Thankfully, federal and state False Claims Acts provide a viable avenue for exposing fraud. By deputizing private citizens, the qui tam provisions of the False Claims Act empower individuals in their fight against corporate fraudsters.

A recent $70 million False Claims Act settlement involving New York City is a perfect example of why we need the False Claims Act. In this case, Dr. Gabriel Feldman, a board-certified preventive medicine physician, was employed by the New York County Health Services Review Organization (NYCHSRO) as a local medical director, and he was tasked with determining whether Medicaid patients qualified for 24-hour personal care services (PCS) under Medicaid’s PCS program. However, time and time again, the City of New York overruled his PCS determinations, improperly authorizing PCS for thousands of New York Medicaid beneficiaries.

Since 1993, Dr. Feldman voices his concerns, both internally and externally. For example, Dr. Feldman testified publicly before the New York City Council in 1993, stating that the City’s PCS program was causing the government to make unjustified payments representing, “…hundreds of millions of dollars in Medicaid waste.”  He also complained repeatedly to his supervisors at the NYCHSRO. However, each time, his concerns fell on deaf ears.

Finally, in 2009, Dr. Feldman filed a qui tam action against the City, laying out the allegations of fraud and detailing the City’s complete disregard for the applicable Medicaid regulations.

Recently, the City of New York finally listened, when it inked a check for $70 million. For his courageous efforts, Dr. Feldman received a handsome reward of $14.5 million.

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.

A number of device makers have received FDA clearance to market their biliary stents as palliative and short-term fixes to relieve pain caused by bile blockages experienced by a limited number of late-state cancer patients. Because these devices were positioned to the FDA as short-term and not life-sustaining, they were subjected to less rigorous clinical studies.

However, once the devices received the FDA’s seal of approval, several device makers allegedly started promoting the devices as suitable vascular stents, which are implanted for permanent use and undergo far longer-term and variable stresses than biliary stents due to their location in the body.

The industry-wide pervasiveness of these promotions was chronicled in a recent court decision out of the District of Massachusetts. In this case, United States ex rel. Nowak v. Medtronic, Inc., the judge observed that the off-label promotions of bilary stents are so rampant in the industry that the vast majority of bilary stent sales are for off-label uses.

Here, the court distinguished off-label pharmaceutical promotions from off-label medical device promotions. Notably, the court concluded, “Off-label promotion cases involving medical devices are uniquely complicated by the relatively more permissive and undefined nature of Medicare and Medicaid coverage of ‘off-label’ medical devices.” For support, the court reaches for a quote from a recent Texas district court decision: “While Medicare and Medicaid typically do not reimburse off-label prescriptions for drugs, . . . eligibility for reimbursement [of Category B medical devices] depends on whether the procedure performed is ‘medically necessary’ or ‘reasonable and necessary.’” United States ex rel. Bennett v. Medtronic, Inc., 747 F. Supp. 2d 745, 747 (S.D. Tex. 2010).

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.

With each passing day, the massive scope of Stimulus Package fraud is becoming more apparent. Similarly, the inadequacy of government controls and, in turn, the need for whistleblowers is also becoming quite clear.

One example of the problem is evidenced in a recent US Department of Health and Human Services audit, where the Inspector General examined one State’s ability to monitor Stimulus funds dispensed under the federal Community Services Block Grant (CSBG) program. Here, the Inspector General examined the mechanisms used by the State of Colorado to monitor the nearly $9 million in Stimulus funds that it dished out to 40 entities that were supposedly creating, coordinating, and delivering programs and services to low-income Americans.

Pursuant to the federal CSBG Act, the State was required to monitor eligible entities by conducting full onsite reviews of each eligible entity at least once during each 3-year period. The State was also required to conduct reviews to determine whether eligible entities met the performance goals, administrative standards, financial requirements, and other requirements of its State.

The Inspector General discovered that the State largely sidestepped its responsibilities to monitor these federal dollars. Specifically, the State did not conduct full onsite reviews at all eligible entities within a 3-year period; ensure that CSBG funds were used to provide services only to eligible clients; conduct initial Stimulus Package onsite reviews at each eligible entity that received funding; or adequately document onsite reviews.

When the Inspector General dove deeper into the expenditures, it discovered rampant fraud and false claims. For example, for the quarter ending March 31, 2010, five entities billed for 140.3 full-time employee hours (FTE). However, based on the time records supporting the entities’ quarterly expenditures, the Inspector General determined that the five entities should have reported only 16.4 FTE. Thus, these entities overestimated the number of jobs reported by 123.9 FTE. Due to its inadequate internal controls, the State did not identify these errors.

Unfortunately, this is just the tip of the fraud iceberg when it comes to the federal Stimulus Package. However, the federal government does not have the time, money, or resources to audit every single dollar, as they did in this instance. In short, the federal government needs the help of the private citizenry to expose the fraudulent activity that is hidden beneath the surface. Hopefully, people with inside knowledge will step forward and leverage the federal False Claims Act to recover these federal funds.

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

According to a False Claims Act qui tam action filed by Dr. Feldman, the City of New York overruled his PCS determinations on a regulator basis, thus improperly authorizing PCS for thousands of New York Medicaid beneficiaries. Moreover, Dr. Feldman alleged that, in other instances, the City ignored his PCS determinations for additional services, thus withholding much-needed medical services from patients, potentially endangering their health and welfare.

The U.S. Government has intervened in this action, filing its complaint-in-intervention last week in the Southern District of New York. Specifically, the Government alleges that New York City’s misactions have wrongfully drained the Medicaid program of at least tens of millions of dollars.

In a variety of government health care programs, local medical directors are entrusted with the final say on whether a patient qualifies and at what level of care. Local medical directors, arguably, have the patients’ best interest in mind when making these determinations, and they are not tempted to steal public health care dollars for the benefit of their employers. However, where the local medical director’s determinations are influenced, overruled or ignored by their employers, the patients and government health care programs suffer.

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

Recently, the Justice Department lived up to its promise, when it inked a settlement with medical device manufacturer Synthes Inc. and its subsidiary Norian Corp. The agreement required these two companies to pay fines totaling $23.2 million and to plead guilty to charges that they illegally experimented with a spinal bone cement on patients. Specifically, the defendants had allegedly trained surgeons to use the cement “off-label” so the company could gather data to support its expanded use. This illegal activity caught the eye of the government after three patients died on the operating table.

Norian pled guilty to conspiracy to impede federal safety standards, a felony, and 110 related misdemeanors. Synthes avoided a felony conviction by agreeing to sell Norian and by pleading guilty to a misdemeanor of shipping a mislabeled product in interstate commerce. In addition, four former Synthes executives pled guilty or no contest to related misdemeanors.

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

In this case, a whistleblower ran a bus service for a county school district. After raising concerns that the school district was violating the federal False Claims Act, the school district greatly reduced the relator’s hours.

The relator brought an action under the False Claims Act’s anti-retaliation provision, which, at that time, was limited to plaintiffs who have an employee-employer relationship with the defendant. The lower court and appellate court, in dismissing the suit, both agreed that the relator was not an employee of the school district.

The amended False Claims Act provision, 31 U.S.C. § 3730(h) (2009), now offers whistleblower protections for “any employee, contractor, or agent.” This legislative improvement is especially important for physicians who may have admitting privileges at a hospital but are not technically employees. Now, these doctors can shine a light on a dishonest hospital, knowing that the FCA provides a level of protection against retaliation.

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

The Kirk decision set the table for one of the more remarkable court decisions of the year. In U.S. ex rel. Drake v. NSI, Inc., No. 3:94-cv-963, 2010 WL 3417854 (D. Conn. Aug. 26, 2010), the court reinstated FCA Section 3729(a)(2) allegations that were dismissed almost a decade ago. In this case, originally filed in 1994, a qui tam relator brought a number of claims against several defendants. In 2000, the relator’s 3729(a)(2) allegations were dismissed. See U.S. ex rel. Drake v. Norden Systems Inc., 2000 U.S. Dist. LEXIS 13371 (D. Conn. Aug. 24, 2000). Since then, the case has continued down a seemingly unending road, including a couple of side trips to the Second Circuit Court of Appeals.

Most importantly, the case was still in the litigative pipeline on June 7, 2009. In turn, in light of the FCA amendments, the relator sought reconsideration of the Section 3729(a)(2) ruling entered ten years ago. After going through the exercise of determining that the application of the revised FCA would not violate the Ex Post Facto Clause of the Constitution, the court ruled that newly minted FCA liability section could apply to the alleged conduct that occurred more than sixteen years ago. Thus, the court granted the relator’s motion to reinstate these claims.

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

In United States v. Hawley, 2010 WL 3292710 (8th Cir. Aug. 23, 2010), the Eighth Circuit started its analysis by noting that Allison Engine holds FCA defendants liable for “natural and foreseeable consequences” of their actions. Here, because the company and its principal agent were familiar with the FCIC payment process, the court easily determined that the defendant “intended” the “natural and foreseeable consequences” of having “Government itself” involved in the payment decision. In turn, the Eight Circuit reversed the lower court’s decision.

While the Allison Engine decision ultimately did not derail the government’s prosecution of this major crop insurance fraud scheme, the lower court’s decision was one of the driving forces behind the recent False Claims Act amendments. From Senator Grassley’s home state of Iowa, this decision came out just hours after Allison Engine identified a major loophole in the FCA’s liability provisions. In championing the FCA Amendments, Senator Grassley was rightly concerned that the court’s reasoning would quickly spread, for the “Government itself” is rarely involved in the “payment decision.” Indeed, our government largely relies on contractors to make payment decisions for everything from Medicare payments to hurricane relief efforts.

The resulting amendments now protect all federal funds, regardless of who actually inks the check. However, few courts have retroactively applied these amendments to cases that were filed prior to the enactment of the amendments. In turn, this means that the government and relators will need to wrestle with the Allison Engine “intent” requirement for a few more years.

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

Notably, the Ninth Circuit, in rejecting the lower court’s reading of the law, held that the relator does not need to identify representative examples of false claims to support every allegation. Instead, the Court of Appeals ruled that it was sufficient to allege particular details of a scheme to submit false claims, as long as these details were paired with “reliable idicia that lead to strong inference that claims were actually submitted” to the government. The Ninth Circuit found that the relator failed to meet even this standard, for he failed to state which particular laws were violated by the defendant’s activities.

Oftentimes, False Claims Act cases turn on a violation of a controlling law or regulation. It is the job of experienced relator’s counsel to help identify the applicable laws and regulations.

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

In U.S. ex rel. Lemmon v. Envirocare of Utah, 2010 WL 3025021 (10th Cir. Aug. 4, 2010), the Tenth Circuit reversed this decision and held that relators do not need to identify particular invoices. The Court of Appeals instead held that relators “need only show the specifics of a fraudulent scheme and provide an adequate basis for a reasonable inference that false claims were submitted as part of the scheme.”

This decision is an important step forward for qui tam actions in this circuit. The government relies on relators to detail the specifics of “fraudulent schemes.” When courts dismiss qui tam actions simply because the relators do not have access to the underlying invoices, they silence potential actions that would have unmasked fraudulent activity.

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

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.

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/.

One of the issues in the case is a key retroactivity provision of the False Claims Act, as amended by the Fraud Enforcement and Recovery Act of 2009 (FERA) (signed into law May 20, 2009). In an opinion issued in October 2009, the District Court essentially held that because FERA’s amendments in Section 3729(a) create liability for conduct that was not previously actionable, they are unconstitutional on grounds they violate the Ex Post Facto clause. The Court also found that the wording of the retroactivity provision was directed to “claims” pending as of the retroactivity date, not “cases,” so that provision did not apply to the claims at issue in Allison, which had been submitted 15 or more years earlier.

This action by DOJ was taken to support Relators’ “Motion To Certify . . . For Interlocutory Appeal” filed on the same date. Both motions argue that the District Court’s Order involves a controlling issue of law, that there are substantial grounds for differences of opinion regarding the Order and that an immediate appeal would materially advance the litigation. If the motions are granted, the Sixth Circuit Court of Appeals will be asked to decide both the constitutionality of the retroactivity provision of FERA and whether that provision applies to “claims” or “cases” that are pending on the retroactivity date, June 7, 2008. The case is important because unless DOJ and the Relator succeed in overturning the District Court, an important False Claims Act (“FCA”) provision as amended by FERA will not apply retroactively and its application will be construed in a manner very limited to plaintiff’s. It is likely that if the Sixth Circuit hears the appeal, that it will at least hold that the retroactivity provision was directed to “cases” not claims.

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

The United States secured $2.4 billion in settlements and judgments in cases involving fraud against the government in the fiscal year ending Sept. 30, 2009, the Justice Department announced November 19, 2009. This represents the second largest annual recovery of civil fraud claims in history, and brings total recoveries since 1986, when Congress substantially strengthened the civil False Claims Act, to more than $24 billion.

Of the $2.4 billion in settlements and judgments obtained in fiscal year 2009, nearly $2 billion was recovered in lawsuits filed under the False Claims Act’s qui tam provisions.

For the full press release, go to: http://www.prnewswire.com/news-releases/justice-department-recovers-24-billion-in-false-claims-cases-in-fiscal-year-2009-more-than-24-billion-since-1986-70521362.html.

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

This settlement resolves allegations that Covenant submitted false claims to Medicare by having financial relationships with five physicians that violated the Stark Law. The United States alleged that Covenant violated the Stark Law by paying commercially unreasonable compensation, far above fair market value, to five employed physicians who referred their patients to Covenant for treatment. These physicians were among the highest paid hospital-employed physicians not just in Iowa, but in the entire United States, according to the DOJ.

For the full press release, go to: http://www.usdoj.gov/opa/pr/2009/August/09-civ-849.html.

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

To read the press release and the senator’s statement, go to http://leahy.senate.gov/press/200904/042209a.html.

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

Grassley says in his April 20, 2009, statement that special interests are surfacing, who don’t want to encourage whistleblowers to report wrongdoing and are looking to squelch the bill.

The point: We can’t keep spending, as a nation, without taking steps to combat fraud and abuse. The Fraud Enforcement and Recovery Act not only ensures that law enforcement officials and prosecutors have the tools and resources necessary to enforce our laws, but it also amends the civil False Claims Act to ensure that taxpayer money lost to fraud, waste or abuse can be recovered.

The legislation, most importantly, will ensure that the law adheres to the FCA’s original intent.

“Specifically, these amendments address a loophole that was created in the FCA by the Supreme Court decision in Allison Engine which could be used by fraudfeasors to evade liability by hiring subcontractors to perform work on government contracts.  Some defendants are already filing briefs in court seeking to have FCA cases dismissed based upon this decision, and it needs to be addressed to protect taxpayer dollars,” Grassley writes.

“We need to act now to stomp out new claims of fraud to send a message that the American taxpayers won’t be taken for a ride.”

To read the entire statement, go to: http://grassley.senate.gov/news/Article.cfm?customel_dataPageID_1502=20209.

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