False claim allegations in the healthcare arena are on the rise due to rigorous enforcement, a more generous federal budget and incentives for whistleblowers. "False claims have become a hot button issue," says David Pivnick, JD, an attorney in the healthcare practice at McGuireWoods. "In the last few years, there's been a significant increase in false claims cases," he says. The following three concepts will help hospitals and health systems prevent or address false claims litigation.
1. Basics of the False Claims Act and the increase in enforcement and litigation. Under the FCA, individuals with knowledge of a false claim — also called relators, or less formally, whistleblowers — may file an action on behalf of the government, called a qui tam lawsuit. Notably, the Government can also file a False Claims action on its own behalf. Common examples of false claims include billing for services not provided, upcoding and billing for medically unnecessary services.
Liability under the FCA is extensive, with penalties currently ranging from $5,500 to $11,000 per claim, along with treble damages for all amounts falsely submitted. If the government intervenes, relators receive a 15-25 percent share of the recovery if the lawsuit is successful. If the government does not intervene, the relator may proceed with the suit on the government's behalf and recover 25-30 percent of the proceeds of an action. Attorneys’ fees are also recoverable under the False Claims Act. These incentives, along with the FCA's protection for whistleblowers against retaliation from current or former employers, can make suits attractive to healthcare employees and others.
The FCA has been augmented in the past two years through the 2009 Fraud Enforcement and Recovery Act and, of course, the 2010 Patient Protection and Affordable Care Act. Rigorous FCA enforcement is becoming more common as healthcare fraud continues to receive more attention and funding. The Department of Justice bolstered its enforcement efforts when it requested a $234.6 million increase in its fiscal year 2011 budget for various efforts, including aggressive pursuit of financial fraud. Specifically, the increase includes a $60.2 million increase for investigating and litigating healthcare fraud. These legislative amendments and budgetary increases correspond with an increase in FCA filings and litigation.
2. Internal investigations and awareness are critical. False claims cases can be very expensive and discovery-intensive, according to Mr. Pivnick. "The key is being aware. Make sure you have internal investigative policies in place and foster an atmosphere that allows people to come forward with information as necessary," says Mr. Pivnick. By making an effort to educate employees and staff on the FCA and maintain awareness, hospitals need to assure employees they will not face retaliation if they come forward with information of improper or questionable conduct.
Hospitals should also identify the team to which employees can report and make this information known within the hospital. Confusion over the line of communication may result in information going unreported. "It doesn't help to go to a direct supervisor if they don't do anything," says Mr. Pivnick. "The investigative team could be someone who is associated with compliance, a hospital executive or outside counsel." Once the hospital is alerted of potential improper conduct, it should launch an internal investigation. Outside counsel is a valuable alternative since it ensures an independent, objective third party between employer and employee.
During this time, hospitals must issue a hold notice and be careful to maintain and preserve all documents — including e-mails. Such rigorous discovery ensures a thorough investigation and complete understanding of documentary evidence.
Interviews as part of internal investigations also require certain considerations, such as how many people sit in on them. "Having two people attend interviews is often most effective," says Mr. Pivnick. One individual will conduct the interview while the other takes notes, allowing the conductor to focus on body language, follow-up questions and the interviewee's conduct.
During investigations, it is also crucial for employees to understand that the attorney represents the hospital rather than the individual employee. This point should be clarified and emphasized so employees understand the attorney-client privilege belongs to the company — not the employee. Witnesses may make requests such as, "Please don't repeat this," or "Don't attribute this to me, but…" since they are discussing workplace matters related to their colleagues. However, according to Upjohn Company v. United States, the U.S. Supreme Court held, in part, that attorney-client privilege is between the attorney and company even when the attorney is communicating with employees of said company.
3. Any filing of a false claims action must be acted upon immediately. "It probably goes without saying, but false claims allegations are not something to be taken lightly," says Mr. Pivnick. "There is substantial expense in terms of both litigation and potential liability." Hospitals should retain seasoned counsel who know the law and how it applies. Hospitals should also conduct internal investigations immediately once an employee comes forward with information. "You don't want to be defending a false claims action from behind," says Mr. Pivnick.
Regular training sessions can clarify the line of communication for hospital staff, ensuring they know which officer to report to and helping them feel comfortable doing so. "Using training and educational efforts, people with questions will know that they have somewhere to go for advice and guidance," says Mr. Pivnick. Hospitals should not be mindful of the FCA only when someone comes forward with potential improper conduct — organizations should routinely train employees, define the internal investigation process and remain aware of the substantial risk associated with false claims allegations and of the concurrent need to be steadfastly compliant with the relevant rules and regulations.
Learn more about McGuireWoods.
Read more about the False Claims Act.
-5 Recent Settlements and Investigations Involving Hospitals
-20 Largest False Claims Cases of 2010
1. Basics of the False Claims Act and the increase in enforcement and litigation. Under the FCA, individuals with knowledge of a false claim — also called relators, or less formally, whistleblowers — may file an action on behalf of the government, called a qui tam lawsuit. Notably, the Government can also file a False Claims action on its own behalf. Common examples of false claims include billing for services not provided, upcoding and billing for medically unnecessary services.
Liability under the FCA is extensive, with penalties currently ranging from $5,500 to $11,000 per claim, along with treble damages for all amounts falsely submitted. If the government intervenes, relators receive a 15-25 percent share of the recovery if the lawsuit is successful. If the government does not intervene, the relator may proceed with the suit on the government's behalf and recover 25-30 percent of the proceeds of an action. Attorneys’ fees are also recoverable under the False Claims Act. These incentives, along with the FCA's protection for whistleblowers against retaliation from current or former employers, can make suits attractive to healthcare employees and others.
The FCA has been augmented in the past two years through the 2009 Fraud Enforcement and Recovery Act and, of course, the 2010 Patient Protection and Affordable Care Act. Rigorous FCA enforcement is becoming more common as healthcare fraud continues to receive more attention and funding. The Department of Justice bolstered its enforcement efforts when it requested a $234.6 million increase in its fiscal year 2011 budget for various efforts, including aggressive pursuit of financial fraud. Specifically, the increase includes a $60.2 million increase for investigating and litigating healthcare fraud. These legislative amendments and budgetary increases correspond with an increase in FCA filings and litigation.
2. Internal investigations and awareness are critical. False claims cases can be very expensive and discovery-intensive, according to Mr. Pivnick. "The key is being aware. Make sure you have internal investigative policies in place and foster an atmosphere that allows people to come forward with information as necessary," says Mr. Pivnick. By making an effort to educate employees and staff on the FCA and maintain awareness, hospitals need to assure employees they will not face retaliation if they come forward with information of improper or questionable conduct.
Hospitals should also identify the team to which employees can report and make this information known within the hospital. Confusion over the line of communication may result in information going unreported. "It doesn't help to go to a direct supervisor if they don't do anything," says Mr. Pivnick. "The investigative team could be someone who is associated with compliance, a hospital executive or outside counsel." Once the hospital is alerted of potential improper conduct, it should launch an internal investigation. Outside counsel is a valuable alternative since it ensures an independent, objective third party between employer and employee.
During this time, hospitals must issue a hold notice and be careful to maintain and preserve all documents — including e-mails. Such rigorous discovery ensures a thorough investigation and complete understanding of documentary evidence.
Interviews as part of internal investigations also require certain considerations, such as how many people sit in on them. "Having two people attend interviews is often most effective," says Mr. Pivnick. One individual will conduct the interview while the other takes notes, allowing the conductor to focus on body language, follow-up questions and the interviewee's conduct.
During investigations, it is also crucial for employees to understand that the attorney represents the hospital rather than the individual employee. This point should be clarified and emphasized so employees understand the attorney-client privilege belongs to the company — not the employee. Witnesses may make requests such as, "Please don't repeat this," or "Don't attribute this to me, but…" since they are discussing workplace matters related to their colleagues. However, according to Upjohn Company v. United States, the U.S. Supreme Court held, in part, that attorney-client privilege is between the attorney and company even when the attorney is communicating with employees of said company.
3. Any filing of a false claims action must be acted upon immediately. "It probably goes without saying, but false claims allegations are not something to be taken lightly," says Mr. Pivnick. "There is substantial expense in terms of both litigation and potential liability." Hospitals should retain seasoned counsel who know the law and how it applies. Hospitals should also conduct internal investigations immediately once an employee comes forward with information. "You don't want to be defending a false claims action from behind," says Mr. Pivnick.
Regular training sessions can clarify the line of communication for hospital staff, ensuring they know which officer to report to and helping them feel comfortable doing so. "Using training and educational efforts, people with questions will know that they have somewhere to go for advice and guidance," says Mr. Pivnick. Hospitals should not be mindful of the FCA only when someone comes forward with potential improper conduct — organizations should routinely train employees, define the internal investigation process and remain aware of the substantial risk associated with false claims allegations and of the concurrent need to be steadfastly compliant with the relevant rules and regulations.
Learn more about McGuireWoods.
Read more about the False Claims Act.
-5 Recent Settlements and Investigations Involving Hospitals
-20 Largest False Claims Cases of 2010