: -$1.5 billion or -70%

• But 415 qui tam cases were filed (326 were filed in 2003)

Taxpayers Against Fraud, 2005

Importance of DOJ Involvement

 Qui tam cases with   Qui tam cases w/out
   DOJ                  DOJ
 2000 $1.2 billion    2000 $1.8 million
 2001 $1.2 billion    2001 $125.7 million
 2002 $1.04 billion   2002 $26.1 million
 2003 $1.48 billion   2003 $87.01 million
 2004 $545 million    2004 $9.4 million 7
             FCA and Health Care
Percentage of cases involving the Department of Health
and Human Services (“DHHS”):

    1987                    12 percent
    1988-1992               15 percent
    1993                    30 percent
    1994                    36 percent
    1995                    34 percent
    1996                    56 percent
    1997                    54 percent
    1998                    61 percent
    2003                    52 percent

Taxpayers Against Fraud Education Fund, 2004.
              FCA and Health Care

• Total recoveries for qui tam by agency

     – Department of Defense: $1.59 billion

     – DHHS: $5.178 billion

Taxpayers Against Fraud Education Fund, 2004.   9
Benefits and Costs Federal Government
   Anti-Health Care Fraud Activities


              $2,500              $2,750




                                Benef its                Costs

                                         (in millions)
“Fighting Medicare Fraud”; Jack Meyer;                           10
June, 2003
           FCA and Health Care
     Prominent Statutory Provisions
                 PROHIBITED ACTS
1)   Person knowingly presents, or causes to be presented, to the
     U.S. Government a false or fraudulent claim for payment or
     approval (31 USC § 3729(a)(1));

2)   Person knowingly makes, uses, or causes to be made or used, a
     false record or statement to get a false or fraudulent claim paid or
     approved by the Government (31 USC § 3729(a)(2)); and

3)   Person conspires to defraud the Government by getting a false or
     fraudulent claim allowed or paid (31 USC § 3729(a)(3)).

                 Cause of Action
1)   A “claim” must be submitted to the Government for payment or
     approval; and

2)   The claim must be “false or fraudulent”; and

3)   The person must “know” the claim is false.

                            (31 USC § 3729(a)(1))                   12

• Some courts have required a 4th element –
  damages – to prove a violation of FCA.

• Majority of courts have held it is not necessary to
  prove damages under Sections 3729(a)(1) and

            Element #1 “Claim”
A “claim” includes:

  any request or demand, whether under a contract or
  otherwise, for money or property which is made to a
  contractor, grantee, or other recipient if the United States
  Government provides any portion of the money or
  property which is requested or demanded, or if the
  Government will reimburse such contractor, grantee, or
  other recipient for any portion of the money or property
  which is requested or demanded.

31 USC § 3729(c)                                            14
            Element #1 “Claim

• “Claim” includes any kind of document or other
  communication that reasonably could be expected to
  cause the government to make or approve a payment.

• “Claim” includes claims to third parties who are
  paid/reimbursed by the government.

            Element #1 “Claim”
• Person who “causes” a false claim to be presented, even
  if not the actual presenter of the claim, may be liable.

• Person actually presenting the claim need not know it is

• Example: Physician may be liable for false claims
  submitted to Medicare by a hospital even though the
  physician did not submit the claim.

  Element #2 “False/Fraudulent”
• Billing for services that were never delivered or rendered, either at
  all, or in the manner documented.

• Performing inappropriate or unnecessary medical procedures.

• Unbundling – Using multiple billing codes instead of the correct
  bundled code in order to increase payment.

• Bundling – Billing more for a panel of tests when a single test was
  asked for.

  Element #2 “False/Fraudulent”
• Double billing – Charging more than once for the same goods or

• Upcoding – Inflating bills by using diagnosis billing codes that
  suggest a more expensive illness or treatment.

• Billing for brand – Billing for brand-named drugs when generic drugs
  are actually provided.

  Element #2 “False/Fraudulent”

• Upcoding employee work: Billing at doctor rates for work that was
  actually conducted by a nurse or resident intern.

• Billing for research that was never conducted; falsifying research
  data that was paid for by the U.S. government.

  Element #2 “False/Fraudulent”

• Prescribing a medicine or recommending a type of treatment or
  diagnosis regimen in order to win kickbacks from hospitals, labs or
  pharmaceutical companies.

• Billing for unlicensed or unapproved drugs.

• Forging physician signatures when such signatures are required for
  reimbursement from Medicare or Medicaid.

         Element #3 “Knowing”

• “person knowingly makes, uses, or causes to be made
  or used, a false record or statement to get a false or
  fraudulent claim paid or approved by the Government”

• 31 USC § 3729(a)(2)

           Element #3 “Knowing”
“Knowing" and "knowingly" means a person

1)   has actual knowledge of the false information;

2)   acts in deliberate ignorance of the truth or falsity of the
     information; or

3)   acts in reckless disregard of the truth or falsity of the information.

31 USC § 3729(b)

Under § 3729(a)(1):
• Specific intent to defraud?
   – Not Necessary.

• Mere negligence in submission (e.g., typo)?
   – Not Actionable.

“False Certification” Theory - claim may be fraudulent
  even if the claim does not contain false information.

   – Government may allege that a violation of another federal
     statute, regulation, or contract serves as the basis for liability
     under the FCA.

   – For example, falsely certify that you are in compliance with Stark
     or Anti-Kickback Statute.

   False Certification Theory

        United States ex. rel. Pogue v. American
         Healthcorp., Inc., 914 F. Supp. 1507 (M.D. Tenn.

        United States ex rel. Goodstein v. McLaren
         Reg’l Med. Ctr., 202 F.Supp.2d 671, (E.D. Mich.

        U.S. ex rel Perales v. St. Margaret’s Hosp., 243
         F.Supp.2d 843 (C.D. Ill. 2003)

Conspiracy Claim – 31 USC § 3729(a)(3)

   “Person conspires to defraud the Government by
    getting a false or fraudulent claim allowed or paid.”

   In this context, failing to prevent the submission of a
    false claim may give rise to liability under the FCA if
    the defendant had a duty to prevent a fraud on the


   Civil penalties of $5,500 to $11,000 per claim,
    plus treble damages (i.e., 3 times the amount
    of the government’s damages).

   Exclusion from Medicare/Medicaid.

              Additional Risk

• Significant costs to defend against
  government investigation.

• Significant costs to defend against a lawsuit.

        • Example: Columbia-HCA fraud case
          went on for 13 years and just one
          side’s lawyers billed 85,000 hours.

Qui Tam/Whistleblower Provisions

 • The FCA contains qui tam, or whistleblower,
   provisions. Qui tam is a unique mechanism in the
   law that allows citizens to sue, on behalf of the
   government, in order to recover damages. 31 U.S.C.
   § 3730(b).

       –   Disgruntled employees

       –   Unhappy patients

       –   Estranged spouses
Qui Tam/Whistleblower Provisions

   A qui tam suit initially stays “under seal”
    (confidential) with the Court for at least 60 days
    during which the U.S. Department of Justice can
    investigate and decide whether to join the action.

   Whistleblowers can recover:

     – 15-25% of the settlement or judgment if DOJ participates;

     – 30% if DOJ declines to intervene.                       30

   Total FCA amount recovered by relators in
    cases declined by DOJ, to date: $362

   Total FCA amount recovered in cases that
    DOJ entered or otherwise pursued: $7.5

              Retaliatory Provision

    (h) Any employee who is discharged, demoted, suspended,
    threatened, harassed, or in any other manner discriminated
    against in the terms and conditions of employment by his or her
    employer because of lawful acts done by the employee on behalf
    of the employee or others in furtherance of an action under this
    section, including investigation for, initiation of, testimony for, or
    assistance in an action filed or to be filed under this section, shall
    be entitled to all relief necessary to make the employee whole. . . .

   (31 USC §3730(h))

Retaliatory Provision cont…


  (h) . . . Such relief shall include reinstatement with the same
  seniority status such employee would have had but for the
  discrimination, 2 times the amount of back pay, interest on the
  back pay, and compensation for any special damages
  sustained as a result of the discrimination, including litigation
  costs and reasonable attorneys’ fees. (31 USC §3730(h))

       Statute of Limitations

Must bring the civil action by

    (1) 6 years after the date the alleged FCA
        violation was committed, or

    (2) 3 years after the date when the material
        facts of the claim are known or reasonably
        should have been known "but in no event
        more than 10 years after the date on which
        the violations [was] committed.”

31 USC § 3731(b)                                     34
                 Indiana FCA

• In 2005, Indiana State legislature enacted Indiana’s own
  False Claims Act. (I.C. § 5-11-5.5-1 et seq.)

• Enacted in conjunction with the creation of the Office of
  the Inspector General.

• Very similar to the federal law.
Indiana FCA – I.C. § 5-11-5.5-2

 A person is liable for a civil penalty if he/she knowingly or

      (1) Presents a false claim to the state for payment or

      (2) Makes or uses a false record or statement to obtain
          payment or approval of a false claim from the state; etc.

Indiana FCA – Civil Penalty

•Violation of Indiana FCA (I.C. § 5-11-5.5-2):

    o Penalty of at least $5,000 and up to 3 times the amount
      of damages sustained by the State.

    o Plus liable for the costs of the civil litigation by the State
      to recover penalty and damages.*

* Penalty is reduced to 2X damages if you gave State all the
information you had within 30 days, fully cooperated with the
investigation, and did not know of investigation/action when you
reported yourself.
      Indiana FCA – Other details

   Attorney General & Inspector General have concurrent jurisdiction to
    investigate these claims. (I.C. § 5-11-5.5-3(a))

   Qui tam/Whistleblower: Complaint by individual is filed under seal
    and a copy must go to both AG & IG. (I.C. § 5-11-5.5-4(c))

   AG or IG may choose to intervene in the qui tam action or let
    individual go it alone.

 Indiana FCA – Other details
• Person who filed initial complaint gets:

    – 15-25% of recovered funds if AG or IG
      intervened in the action;

    – Not more than 10% if AG or IG intervened
      and the evidence in the action was primarily
      public record;

    – 25-30% if AG and IG do not intervene in the

I.C. § 5-11-5.5-6
       Indiana FCA – Retaliatory
• Employee who has been discharged, demoted, etc., by
  the employer because employee objected to actions at
  issue or helped with the false claims investigation is
  entitled to be made whole, including:

   – Reinstatement to previous position;

   – 2 times amount of back pay owed;

   – Interest on the back pay; and

   – Special damages (e.g., atty’s fees).
  I.C. § 5-11-5.5-8
      Other Indiana Statutes
I.C. § § 35-43-5-4.5 and 34-24-3-1:

   – A person who knowingly and with intent to defraud,
     presents a false, incomplete or misleading claim to an
     insurer can be held liable for civil damages caused by the

   – Under Indiana law, the insurer is entitled to recover an
     amount equal to three (3) times the amount of actual
     damages suffered as a result of the false or misleading
     actions, the costs of the litigation and attorney fees.

      Indiana Medicaid Fraud

   The Office of Medicaid Policy and Planning can assess a fine in
    the amount of 3 times the claim amount against a provider who
    submits, or causes to be submitted, any false or fraudulent
    claims for Medicaid services.

   405 IAC 1-1-6.

      Four Common FCA Cases
1)   “Mischarge” Case – services are not provided in manner set
     forth in claim.

2)   “Fraud-in-the Inducement” Case – kickbacks.

3)   “False Certification” Case – false certification of statutory or
     regulatory compliance.

4)   “Substandard Service” Case – failure to meet quality of care

                  Civil False Claims and Qui Tam Actions; John Boese, 2003 Supplement
             Emerging Issues

   Abuse of “under seal” time period.

   Discovery as fishing expedition.

   Extensive litigation on whether “government knowledge” of a
    false claim precludes liability – emerging consensus that
    government knowledge does not negate falsity.

   Abuse of process in health care market.

             High Profile Cases

HCA - $731,400,000

   December 2000, HCA the Healthcare Company (formerly
  known as Columbia HCA), the largest for-profit hospital
  chain in the United States, pled guilty to criminal conduct
  and agreed to pay $731,400,000 under the False Claims

   Charges included: billing for lab tests that were not
  medically necessary and not ordered by physicians, and
  “upcoding” medical problems in order to get higher
  reimbursements for more serious medical issues.               45
            High Profile Cases

TAP Pharmaceutical Products Inc. - $559,483,560

     In October 2001, TAP Pharmaceutical Products Inc.
     agreed to pay $875 million to resolve criminal charges and
     civil liabilities in connection with fraudulent drug pricing
     and marketing of Lupron, a drug sold for the treatment of
     prostate cancer.

    TAP gave doctors kickbacks by providing free samples
     with the knowledge that the physicians would bill Medicare
     and Medicaid $500 per dose.
        High Profile Cases

Schering-Plough - $292,969,482

    In July 2004, Schering-Plough, a major pharmaceutical
     manufacturer, agreed to plead guilty to fraud in the pricing
       of Claritin sold to Medicaid programs.

              High Profile Cases
Beverly Enterprises Inc. - $170,000,000

    In February 2000, Beverly Enterprises Inc., the nation’s largest
     nursing home chain, agreed to pay $175 million to resolve civil
     and criminal charges that it defrauded Medicare.

    The fraud allegations involved nursing home workers charging
     Medicare for time not spent on Medicare patients.

             High Profile Cases

Vencor, Inc./Ventas Inc. - $104,500,000

    In March 2001, Vencor Inc., one of the nation’s largest nursing
     home chains agreed to pay $104.5 million to resolve civil
     claims that Vencor knowingly submitted false claims for failure
     to deliver promised quality of care to nursing home patients
     due to inadequate staffing, improper care of bedsores, and
     failure to meet resident’s basic dietary needs.

     Not Just the Big Guys…

August 18, 2004

• Pennsylvania U.S. Attorney reached a $1.5 million
  settlement with an ophthalmologist and the former
  operators of two hospitals.

• There were allegations of improper financial arrangements
  and referral inducements in violation of the Stark and Anti-
  Kickback laws.

• The qui tam relator alleged that Mercy Community Hospital
  and Brandywine Hospital provided free space, equipment,
  personnel, supplies, excessive medical director fees, and
  other services to the ophthalmologist.                         50
        Not Just the Big Guys…

September 15, 2004
• The U.S. Government and a physician, who pursued litigation
  against a hospital and his fellow physicians settled case for a total of
  $2.5 million.

• The case involved Dr. Brooks, who was a physician on the medical
  staff at Pineville Community Hospital in Pineville, KY., and was a
  member of the hospital’s quality assurance committee. While
  carrying out his committee duties, Brooks discovered what he
  determined to be numerous billing improprieties by Pineville
  Community Hospital and two physicians. Rather than correcting the
  improprieties, the hospital rebuffed Brook’s efforts and subjected
  him to a variety of retaliatory abuses.
            Indiana Not Immune
October 29, 2003 – Chomer v. Logansport Mem’l Hosp.

• Plaintiff filed suit against Logansport Memorial Hospital
  (Hospital) and the Logan Emergency Physicians (LEP),
  asserting a retaliation claim under the False Claims Act (FCA)
  whistleblower provisions, 31 U.S.C. §3730(h).

• LEP removed plaintiff from the emergency room schedule at
  the Hospital after he informed patients that “it was
  inappropriate for them to come to the emergency room for
  colds and non-emergency medical conditions.” Plaintiff had
  filed a report about the alleged Medicare/Medicaid fraud and
  abuse before being terminated.

• Court refused to dismiss the physician’s FCA complaint. Case
  is apparently still pending.                                     52

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