The United States Department of Justice announced in November 2014 that it had recovered a record $5.69 billion under the federal False Claims Act ("FCA") in fiscal year 2014. The Department of Justice ("DOJ") also pointed out that since January 2009, it has recovered more than $22.75 billion from government contractors and program participants accused of fraud under the FCA. Because of the peculiar structure of the FCA, whistleblowers – almost all of whom are employees of the companies found to have engaged in fraud against the government – received a substantial portion of the total recoveries. Recoveries against businesses participating in the Medicaid, Medicare and TRICARE programs totaled $2.3 billion in FY 2014. This was the fifth consecutive year in which the government recovered more than $2 billion against healthcare companies under the FCA.
The DOJ announcement also pointed out that in fiscal years 2013 and 2014, more than 700 lawsuits were filed by whistleblowers on behalf of the United States government against businesses suspected of fraud. These cases, known as qui tam actions, allow the whistleblower to share between 15% and 30% of the government's recovery, depending on the level of participation by the government in the lawsuit and the value of the whistleblower's contribution to the case.
Background of the False Claims Act
The FCA was enacted during the Civil War era in response to unscrupulous persons who sold shoddy goods or worthless food to the Union Army. Under it, a person who submits a false or fraudulent claim for payment by the government is subject to triple damages and a penalty from $5,500-$11,000 per claim. To create an incentive for citizens who know about the submission of fraudulent claims to the government to report the fraud, the statute provides that any person may sue the defrauding party in the name of the United States. The whistleblower – known as a "relator" – must file the suit under seal in the appropriate United States district court. The great majority of these lawsuits are brought by employees. These employees/whistleblowers are protected from retaliation by their employers because of lawful actions taken to prevent violations of the FCA or for having filed or participated in an FCA lawsuit.
A main target of FCA litigation has been healthcare/long term care providers and most theories of recovery involve allegations of Medicare/Medicaid fraud. Common examples include claims of billing for procedures not done, medications not administered or physicians who never actually saw the patient. Incorrect billing codes can even result in qui tam liability. In one case, a psychiatric medical practice group was successfully sued for providing psycho-therapy to elderly inpatients unlikely to receive any benefit from those services.
The rise of qui tam actions in healthcare
The explosion of qui tam litigation in the healthcare area has resulted in a proliferation of new theories advanced by qui tam litigators to bring their facts within the lucrative FCA. Over the past 10 years, one theory of attack by whistleblowers against providers of senior living care has been that the care at a facility was so poor that it was "worthless"; as a consequence, the claim submitted to the government for that care was a false claim under the statute. Some courts have been reluctant to accept such a theory, holding that whether the service provided met program guidelines or fell short of a standard of care was a matter for regulatory action by the Department of Health and Human Services or state law medical malpractice litigation.
One recent decision from the United States Court of Appeals for the Seventh Circuit in Chicago held that for the "worthless services" theory to be valid, the service must be performed in such a shoddy or ineffective manner that it amounted to no service at all.
Other courts, however, have been more receptive. Given egregious enough facts, they have found that defendants charged the government for something so substandard that it equated to no value.
What can healthcare employers do?
Significant fines, criminal and civil liability, and the threat of irreversible damage to reputation are serious business. The legal theories to support a false claims action continue to expand, as do the financial incentives. In response, employers should delineate and communicate ethical expectations and affirmatively create an environment in which employees will bring complaints of non-compliance to their employer, rather than to the government or a plaintiff's lawyer. To this end, employers should create a culture of compliance and ethical conduct.
This commitment requires:
- State of the art policies;
- Effective avenues for internal complaints;
- Training at all levels of the organization; and
- An effective system of investigating incidents and complaints
These steps can reduce potential exposure to retaliation claims while helping to ensure that the provider will not be compromised by an existing or former employee who has made allegations covered by state or federal whistleblowing statutes. The commitment to a robust culture of compliance must include real "buy in" from leadership. A supervisor's behavior can exert a profound influence on an employee's decision. Thus, the full board of directors/trustees should have knowledge and some oversight of key risk areas, including ensuring that senior management is held accountable to the same standards as other employees.
Employees must know what is "wrong" and employers must unequivocally communicate how employees are expected to behave. The code of ethics should be tailored to specifically reflect the medical provider's risk assessment. For example, the code should outline expectations regarding medical charting and billing and further explain the employer's expectations regarding mandatory reporting of observed misconduct.
The code must prominently advise that employees who complain of unlawful conduct under the code of ethics or corporate policy will not be retaliated against by supervisors or coworkers. Employers should consider amending the company's current antidiscrimination, harassment, payroll/timekeeping and health and safety policies to include anti-retaliation provisions that encourage employees to come forward with complaints.
Employers must provide employees with confidential avenues to lodge complaints; a confidential hotline is one of the best ways to encourage reporting. Indeed, in 2013, 60% of internal complaints of fraud were made anonymously. (The 2014 Ethics and Compliance Hotline Benchmark Report, NAVEX Global (March 2014), at 12.) The rate of discovering fraud by "accident" doubles if the employer has no confidential hotline for reporting (See Report to the Nations on Occupational Fraud and Abuse, 2014 Global Fraud Study, Association of Certified Fraud Examiners (2014), at 22.)
Ethics, reporting and anti-retaliation policies are only effective if communicated and understood, a goal best accomplished through training. Training educates employees on what constitutes unethical or unlawful conduct and how to report it. Part of establishing an effective compliance program is making certain that the individuals in high-level management are knowledgeable about ethics and compliance and retaliation prevention. Every executive, board member and high-level manager should be trained, creating the right "tone at top." The government is less likely to pursue penalties against the organization when there is evidence of a culture of compliance.
Training must acknowledge the key role played by first-tier supervisors and mid-level management in ensuring compliance. Managers have a heightened duty to recognize and respond to any retaliatory actions toward the internal whistleblower. Compliance policies must train supervisors to effectively respond and, in many cases, elevate any complaints or incidents of unlawful or fraudulent conduct, including allegations of retaliation, even if the complaining employee asks that nothing be done with his or her complaint. Each complaint of fraud or retaliation needs to be objectively and aggressively investigated. As Jack and Suzy Welch recount, "the only way to deal with a whistleblower's accusations-again every single time and often against your own instincts-with a hyper bias toward believing the informant is on to something big..." (Reuters, May 1, 2012). Whether it is a report about dishonest behavior, retaliation, or sub-standard care, the provider should conduct a full investigation of any complaint, either through trained, in-house personnel or independent, outside investigators. To the extent possible, both the peer review privilege and attorney client privilege should be protected.
Finally, providers—particularly those with multiple patient care facilities and operations—should centralize the reporting function so that a central repository exists to monitor and audit compliance with the reporting and investigation policies and procedures. This important internal control both detects and prevents misconduct from occurring.