WARNING SIGNAL The federal False Claims Act enables — and often motivates — whistleblowers to expose fraudulent practices.

The U.S. False Claims Act is the federal government's most effective tool against healthcare fraud. It makes it illegal to submit fraudulent payment claims to the federal government, and lets whistleblowers file lawsuits against those who they claim have done so. Owing to the huge amount the government spends through its Medicare and Medicaid programs, healthcare providers are by far the No. 1 target of FCA litigation.

Just ask the Princeton (Ind.) Surgery Center, named 2 years ago in a False Claims lawsuit alleging fraudulent billing practices. The whistleblower was the former chief financial officer at nearby Gibson General Hospital, who filed a complaint against the hospital, the ASC, 9 physicians and a nurse anesthetist, accusing his hospital of handling billing for the ASC in order to increase payments from Medicare and Medicaid. The lawsuit claims the hospital submitted about 65 false claims per month to Medicare for nearly 2 years, causing the government to lose an estimated $2,100 per claim. The ASC and the hospital split hundreds of thousands of dollars in overpayments — 15% for Gibson General Hospital and 85% for the Princeton Surgery Center, says the suit.

The FCA has also been cited recently in cases involving a South Carolina hospital's Stark Law-violating contracts with physicians and a medical device manufacturer's inducements to surgeons.

When whistles are blown
FCA lawsuits may be filed by private citizens on behalf of the government. These whistleblowers are often disgruntled or recently terminated employees. Their inside information is the key: An FCA allegation cannot be based on publicly disclosed information unless the whistleblower was the original source of that information.

Although any recovered damages belong to the government, the whistleblower is entitled to a portion of the money, either through settlement or court judgment. This can range from 10% to 30% of the total, which in some recent settlements amounted to tens of millions of dollars, so whistleblowers can be very motivated indeed.

Protecting yourself
There are no strategies guaranteed to shield you from a FCA lawsuit, but here's what you can do to lessen the possibility you'll ever find your facility embroiled in a whistleblower situation.

First and foremost, know the rules and stick to them. Your operating policies and protocols should reflect an aim toward comprehensive regulatory compliance. Make sure all employees are trained to understand the importance of compliance with all applicable healthcare regulations. Remind them of their duties to report illegal conduct.

Be sure to provide a way by which employees can report violations internally and anonymously. Take these reports seriously. Even if an employee registering a complaint is in error about what the law requires, and even if what she is reporting is not actually illegal, make sure she doesn't feel as though her complaint is being brushed off.

It's just as important to train your supervisors and managers on properly and sensitively receiving employees' complaints, and promptly responding to troubled working relationships. Obtain confirmation from departing employees, management or staff that they've disclosed any misconduct of which they're aware.

No signs of slowing down
Healthcare providers involved in FCA actions can face potentially significant risks. According to the law, damages can be tripled, and civil penalties range from $5,000 to $10,000 per claim.

It can get worse. Depending on the seriousness of the alleged fraud, a provider might be ordered to enter into a corporate integrity agreement, which usually involves 5 years of stringent requirements and government oversight.

The biggest pitfall of FCA lawsuits, however, is that defendants who are found liable for fraudulent activity can be excluded from participation in Medicare, Medicaid and other federal healthcare programs — a veritable death sentence for providers.

After all these years, the False Claims Act shows no signs of slowing down. With bipartisan support in Washington and with Medicare and Medicaid spending increasing under healthcare reform, it's only getting stronger. While its 150th anniversary next March might not be cause for public commemoration, it would be unwise to underestimate what has become the federal government's most effective tool against healthcare fraud.

EXPANDING REACH

False Claims Act Picking Up Steam

Over the past 3 years, 2 significant amendments to the U.S. False Claims Act have greatly expanded its reach, particularly in the context of health care.

• The Fraud Enforcement and Recovery Act of 2009. This act expanded liability for "reverse false claims." Previously, reverse false claims meant false statements made to avoid paying money owed to the government. The new amendment doesn't require the defendant to have made false statements. So, for example, a provider who fails to return an overpayment to Medicare could be found liable without making any false statements at all. What's more, a provider doesn't actually have to know about the overpayment to be held liable for it. Reckless disregard or deliberate ignorance of the overpayment is enough to support FCA charges.

• The Affordable Care Act of 2010. The healthcare reform law sets a 60-day deadline for reporting and returning overpayments. The clock starts when a provider "identifies" an overpayment, and failure to return overpayments on time violates the FCA. CMS's proposed regulations on the 60-day repayment rule (which, for now, apply only to Medicare Part A and Part B providers), state that an individual "identifies" overpayment if he has actual knowledge of it, or recklessly disregards or deliberately ignores it.

These regulations, however, leave a lot of questions unanswered. Does the 60-day clock start when a provider first suspects there may be an overpayment, or when the amount of the overpayment is calculated and confirmed? What about complex overpayment situations, in which a provider cannot reasonably be expected to quantify or calculate the amount within 60 days? Additionally, providers are bound to a 10-year look-back period in which overpayments must be reported and returned, an obligation considerably more burdensome than Medicare's 3-year window for reopening claims.

The $8.7 billion in settlements and judgments that the Department of Justice secured in FCA cases from 2009 to 2011 is the largest 3-year total in the department's history. It's a safe bet that FCA recoveries for 2012 and beyond will continue at this record-setting pace.

— Jennifer L. Weaver, JD