The False Claims Act (FCA) imposes liability on individuals and companies who defraud or submit false claims to the federal government. The FCA allows the federal government to seek treble damages, civil penalties and attorney’s fees for violations of the Act. Further, the FCA contains qui tam, or whistleblower, provisions which award whistleblowers up to 30% of the amount recovered by the federal government. FCA suits and recoveries have exploded in recent years. The federal government reports that FCA recoveries have topped $22 billion since 2009. Accordingly, the FCA is widely considered the fastest growing area of federal litigation and has been described as the “government’s most potent civil weapon in addressing fraud.”
Historically, FCA claims have targeted the health care industry, and 2014 was no exception. According to the Department of Justice, more than 60% of new matters were health care related, and 2014 health care-related recoveries exceeded $2.3 billion. This is the fifth straight year the federal government has recovered more than $2 billion from companies in the health care industry.
Pharmaceutical companies accounted for a substantial part of the $2.3 billion recovered from the health care industry in 2014. For example, Johnson & Johnson and two of its subsidiaries paid $1.1 billion to resolve FCA claims involving allegations it violated the Anti-Kickback Statute by making improper payments to physicians and a pharmaceutical provider and engaged in off-label marketing of three prescription drugs.
The federal government also focused on hospitals, nursing homes, home health and hospice agencies and physician practices in 2014. For example, one large hospital chain paid more than $98 million dollars to resolve allegations it improperly billed Medicare, Medicaid and TRICARE for inpatient services which could have been provided in a less costly setting. A large nursing home provider paid $3.75 million to resolve allegations that it billed Medicare for unnecessary rehabilitation services. A Tennessee-based home health agency paid over $25 million relating to allegations that it upcoded services provided unnecessary care.
Given the risk and devastating effect that an FCA allegation can have, health care providers should take internal reports of misconduct seriously. Although whistleblowers have a great financial incentive to report alleged misconduct to the government, studies show that most whistleblowers report their conduct internally before going to the government. Emphasizing the your compliance plan and conducting timely internal investigation when internal reports of misconduct are made by staff or patients may defuse a FCA suit before it begins.
James C. Lesnett, Jr. and Eric H. Cottrell have substantial experience investigating and litigating FCA issues. They have also successfully helped clients avoid FCA litigation through direct pre-trial settlement negotiations with governmental authorities.