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 The False Claims Act was originally enacted by Congress in 1863, as a response to widespread abuses by government contractors against the Union Army during the Civil War.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:

Health Care

Industry-Wide Allegations of Fraud Do Not Silence Defendant-Specific Qui Tam Actions

by Nolan and Auerbach on March 14, 2011

A few weeks ago, the Seventh Circuit published a ground-breaking court decision that was largely off the radar for FCA experts. However, the implications of this court decision, United States ex rel. Baltazar v. Advanced Healthcare Associates, S.C., No. 09-2167 (7th Cir.  Feb. 18, 2011), will have a lasting impact for years to come. This opinion, penned by respected Chief Judge Easterbrook, removed much of the confusion surrounding the old FCA public disclosure bar and cemented the reach of the recently revised FCA public disclosure bar.

The FCA public disclosure bar, 31 U.S.C. 3730(e)(4), was grafted into the False Claims Act in 1986 to silence parasitic qui tam suits. However, because the government needs the assistance of relators to uncover fraudulent behavior, Congress narrowly tailored the bar to only preclude those actions that actually copied fraud allegations from specific types of public disclosures. In short, Congress wanted to ensure that non-parasitic qui tam suits could survive, particularly if they provided additional information that assisted the government’s fraud-fighting efforts.

However, over the course of nearly a quarter of century, courts increasingly misapplied and misinterpreted the FCA public disclosure bar, such that non-parasitic qui tam suits were regularly derailed by the public disclosure bar. In one clear example, involving a healthcare fraud case, the Seventh Circuit seemed to rule in United States ex rel. Gear v. Emergency Medical Associates, 436 F.3d 726 (7th Cir. 2006), that the public disclosure bar applied when public allegations raised industry-wide fraud allegations, even when the allegations did not mention the specific defendant identified in a later filed qui tam action.

Congress recently responded, in part, by amending the FCA public disclosure bar, clarifying that the bar is only triggered when the publicly disclosed allegations are “substantially the same” as those allegations detailed in the qui tam action. In turn, Congress stressed that the public disclosure bar does not apply when the public allegations generally allege fraud against an entire industry.

In Baltazar, the Seventh Circuit was faced with making sense of this new language. As an initial matter, while the court stated that the new language did not apply to the case at bar, the Congress intent behind the amendment certainly colored its interpretation of the old public disclosure bar. Through this lens, the court held that a qui tam suit alleging “defendant-specific facts” is not “substantially similar” to publicly disclosed allegations of “industry-wide” fraud. Thus, while not explicitly rejecting its earlier Gear ruling, the Seventh Circuit clearly stated that a “defendant-specific” complaint clears the public disclosure bar.

With the “substantially similar” language now codified into the FCA public disclosure bar, the Baltazar reading of “substantially similar” clarifies that industry-wide public disclosure allegations do not derail allegations that detail fraud of a specific industry player. This is a giant step forward for the public disclosure bar and the qui tam community.

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

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Outlier Payments Make DRG Fraud “Material” to Government

by Nolan and Auerbach on September 15, 2010

A registered nurse brought a qui tam action against a hospital, alleging that the hospital’s doctors were fabricating post-operation complications to allow for patients to remain in the hospital so that cosmetic surgeries could be performed. The hospital filed a motion to dismiss, arguing that the relator failed to identify an actual false claim or invoice that was actually submitted to the government. In addition, the hospital argued that, even if true, the alleged activity was immaterial to the government’s payment decision.

In U.S. ex rel. Wagemann v. Doctor’s Hospital of Slidell, LLC, 2010 WL 3168067 (E.D. La. Aug. 6, 2010), the court granted the hospital’s motion to dismiss. While rejecting the hospital’s argument that relator must identify an actual claim submitted to the government, the court ruled that the relator must still plead enough facts “from which the court may reasonably infer that false claims were actually submitted for payment.” Here, the relator only offered “mere conclusory assertions.”

Then turning its attention to the hospital’s “immateriality” argument, the court noted that Medicare generally reimburses a fixed amount per patient based on the patient’s diagnosis, the procedures performed and the Diagnosis Related Group (“DRG”) into which the payment falls. According to the court, “If the defendants’ alleged scheme did not increase the fixed amount paid by Medicare, they are immaterial to the amount of reimbursement received.” Here, the court found that this requisite allegation was missing from the relator’s complaint.

In cases involving DRG payments, relator’s have been able to show damage to the government by discussing the impact on outlier payments. Outlier payments are warranted when a hospital’s cost-adjusted charges exceed either a fixed multiple of the applicable DRG rate or a fixed dollar amount established by the government. In turn, because outlier reimbursements are contingent on unusually long hospital stays and/or unusually costly treatments, the relator must allege facts to demonstrate that the unnecessary procedures resulted in either or both, thereby artificially inflating charges without corresponding increase in costs. Evidently, the relator in this case did not include allegations of outlier fraud.

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

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Eon Labs Pays U.S. $3.5 Million to Settle Medicaid False Claims Allegations in qui tam case brought by Nolan and Auerbach, P.A. Client

by Nolan and Auerbach on February 22, 2010

Eon Labs Inc. has agreed to pay the United States $3.5 million to resolve False Claims Act allegations relating to the company’s drug Nitroglycerin Sustained Release (SR) capsules, the United States Department of Justice (DOJ) announced Feb. 22, 2010. Eon Labs is a subsidiary of Sandoz Inc., which is in turn a subsidiary of Novartis AG.

In April 1999, the Food & Drug Administration (FDA) determined that the unapproved drug Nitroglycerin SR lacked substantial evidence of effectiveness and published a notice proposing to withdraw approval of the product.  The qui tam lawsuit alleged that, after the FDA notice, Nitroglycerin SR no longer was legally eligible for reimbursement by government health care programs such as Medicaid.

The lawsuit alleged that  Eon submitted false quarterly reports to the government that misrepresented Nitroglycerin SR’s regulatory status as a Covered Outpatient Drug under the Medicaid program.

The settlement resolves allegations against Eon in a multi-defendant whistleblower action, which remains sealed in part.

For the full release, go to: http://www.justice.gov/opa/pr/2010/February/10-civ-171.html.

For more information about qui tam law and health care fraud, contact Nolan and Auerbach, PA. at http://www.whistleblowerfirm.com.

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New Poll: Nearly Two Thirds of Business Professionals Expect Uptick in Recovered Government Funds

by Nolan and Auerbach on January 27, 2010

Sixty-four percent of business professionals polled during a recent Deloitte webcast think the Fraud Enforcement and Recovery Act will be effective in increasing the total dollar amount the government will recover under the False Claims Act, according to a Jan. 27 Deloitte press release.

Respondents indicated their greatest concerns under the Fraud Enforcement and Recovery Act’s enforcement changes are: an expanded universe of companies potentially liable for FCA violations (24 percent); increased consequences of failing to return overpayments to the government (13 percent); extended whistleblower protections to non-employees (12 percent); and revived government ability to use Civil Investigative Demands (11 percent).

Approximately two-thirds (66 percent) of respondents were unaware that private qui tam plaintiffs — or whistleblowers — can bring suits under the FCA on behalf of the U.S. government against companies misusing government funds and keep a share of recovered funds.

Respondents expect that the financial services (44 percent) and health care and life sciences (23 percent) industries will see the highest increase in litigation resulting from increased Fraud Enforcement and Recovery Act, as well as FCA enforcement activity.

More than 800 business professionals from the banking and securities, consumer and industrial products, energy, resources and power, financial services, health care and life sciences, public sector technology, media and telecommunications and manufacturing industries responded to the online polling questions during an October 2009 Deloitte webcast.

For the full release, go to: http://www.prnewswire.com/news-releases/deloitte-poll-nearly-two-thirds-of-business-professionals-expect-uptick-in-recovered-government-funds-82784237.html.

For more information about qui tam law and health care fraud, contact Nolan and Auerbach, PA. at http://www.whistleblowerfirm.com/.

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