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.

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.

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.

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.

The Court’s reading of “report” is largely disconnected from reality. When the federal government receives a FOIA request, it responds by handing over a copy of the requested document. End of story. A government official does not pen an extensive report, detailing official government policy on the content of the requested document. Indeed, in the vast majority of cases, the “report” consists of a boilerplate cover form, memorializing the disclosure of the copied document. Nearly half of the circuits and three of the Justices recognize this reality.

So what does this mean for would-be-whistleblowers? Not much. First, it is important to note that Congress amended the public disclosure bar in 2010, clarifying that the public disclosure bar only silences whistleblowers who simply parrot publicly disclosed fraud allegations. Second, even under the old public disclosure bar, a whistleblower can move forward with a qui tam suit as long as his knowledge of the fraud is not dependent on the publicly disclosed allegations.

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

Recently, Congress sought to put the Act back on track, when it amended the public disclosure bar provision. Unfortunately, when Congress righted the proverbial ship, it failed to include a retroactivity provision. The end result is that a generation of False Claims Act cases will have to wrestle with the old public disclosure bar provision and its wayward case law.

Hopefully, courts will look to the revised public disclosure bar as a guiding light for how to apply the old provision. Indeed, this appears to be the trend in recent court decisions. At the very least, courts have gone to greater lengths to preclude only truly parasitic qui tam suits, as opposed to those that mirror snippets of publicly disclosed information. For example, this week, in U.S. ex rel. Repko v. Guthrie Clinic, P.C., No. 3:04cv1556 (M.D. Pa. April 18, 2011), the court refused to preclude evidence that showed that the relator had not based his action on publicly disclosed allegations. Previously, the court would have compared the qui tam complaint with the publicly disclosed allegations, with little concern over whether the action was actually “based upon” the public disclosure. This is a giant step forward for the qui tam community and the public fisc..

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

This issue reared its ugly head in a 12-year-old intervened qui tam action against Caremark, a pharmacy benefits management (PBM) company that administers pharmacy benefits for insurance companies, managed care organizations, and public and private health plans and organizations. United States ex rel. Ramadoss v. Caremark Inc., No. 09-50727 (5th Cir. February 24, 2011).

Medicaid is supposed to be the payor of last resort. However, Caremark allegedly shifted the costs to Medicaid by refusing to pay for the pharmacy benefits of individuals who were eligible for both Medicaid and a plan administered by a Caremark. Specifically, when these so-called “dual eligibles” identified themselves at a pharmacy as Medicaid recipients, instead of privately-insured individuals, Caremark would subsequently refuse to reimburse Medicaid, leaving the Medicaid program with the tab.

Significantly, if the state Medicaid agency discovers that a Medicaid recipient is a dual-eligible individual, the federal law requires the agency to seek reimbursement from the private insurer, such as Caremark.

The lower court held that the Reverse FCA did not apply, for Caremark submitted false statements to state Medicaid agencies, not the federal government, and it had no “obligation” to the federal government.

On appeal, federal and State governments argued that Caremark’s actions violated the Reverse FCA, for its false statements caused the state Medicaid agencies to make false statements to the federal government, which, in turn, impaired the agencies’ obligations to the federal government.

Claims under the Reverse FCA provision require proof that the defendant “knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government.” 31 U.S.C. § 3729(a)(7).

In endorsing the governments’ reading of the Act, the Court of Appeals highlighted that FCA provides that a person who causes a false statement to be made “to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government” is liable under the FCA. 31 U.S.C. § 3729(a)(7). Notably, the statute does not require that the statement impair the defendant’s obligation; instead, it merely requires that the statement impair “an obligation to pay or transmit money or property to the Government.” 31 U.S.C. § 3729(a)(7) (emphasis added).

Here, FCA liability hinged on the fact that Caremark’s actions impaired the State Medicaid Agencies’ obligations to recover and return Medicaid funds.

Notably, the court was able to sidestep the trickier question of whether the Reverse FCA applies when the defendant has no direct obligations to the federal government and the innocent party has no obligation to recover the funds for the federal government. This dormant issue continues to percolate below the surface.

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

Strawn comes to TAF after spending fourteen years as a Department of Justice Trial Attorney and Special Assistant U.S. Attorney within the Civil Division, advising client agencies and leading teams in complex investigations and litigation. She has extensive experience in civil and criminal litigation in trial and appellate courts, has defended congressional and federal agency actions, prosecuted complex government fraud cases (including pharmaceutical cases), and handled civil penalty and injunctive actions.

“The period ahead is very promising,” said Neil Getnick, Chairman of the TAF Board of Directors. “Thanks to the excellent work of Jeb White and the TAF staff, we have a stronger federal False Claims Act and more state False Claims Acts than ever before.”

During Mr. White’s tenure with TAF, he led the effort to modernize the federal False Claims Act for the first time in nearly a quarter of a century; tirelessly advocated for greater incentives and protections for those blowing the whistle on fraud targeting the Internal Revenue Service, the Securities and Exchange Commission, and state governments; and fought to protect anti-fraud and whistleblower laws in the courts.

“Susan Strawn will be a tremendous asset for TAF and the qui tam legal community,” said Jeb White. “Our fraud-fighting efforts will be buoyed by a strong leader at the helm of TAF.”

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

This decision establishes a per se rule mandating dismissal of qui tam actions that do not meet all of the FCA procedural requirements. In order to navigate the Act’s many procedural landmines, potential whistleblowers should retain experienced qui tam counsel. After several recent amendments, the False Claims Act is now full of additional nuances and roadblocks.

Nolan & Auerbach, P.A. has been at the forefront of these recent developments. Indeed, when Congress recently amended the False Claims Act, it called on Nolan & Auerbach, P.A. Partner Jeb White to testify about the importance of these statutory changes.

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

In 2005, the U.S. Supreme Court determined that the drafters of the False Claims Act failed to include a statute of limitations period for FCA anti-retaliation suits. In turn, the Court ruled that the courts must rummage through the state statutes and borrow the statute of limitations period from the most closely analogous state whistleblower statute. This generated a patchwork of statute of limitations periods, with most hovering around 90 days.

Earlier this year, as part of the Dodd-Frank Wall Street Reform legislation, Congress finally established a uniformed three-year statute of limitations period for all FCA anti-retaliation actions. Unfortunately, courts, such as this one, have ruled that this amendment is not retroactive.

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

Quite often, companies who are fearful of qui tam actions will encourage departing employees to sign broad employment releases. The enforceability of these releases varies widely from circuit to circuit. Before signing on the dotted line, potential relators should contact an experienced False Claims Act attorney.

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

As evidenced by this case, people scheme the government for a variety of reasons. While the motives and benefits are not always readily apparent, the end of result is always the same—the American tax dollar is diverted from its intended purpose. Whistleblowers safeguard the public fisc by unmasking these frauds, irrespective of the defendants’ hidden motives.

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

The Public Disclosure Bar was added to the FCA in 1986, with the twin purposes of encouraging the filing of qui tam actions while still preventing relators from receiving a reward when they merely copy fraud allegations that have already been broadly disseminated to the public. The bar was only intended to apply when the fraud allegations were detailed in the very specific, statutorily defined public disclosures, enumerated in 31 U.S.C. 3730(e)(4)(A).

Over the years, however, some courts have broadly interpreted this list to include disclosures that fall outside of this narrow list. For example, when it comes to the issue now before the Supreme Court, then-Judge Alito penned an opinion in U.S. ex rel. Mistick PBT v. Housing Authority of the City of Pittsburgh, 186 F.3d 376 (3d Cir. 1999), which held that a government employee’s response to a FOIA request qualifies as a governmental “report” under the FCA public disclosure bar.

Other courts have sensibly read the bar to only apply to actual governmental reports, which likely put the government on to the trail of fraud. For example, in U.S. ex rel. Haight v Catholic Healthcare West, 445 F.3d 1147 (9th Cir. 2006), the court took a different approach. Rather than relying on the dictionary definition of the words “report” and “investigation,” the Ninth Circuit looked at the words in the context of the Public Disclosure bar as whole. The Ninth Circuit concluded that construing the terms “report” and “investigation” to refer to work product that represents governmental analysis or leg-work, rather than the mechanistic production of documents that follows upon a FOIA request, is in keeping with the goals of the FCA’s Public Disclosure Bar:

a FOIA request is a mechanism for duplicating records that are in the possession of the federal government and that are not otherwise excludable from members of the public. In contrast, reports and investigations generally involve independent work product. “Report” denotes a document that includes an analysis of findings; “investigation” implies independent governmental leg-work. Moreover, the FCA’s jurisdictional bar groups “report” and “investigation” with a series of other enumerated sources that each involve extensive governmental work product and involvement. Because responding to a FOIA request requires little more than duplication, labeling any response to a FOIA request a “report” or “investigation” would ignore the way in which each of the enumerated sources [in the statute] involves governmental work product.

Id. at 1153 (internal quotation marks and citation omitted).

In Kirk, the Second Circuit agreed with the Ninth Circuit, further dividing the circuits on this issue. The U.S. Supreme Court will now have the ultimate say on this important issue.

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

The federal government brought a False Claims Act action against a mortgage company, alleging that it violated the FCA when its employees improperly paid referral fees to a real estate company. The mortgage company argued that it should not be held liable for its employees’ misdeeds, especially since the fraudulent activity was against the company’s penal interests. In United States v. Anchor Mortgage Corp., 2010 WL 3184210 (N.D. Ill. Aug. 11, 2010), the court held that under the theory of respondeat superior, the company can be held liable when its employee was “acting within the scope of employment.” Here, the court found that the employees were acting within the scope of their delegated authority and the employees were clearly acting for the benefit of the mortgage company, “which profited from the transactions” of the increased business.

Corporations are required to maintain a watchful eye over the actions of their employees. Too often, companies turn a blind eye to fraud within their corporate ranks, only to argue that they were oblivious to the fraudulent activity pumping up their soaring profits. Relators are able to hold these companies accountable.

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

Narrow readings of the FCA, such as this decision, were the driving force behind several recent FCA amendments. Under the amended False Claims Act, employees who now raise concerns within the confines of the corporation are protected by the FCA’s anti-retaliation provision. Unfortunately, the courts have ruled that these amendments do not apply to cases that were filed prior to the enactment of the amendments.

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

In United States ex rel. Hixson v. Health Management Systems, 2010 WL 2977396 (8th Cir. July 30, 2010), the Eighth Circuit, affirming the dismissal of a qui tam action, held that FCA liability does not attach where there are two “right” ways to read an applicable regulation. Notably, the court’s decision hinges solely on the ambiguity of the regulation, with no consideration of the evidence demonstrating that the defendant knew, or should have known, the correct meaning of the law. In short, the court held that the ambiguity negated scienter as a matter of law.

The Hixson decision jumped the tracks by blurring the lines between the “falsity” and knowledge elements of the False Claims Act. This conflated analysis permits a defendant to steal from the government with impunity. As the Ninth Circuit pointed out, this reading of the FCA would permit a defendant to “submit a claim, knowing it is false or at least with reckless disregard of its falsity, thus meeting the intent element, but nevertheless avoid liability by successfully arguing that its claim reflected a ‘reasonable interpretation’ of the requirements” and was therefore “not false.” United States ex rel. Oliver v. Parsons Co., 195 F.3d 457, 463 n.3 (9th Cir. 1999).

This “two rights” escape hatch is closed by separately assessing the defendant’s knowledge. First, in assessing the “falsity” of the claims, the court must interpret the underlying regulation or contract. Once the court determines the true meaning of the law, it then must determine whether the defendant’s claims were “knowingly” false. Ultimately, if the defendant did not have reason to know that the claims were false, FCA liability will not attach. However, the court cannot short-circuit this analysis by glossing over the individual defendant’s knowledge of the applicable regulations.

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

Prior to FERA, the False Claims Act (FCA) imposed liability on any employer who discriminated in the terms or conditions of employment against an employee because of the employee’s lawful acts in furtherance of a qui tam action. However, the FCA arguably did not cover the following common types of retaliation: (i) retaliation against those who plan to file a qui tam action that never gets filed, who blow the whistle internally or externally without the filing of a qui tam action, or who refuse to participate in the wrongdoing; (ii) retaliation against the family members and colleagues of those who have blown the whistle; and (iii) retaliation against contractors and agents of the discriminating party who were not technically “employees.”

Widening the scope of protected activity, the amendments ensure that Section 3730(h) not only protects “lawful actions done…in furtherance of an [FCA] action,” but it also protects “other efforts to stop 1 or more [FCA] violations.” Thus, in addition to protecting steps taken in furtherance of a potential or actual qui tam action, the FCA also protects steps taken to remedy the misconduct through methods such as internal reporting to a supervisor or company compliance department and refusals to participate in the misconduct that leads to false claims, whether or not such steps are clearly in furtherance of a potential or actual qui tam action.

Addressing the concern about indirect retaliation against colleagues and family members of the person who acts to stop the FCA violations, the amendments also clarify Section 3730(h) by adding language expressly protecting individuals from employment retaliation when “associated others” made efforts to stop FCA violations. This language is intended to deter and penalize indirect retaliation by, for example, firing a spouse or child of the person who blew the whistle.

Protecting persons who seek to stop violations of the Act regardless of whether the person is a salaried employee, an employee hired as an independent contractor, or an employee hired in an agency relationship, the amendments change Section 3730(h) so that it expressly protects not just “employees” but also “contractors” and “agents.” Among other things, the amendments ensure that Section 3730(h) protects physicians from discrimination by health care providers that employ them as independent contractors, and government subcontractors from discrimination or other retaliation by government prime contractors.

Finally, to ensure that wronged individuals have sufficient time to avail themselves of Section 3730(h) protections, the amendments add an explicit three-year statute of limitations period for all FCA anti-retaliation actions. This much-needed amendment is underscored by a recent U.S. Supreme Court decision which held that the Act lacked an applicable statute of limitations provision and that the courts, therefore, must apply the limitations period from the “most analogous” state statute.[1] The resulting statute of limitations patchwork injected uncertainty into the practice area and greatly shortened applicable time periods to less than twelve months for the vast majority of jurisdictions. The amendments replace this confusion with a set, straightforward time limitation.

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

These court decisions have failed to grasp the real-world limitations that prevent relators from meeting such a strict evidentiary standard at the pleading stage. Relators typically know the intricacies of a fraud scheme, but not necessarily the specifics of an invoice that were later submitted to obtain payment for the fraudulent activity. Conversely, billing clerks may have access to the requisite invoices, but they typically do not have knowledge of the underlying fraud scheme. Most assuredly, Congress did not intend to limit the False Claims Act to billing clerks.

Thankfully, many courts have adopted a more commonsense application of Rule 9(b). Indeed, the recent trend has swung in the direction of a more favorable reading of Rule 9(b). At the next available opportunity, the Supreme Court should join this chorus.

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

Prior to FERA, the False Claims Act (FCA) imposed liability on any employer who discriminated in the terms or conditions of employment against an employee because of the employee’s lawful acts in furtherance of a qui tam action. However, the FCA arguably did not cover the following common types of retaliation: (i) retaliation against those who plan to file a qui tam action that never gets filed, who blow the whistle internally or externally without the filing of a qui tam action, or who refuse to participate in the wrongdoing; (ii) retaliation against the family members and colleagues of those who have blown the whistle; and (iii) retaliation against contractors and agents of the discriminating party who were not technically “employees.”

Widening the scope of protected activity, the amendments ensure that Section 3730(h) not only protects “lawful actions done…in furtherance of an [FCA] action,” but it also protects, “other efforts to stop one or more [FCA] violations.” Thus, in addition to protecting steps taken in furtherance of a potential or actual qui tam action, the FCA also protects steps taken to remedy the misconduct through methods such as internal reporting to a supervisor or company compliance department and refusals to participate in the misconduct that leads to false claims, whether or not such steps are clearly in furtherance of a potential or actual qui tam action.

Addressing the concern about indirect retaliation against colleagues and family members of the person who acts to stop the FCA violations, the amendments also clarify Section 3730(h) by adding language expressly protecting individuals from employment retaliation when “associated others” made efforts to stop FCA violations. This language is intended to deter and penalize indirect retaliation by, for example, firing a spouse or child of the person who blew the whistle.

Protecting persons who seek to stop violations of the Act regardless of whether the person is a salaried employee, an employee hired as an independent contractor, or an employee hired in an agency relationship, the amendments change Section 3730(h) so that it expressly protects no just “employees” but also “contractors” and “agents.” Among other things, the amendments ensure that Section 3730(h) protects physicians from discrimination by health care providers that employ them as independent contractors, and government subcontractors from discrimination or other retaliation by government prime contractors.

Finally, to ensure that wronged individuals have sufficient time to avail themselves of Section 3730(h) protections, the amendments add an explicit three-year statute of limitations period for all FCA anti-retaliation actions. This much-needed amendment is underscored by a recent U.S. Supreme Court decision which held that the Act lacked an applicable statute of limitations provision and that the courts, therefore, must apply the statute of limitations period from the “most analogous” state statute[1]. The resulting statute of limitations patchwork injected uncertainty into the practice area and greatly shortened applicable time periods to less than twelve months for the vast majority of jurisdictions. The amendments replace this confusion with a set, straightforward time limitation.

For more information about whistleblower protection,  qui tam law and health care fraud, contact Nolan & Auerbach, P.A.

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