Among the most important False Claims Act (FCA) issues to understand in discharging one’s obligations to comply with the law is what, if anything, one must do when the underlying regulatory scheme governing payment from the government is ambiguous. For example, if the company simply adopts a reasonable interpretation of the law and seeks payment, will courts, under FCA precedent, find the company liable under the FCA if, upon review, the company’s reasonable interpretation is wrong? Under these circumstances, will the company be deemed to have acted with “reckless disregard” in violation of the FCA if there is no official governmental guidance that would have warned the company away from its reasonable interpretation of law?
An issue every health care entity that submits claims to the government must frequently confront is when and how to disclose an overpayment to the government. This issue arises when, for example, an employee expresses concern about a claim or an internal audit or review questions a claim, or a Medicare Administrative Contractor inquires into a claim. Under amendments to the Affordable Care Act (ACA), if an overpayment is not reported to the government within 60 days, the entity could be held liable under the FCA for treble damages and substantial civil penalties.1
Akin Gump litigation partner Shawn Hanson and senior counsel Maria Ellinikos have written an article titled “A Little-Known Powerful Tool To Fight Calif. Insurance Fraud” recently published by Law360.
I. Stark Law and False Claims Act
The FCA has become the primary enforcement vehicle for the Ethics in Patient Referrals Act, better known as the Stark Law. There are now more than 150 public cases citing to both the Stark Law and the FCA.1 The government and relators have collected several hundred million dollars in FCA judgments or settlements in cases alleging an FCA violation based upon an alleged Stark Law violation.2
The Stark Law prohibits certain types of health care referrals for designated health services (DHS) when a health care entity has a financial relationship with a physician. Services a physician personally performs are not referrals for purposes of the Stark Law. Personally performed professional services are acts that the doctor does for the patient directly, such as performing surgery for which the doctor bills a professional fee. This is distinguished from ancillary services that the physician may refer to the hospital for which the hospital separately bills a facility fee or technical component.
The New York Court of Appeal ruled on Tuesday, October 20, 2015 that Sprint must face a $390 million tax fraud suit brought by New York Attorney General (AG) Eric Schneiderman, finding that the state’s tax law applies to interstate phone services, and the AG’s complaint stated a claim under the New York False Claims Act (FCA).
According to the AG’s complaint, Sprint violated the NY FCA by deliberately failing to bill customers for taxes on its wireless services during a seven-year period to gain a competitive advantage. Sprint had moved to dismiss the complaint and appealed to New York’s highest court after losing the motion. A more detailed discussion of Sprint’s motion to dismiss and the trial and appellate courts’ rulings are available here
A common issue that any person who conducts business with the government confronts is this: When does a perceived rule violation or contractual breach result in potential FCA violations, subjecting the person to treble damages and substantial civil penalties?
This question is particularly pressing for those participating in Medicare and Medicaid programs. Prior to participation in these programs, health care providers and suppliers must enter into various agreements certifying that they will adhere to various rules and regulations. When submitting claims for payment or cost reports, health care entities must also certify that they complied with various federal and state rules and regulations.
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The FCA is the government’s primary weapon to prevent fraud against the United States. Since Congress substantively amended the FCA in 1986 to facilitate the filing of private whistleblower lawsuits (known as qui tam actions filed by plaintiffs known as “relators”), more than 9,000 qui tam actions have been filed. In fact, over one recent five-year period (2008-2013) alone, more than 3,000 lawsuits were filed, and $20 billion was recovered. These numbers rival or even eclipse securities and antitrust in annual filings and recoveries.1
Last week, a Los Angeles Superior Court held that the relevant date for determining when the statute of limitations begins to run under the Insurance Frauds Prevention Act (IFPA) is the date an insurer forms a reasonable belief that a claim is fraudulent and refers the claim to the California Department of Insurance (DOI), not the date the insurer refers a claim to its Special Investigation Unit (SIU).