False Claims Act/Qui Tam

This blog is about qui tam, a  lawsuit brought under the False Claims Act by a private plaintiff on behalf of the Federal or State Government (rather than by the Government itself). The False Claims Act was originally enacted by Congress in 1863, as a response to widespread abuses by government contractors against the Union Army during the Civil War. The qui tam provisions are now used widely and this blog is intended to keep readers up to date with all qui tam related news and to provide commentary when warranted.  This blog also contains an array of laws and regulations concerning qui tam set out in an easy to read format.

From the category archives:

False Claims Act

Whistleblowers Assist States in Recovering Stolen Medicaid Dollars

by Nolan and Auerbach on November 4, 2011

HHS-OIG posted an interactive map providing a state-by-state view of the health care dollars recovered from Medicaid fraudsters. An accompanying chart provided a more in-depth peek behind the $1.84 billion recovered in 2010. Of particular note, less than 2,000 Medicaid Fraud Control Unit (MFCU) employees guarded the nation’s Medicaid coffers, and only four states had more than 100 MFCU employees.

So, how did such a small army of fraud-fighters recover such a notable sum in 2010? First, most of the recoveries are led by the federal government and their component agencies, such as the FBI, HHS-OIG, and the FDA. Further insight is available if you dissect the numbers on a state-by-state basis.

Notably, some states with large Medicaid budgets were substantially less successful in recovering stolen Medicaid dollars. For example, even though Pennsylvania had the fourth largest Medicaid budget, of nearly $20 billion, it only ranked eighteenth in the nation in Medicaid recoveries, securing a measly $29 million in civil recoveries. Tennessee, on the hand, had less than half the Medicaid expenditures, at $8 billion per year, but the state ranked sixth in the nation in recoveries with over $70 billion in civil recoveries.

At first glance, the size of a state’s MFCU staff seems to be the deciding factor. For instance, the three largest MFCU staffs belonged to the three most successful states in recovering Medicaid dollars—New York, Florida and California. However, these three states had the largest pool of funds to guard and, therefore, the greater chance to siphon out fraudulent dollars. Indeed, when you calculate the dollars recovered per MFCU staff member, these three states do not even appear in the top twenty.

States with False Claims Acts recover substantially more stolen Medicaid dollars. Indeed, eight of the top 10 states and twelve of the top 15 states have False Claims Acts. Conversely, six of the bottom 10 states and ten of the bottom 15 states do not have False Claims Acts. Seemingly, State False Claims Acts are a major factor in recovering funds from Medicaid fraudsters.

States with False Claims Acts efficiently and effectively fight Medicaid fraud because they leverage the resources and inside information of whistleblowers, and are able to participate in federal investigations and prosecutions. While other States are looking for the proverbial “needle in the haystack,” states with False Claims Acts are able to participate in federal prosecutions, and also independently zero in on fraudulent schemes that drain their limited Medicaid dollars. In return, MFCUs are better able to protect Medicaid dollars and whistleblowers are able to receive substantial rewards. This public-private partnership accounts for over half the $1.84 billion recovered by MFCUs in 2010.

For more information about qui tam law and healthcare fraud, contact Nolan & Auerbach, P.A.

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When Medical Device Companies Fail to Honor Product Warranties

by Nolan and Auerbach on October 4, 2011

Oftentimes, medical device companies will tout the longevity and reliability of their products. To further seal the deal, companies will tag on an extensive warranty, promising generous credits and rebates should their devices need repair or replacement. However, if a company inappropriately skirts its obligations under these warranties, it could run afoul of the federal False Claims Act when government health care dollars are involved.

This alleged business practice emerged in a recently settled False Claims Act action against Guidant LLC, a subsidiary of Boston Scientific Corporation. In this intervened qui tam suit, which settled for $9.25 million, the company allegedly inflated the cost of replacement pacemakers and defibrillators to federal health care programs by knowingly failing to grant warranty credits and rebates to hospitals for devices that were explanted while covered under a product warranty.

According to the government, Guidant’s misactions were evidenced in inflated invoices that failed to include appropriate credits and rebates for replacement pacemakers and defibrillators. These invoices were submitted to Department of Veterans Affairs hospitals and Department of Defense facilities. In addition, inflated invoices were allegedly submitted to private hospitals, which caused these facilities to overstate the cost of these devices on Medicare cost reports.

At its core, this is just another variation of a century-old False Claims Act theme of overcharging the federal government. However, because these misdeeds are easily obscured behind corporate walls, the qui tam litigation process offers substantial rewards to employees who successfully tear down these walls and expose companies who knowingly turn a blind eye to product warranties.

For more information about qui tam law and healthcare fraud, contact Nolan & Auerbach, P.A.

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FDA Encourages Doctors to Report Off-Label Marketing

by Nolan and Auerbach on July 8, 2011

The FDA recently touted figures from its Bad Ad Campaign, a campaign designed to encourage doctors, patients and sales professionals to report misleading advertising and promotions in the healthcare industry. The 328 reports submitted over the last year are three times as many as the average of 104 reports submitted in previous years.

The FDA has pledged ongoing support for the program that will take aim at young professionals entering the healthcare industry and continuing to educate groups at hospitals and trade shows.

Of the reports submitted most were turned in by doctors, sending a message to the pharma sales force, “Docs are now the eyes and ears of the FDA.”

Unfortunately, in the past, the FDA has been very slow to take action on reports of wayward marketing promotions. Indeed, all too often, providers’ concerns have been simply lost in the morass of government bureaucracy.

The good news is that the False Claims Act provides a viable alternative. This fraud-fighting law not only provides substantial rewards for whistleblowers, but it includes an action-enforcing mechanism that statutorily requires the government to investigate allegations of fraud. In other words, if providers want to ensure that the government will at least consider their concerns, they should file a False Claims Act qui tam action.

If a provider is aware of egregious off-label promotions, they are strongly encouraged to seek out an experienced law firm that focuses its practice on health care False Claims Act actions.

For more information about qui tam law and healthcare fraud, contact Nolan & Auerbach, P.A.

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Leveling the Playing Field for Honest Business Competition

by Nolan and Auerbach on June 3, 2011

Oftentimes, when people describe the typical whistleblower, they paint a picture of a dissatisfied employee who stands up to his or her wayward employer. While this is certainly true in a lot of False Claims Act cases, there is no requirement that the whistleblower be an employee or a so-called “insider.” Indeed, some of the most effective whistleblowers are the direct corporate competitors of the fraudulent businesses.

The most recent example involves a case filed under the California False Claims Act, which maintains that seven private medical labs allegedly overbilled the state Medicaid program for diagnostic testing. The whistleblower, the CEO of a competitor lab company, refused to join in the alleged price-gouging.  His courage was recently rewarded, after Quest Diagnostics agreed to pay Medicaid $241 million to settle the lawsuit.

For more information about qui tam law and healthcare fraud, contact Nolan & Auerbach, P.A.

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