Preparing For The Wave Of Whistleblower Lawsuits

Introduction
The stage is set. With the increase in federal funding for health care fraud enforcement over the past three years and the heightened awareness of the "whistleblower" or qui tam provisions of the False Claims Act, 1999 may well be the year when a whistleblower suit hits home. Understanding both the unique features of the False Claims Act (FCA) - and how it is being used by regulators, entrepreneurial attorneys and others - can help you prepare for, respond to (and perhaps even avoid) such claims.

The False Claims Act
The Federal False Claims Act ("FCA") has emerged as the weapon of choice in the government's war against fraud in the health care industry. A provider or payor may violate the FCA if it:

• knowingly presents to the U.S. government a false or fraudulent claim for payment;
• knowingly makes a false statement to obtain payment of a false or fraudulent claim;
• conspires to defraud the government by inducing the payment of a false or fraudulent claim; or
• knowingly uses a false record or makes a false statement to conceal an obligation to pay or transmit money to the government.

The FCA allows for the recovery of treble damages, attorneys' fees, plus a civil penalty of $5,000 to $10,000 per claim. Consequently, liability under the FCA can be astronomical when based on "false or fraudulent" claims submitted repeatedly over the course of months or even years. An FCA violation may also be grounds for exclusion from the Medicare and Medicaid programs.

Whistleblower Lawsuits
A unique aspect of the FCA is its qui tam or whistleblower provision. This provision permits private individuals to initiate an FCA lawsuit on behalf of the government. The FCA whistleblower - or "relator,"as he or she is called - is then entitled to a percentage of any recovery. The relator's percentage may vary from 10% to 30% depending upon his or her level of involvement.

Although almost anyone can be a whistleblower, relators usually fall into one of three categories: a disgruntled current or former employee; a competitor; or a "professional" (a professional whistleblower would be a company that combs through Medicare claims data for atypical billing patterns, such as pneumonia upcoding).

If an FCA action is initiated by a relator, it will be filed under seal. In other words, you may be a defendant in a qui tam lawsuit and not have any way of knowing about it. This allows the government, in theory, to have an opportunity to review the allegations and investigate the claims before making a decision whether to take over the case. In fact, an FCA case may be pending and an investigation pursued for months (or even years) before the complaint is unsealed.

Health care organizations should be vigilant for signs indicating that they may be under investigation. A subpoena or request for records could indicate that a qui tam case has been filed. Once an organization is aware of an investigation, it can start gathering information to understand the nature and extent of any exposure and begin preparing its defense. Davis Wright Tremaine's booklet, "A Health Care Provider's Guide to Subpoenas, Audits and Search Warrants" identifies several issues to consider when an organization is the subject of a government investigation.

A New Cottage Industry
The risks of a FCA whistleblower lawsuit are being exacerbated by advocacy groups promoting the use of the Act. Over the past few years, several publications, websites and associations have been established that are devoted to assisting actual or potential whistleblowers.

Health care industry employees may receive flyers or e-mails urging them to consider whether they have any basis for asserting a qui tam complaint on behalf of the United States government. It appears that the prospect of multimillion-dollar recoveries under the FCA has spawned a new cottage industry devoted to qui tam actions.

Adding Insult To Injury: Wrongful Discharge Cases With False Claims Act Allegations
To make matters worse, attorneys who represent employees in discrimination, harassment and other workplace claims are adding the FCA weapon to their arsenal. Former and current employees are using the threat of FCA claims to gain leverage in negotiations, and adding such claims to their "wrongful discharge" lawsuits. The whistleblower protection provisions of the FCA are another trap for the unwary. The FCA specifically prohibits taking adverse action against an employee based upon his or her whistleblower status or activities.

Once the false claims lion is out of the cage, it is difficult to tame: qui tam actions are not subject to the same private settlement rules as typical employee claims. If your organization is forced to defend one of these hybrid beasts, you will need attorneys with experience in both employment law as well as health care matters.

Compliance Programs: A Partial Solution Going Forward
If your organization is named as a defendant in a case currently under seal, then a compliance program will not eliminate the lawsuit. By going forward, however, an organization's risk under the FCA may be reduced by implementing a compliance program, and it may even allow you to negotiate a lower settlement amount with the government.

If one successfully incorporates appropriate training and monitoring components, a compliance program should:

• decrease the number and frequency of inaccurate claims;
• increase the organization's odds of detecting errors before the government does;
• encourage its employees to address problems internally, rather than seeking outside assistance or intervention.

Summary
The qui tam provisions of the FCA have generated an increasing number of whistleblower claims against health care entities. Both in responding to an FCA claim and in taking steps to reduce one's exposure, organizations need to consider a range of employment, regulatory and litigation issues.