Although General Lee Surrendered at Appomattox, the False Claims Act Did Not

Posted on: November 27, 2007  |   Author: Sean
Filed Under: Distinguished Speaker Series, Other   |   Leave a Comment

Having just completed a cite check on an article involving the False Claims Act (FCA), I thought I had a substantive understanding of the FCA and its relation to the health care industry. Nevertheless, Mr. Luce’s presentation greatly expanded what I later came to realize was just the tip of the FCA iceberg.

The FCA is the chief civil enforcement tool for the federal government. Although it was originally intended for defense contracts during the Civil War, it has now expanded into an array of areas involving government contracting. To be in violation of the FCA, a contractor must make a claim for payment that is false or fraudulent. The requisite standard is akin to gross negligence, where the perpetrator has to “knowingly” submit the false claim for payment. Of course, this standard is at odds with such programs as Medicare, which itself allows health care entities to submit inaccurate claims. Additionally, many inaccurate Medicare claims, although deliberate, are not intended to be false or fraudulent. Unfortunately, the simple Civil War contracts in existence during the creation of the FCA, did not involve the complexities that are now common for the administrative state, such as Medicare contracts. As a result, contractors are able to easily violate the FCA, without having any intention of being false or fraudulent.

What becomes even more alarming is the stiff penalties that are associated with violating the FCA. The FCA is enforceable both civilly and criminally. As Mr. Luce illustrated, the FCA has horrible consequences for an administrator, executive, or doctor, even if they never intended to be false or fraudulent. Couple this with the fact that FCA actions can be initiated by not only government entities but also anonymous individual relators, and one quickly realizes a situation where competitors are spearheading FCA actions against one another. Of course there are limitations to a relator’s ability to file – if the FCA action has already been filed by another party, if the basis of the FCA action is already public information, if the statute of limitations has run – but these restrictions have yet to greatly impede either relators or FCA actions. Rather as Mr. Luce pointed out, the FCA actually appears to be the preferred weapon of choice for the federal government, especially in the field of health care. In 2006, 80% of FCA recoveries were from the health care industry. Additionally, the FCA appears to be replacing medical malpractice cases as states place damage caps on malpractice recovery. And given the perception, which some feel is a misperception, that FCA actions stop people from defrauding the government, it appears that FCA claims will only continue to grow.

Unfortunately, the popularity of FCA claims comes at a cost. For instance, FCA claims deter proactive hospital administrators and physicians, because under the FCA they can be subject to both criminal and civil sanctions for submitting an inaccurate claim, even if they never have the intention of being false or fraudulent. Of course, such sanctions will have a diminishing effect on the quality of care Americans can expect to see in the future. Although Mr. Luce’s synopsis of recent cases, shows that it might be harder for private relators to succeed on their FCA claims, this still does not suggest a decrease in FCA claims or the government’s involvement. Overall, it appears that the FCA has grown beyond its original intention, causing a new source of revenue for plaintiff attorneys and further detriment to the quality of care Americans’ can expect in the health field. Overall, it appears that the FCA is in need of some major post-Civil War amending, because although the war ended government contracting had just begun.

Response to Greg Luce: Potential Amendments and Defenses to the FCA

Posted on: November 14, 2007  |   Author: Jonathan
Filed Under: Distinguished Speaker Series, Other   |   Leave a Comment

Today, 80% of FCA recoveries are from the health care industry. The FCA is becoming a strategy to be used in place of negligence. A major point that Mr. Luce had was that if the government is allowed to use the FCA as a regulatory tool in litigation and someone can sue for quality of care concerns, how will this affect the health care industry in general? Will this restrict who practices or wants to practice medicine, how will a hospital react if the government imposes criminal liability? Quality of care is always a difficult topic as there is usually never just one entity in total charge. Responsibility is going to be continually shifted between medical actors. Mr. Luce says that the use of the FCA may be viewed as a compliance tool for the government, but in all reality, it is used just for the money.

Several amendments have been suggested to reinforce the False Claims Act. These amendments relate to the public disclosure bar, allowing the government to decide whether a relator is a public source or not. Another amendment would extent the statute of limitations to ten years. I think that most of these suggestions are simply ways for the government to enhance the impetus behind the FCA and not ways of regulating and ensuring compliance and quality in the health care industry. In other words, they serve no real purpose.

On account of this presentation, my interest in the FCA grew and I decided to do a little research on possible defenses to a FCA action. Under the civil False Claims Act the defense counsel has a two pronged attack against the materiality of an overpayment claim. First, the defense should challenge the materiality as to the purported false claim for payment as to the reimbursement decisions of the federally-funded entity. Secondly, the defense should challenge the materiality of the causal link between the purported false claim and any government showing of damages. The defense can argue legally claiming insufficient evidence. The “purposefully” facet of the FCA can be argued against because it is harder for the government to prove that a health care provider purposefully committed fraud. Defense can create obstacles to discovery including attorney client privilege, work product, etc. The defenses described by Mr. Luce are also important, the fact that relators must be original sources and the public disclosure bar.

Greg Luce: False Claims Enforcement Against The HealthCare Industry

Posted on: November 14, 2007  |   Author: Greg
Filed Under: Distinguished Speaker Series, Other   |   Leave a Comment

On October 9 2007, Gregory M. Luce spoke about the Federal False Claims Act (“FCA”) and the evolution of the FCA in the health care field. Mr. Luce’s extensive background as a health care litigator (from the big-firm defense side) allowed a glimpse into what he deemed to be a growing problem with the FCA. Despite Mr. Luce’s self-proclaimed stereotype that “big-firm litigators” want to dismiss cases on technicalities and hesitate to try cases on the merits, Mr. Luce spoke about a merit-based flaw he has seen develop in FCA cases.

After a brief summary of the FCA’s background and requirements, Mr. Luce spoke about what he deemed to be a “corrupted evolution” of the use of the FCA. At its core, the FCA attempts to prohibit people from defrauding the government. The FCA is essentially a law stopping fraud in which someone lied (or misrepresented a material fact) about recovery supposedly owed to them. Mr. Luce contended, however, that the core intent of the FCA does not parallel the basic use of the FCA in today’s health law field. Mr. Luce contributes this “corrupted evolution” to the fact that the real money is not in uncovering “real fraud” but in finding a “regulatory disparity” in an institution or in finding a case where the government is paying more than it needs to pay, and then alleging that those circumstances are tantamount to fraud.

Mr. Luce noted that the two most frequent types of scenarios where the Department of Justice and relators have successfully alleged FCA theories absent traditional elements of fraud were in (1) quality of care cases and (2) personal individual liability cases.

Regarding the quality of care cases, Mr. Luce found it disturbing that someone can be held civilly liable or criminally guilty under the FCA for providing lack of quality care. His concern stems from the high risks imposed by the prescribed consequences under the FCA. Mr. Luce worries that those high risks for medical practitioners and institutional investors will discourage others’ entrance into the health care field.

Regarding the personal liability of individuals, Mr. Luce detailed a recent case in which a Tenet executive battled a civil claim brought by the government alleging that she was aware of certain questionable arrangements with doctors (by way of reports prepared by her attorney which mentioned that the “arrangements were troublesome”) and subsequently certified that Tenet’s arrangements with those doctors were in compliance with the law. Mr. Luce finds two apparent problems with this case:

o The government was able to obtain a privileged document, which formed the basis of their allegations (certain things may be privileged but “nothing is beyond discovery”).

o There is no claim for payment (an essential element of the FCA).

Essentially, Mr. Luce found it disturbing that this type of scenario is one that illustrates the well known premise that when the government wants to go after you, they will. This premise apparently rings true even when the instrument they choose to prosecute with (in this case, the FCA) is not in perfect accord with spirit of the statute. Mr. Luce’s concerns regarding the recent use of the FCA parallel current controversies where some experts in the field deem the FCA to be “too blunt of a weapon” for some of its current uses.

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