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What are the Potential Medicaid Fraud Penalties?

By Joy Clairmont

The potential penalties for healthcare providers found liable for committing Medicaid fraud are significant. If an entity is liable for Medicaid fraud in violation of the False Claims Act, the possible penalties include: civil monetary penalties for each false claim submitted, treble damages based on the amount defrauded from Medicaid, costs, fees and expenses. If you have knowledge about potential Medicaid fraud, you may pursue a qui tam lawsuit as a whistleblower and possibly receive a portion of these Medicaid fraud penalties.

Incentives for Whistleblowers to Report Medicaid Fraud

The False Claims Act allows for individuals with evidence and knowledge of fraud committed against the government to file a case on behalf of the government. If the government recovers money from such a case, the individual may be entitled to an award or a percentage of the recovery, ranging from 15-30% of the recovery.

Medicaid Program Fraud

The Medicaid Program is often a target for fraud. Medicaid is an extensive government health insurance program for low-income residents, children, the elderly and disabled individuals. Medicaid Program spending tops over $550 billion per year.

Each State’s Medicaid Program covers a range of medical benefits including inpatient hospital services, home health services, laboratory tests and ambulance transportation to medical care. States’ Medicaid Programs are jointly funded by the Federal and State governments. As such, if you know of a potential Medicaid fraud case, it could be brought under the Federal and State False Claims Acts and, if successful, you would be entitled to a share of the recovery.

Specific Medicaid Fraud Penalties

There have been many successful Medicaid fraud cases brought by whistleblowers pursuant to the Federal and State False Claims Acts against a variety of healthcare providers, such as hospitals, pharmacies and drug companies. The penalties in these cases have included:            

  • Treble Damages: This is the most significant penalty in Medicaid fraud cases. Damages are calculated by taking the amount fraudulently received from the government in reimbursement (or fraudulently underpaid to the government) and multiplying that amount by three. 31 U.S.C. § 3729(a)(1). This is referred to as “treble damages.”
  • Civil Monetary Penalties: Civil monetary penalties are assessed on a per claim basis. This means that each individual false claim carries its own penalty. Thus, for a court to impose a civil penalty, it must first determine how many distinct violations occurred. The current minimum penalty per claim is $10,957, and the current maximum penalty per claim is $21,916.
  • Attorneys’ Fees, Costs and Expenses: In addition, a successful whistleblower is entitled to the reimbursement of attorneys’ fees, costs, and expenses. 

Berger & Montague’s Successful Medicaid Fraud Cases

Berger & Montague has a long track record of bringing successful Medicaid fraud cases on behalf of qui tam whistleblowers and recovering hundreds of millions of dollars for the government. Some of the Firm’s noteworthy cases include:

  • United States ex rel. Rinehart v. Walgreen Co., Case No. 2:14-cv-0148 (E.D. Cal): This Medicaid fraud case against Walgreens settled for $9.86 million in April 2017. The settlement resolved allegations that Walgreens falsely billed California’s Medicaid Program, Medi-Cal, in violation of the False Claims Act and the California False Claims Act. The lawsuit alleged that Walgreens improperly billed Medi-Cal for certain prescription drugs, “Code 1” drugs, appearing on Medi-Cal’s formulary list. As alleged, Walgreens knowingly failed to comply with applicable “Code 1” drug restrictions and documentation requirements by failing to ensure that the drugs were prescribed for the requisite diagnoses prior to dispensing the drugs to Medi-Cal beneficiaries.
  • United States ex rel. Streck v. AstraZeneca, LP, et al., C.A. No. 08-5135 (E.D. Pa.):  a Medicaid rebate fraud case which settled in 2015 for a total of $55.5 million against three pharmaceutical manufacturers: AstraZeneca, Cephalon, and Biogen.
  • United States ex rel. Kieff and LaCorte v. Wyeth and Pfizer, Inc., Nos. 03-12366 and 06-11724-DPW (D. Mass.):  a Medicaid rebate fraud case involving Wyeth’s acid-reflux drug, Protonix, which settled for $784.6 million in April 2016.

It is free to speak with our nationally recognized whistleblower attorneys:


 

Why Was the False Claims Amendments Act of 1986 Enacted?

By Lane L. Vines

The Original “Lincoln Law”

The False Claims Act (“FCA”), 31 U.S.C. §§ 3729-3733, was originally enacted in 1863 during the administration of President Abraham Lincoln and has often been referred to as the “Lincoln Law.” The law was motivated by the unscrupulous acts of government contractors during the American Civil War who provided deficient goods and services to the Union Army.

As enacted, the FCA provided for both criminal and civil liability and allowed any person to bring suit in the name of the United States to recover civil penalties and forfeitures. These so-called qui tam” provisions thus enlisted members of the public, known as relators, to actively pursue recoveries for fraud on behalf of the Government. Relators may then share in a portion of those recoveries. The original FCA remained relatively unchanged for decades.

The 1943 Amendments

In 1943, amid criticism that qui tam actions were providing recoveries to undeserving relators and impeding federal law enforcement, Congress amended the FCA to effectively curtail the ability of relators to prosecute claims and reduce a relator’s share in the event of a successful suit. While the 1943 Amendments may have been intended to reform the FCA, fraud against the Government skyrocketed during the next several decades. Worse yet, most of the wrongdoing went unpunished. According to a 1981 report by the Government Accountability Office, “[f]or those who are caught committing fraud, the chances of being prosecuted and eventually going to jail are slim…. The sad truth is that crime against the Government often does pay.”

The 1986 Amendments

Faced with rampant fraud and a lack of government resources to combat it, Congress eventually recognized that a more robust FCA was needed. In 1986, Congress passed Public Law 99-562 (100 Stat. 3153), known as the False Claims Amendments Act of 1986. This legislation, sponsored by long-time whistleblower advocate Senator Charles Grassley of Iowa and Representative Howard Berman of California, among others, made numerous changes to strengthen and enhance enforcement of the FCA. The Amendments focused on not only increasing penalties but also empowering relators through added protections against retaliation and greater incentives.

Among other things, the 1986 Amendments:

  • created an explicit cause of action for reverse false claims (e., false statements made to reduce an obligation to pay the United States), 31 U.S.C. § 3729(a)(1)(G);
  • created an explicit cause of action for retaliation against whistleblowers, 31 U.S.C. § 3730(h);
  • increased sanctions from a penalty of not more than $2,000 and double damages to a penalty of not less than $5,000 nor more than $10,000 and treble damages, 31 U.S.C. § 3729(a);
  • increased the maximum award available to qui tam relators from 25% to 30%, 31 U.S.C. 3730(d)(2);
  • added an express definition of the knowledge required for a violation, declaring that a specific intent was unnecessary, 31 U.S.C. 3729(b);
  • provided a specific preponderance-of-the-evidence burden of proof standard, 31 U.S.C. 3731(d);
  • added a declaration that states may act as qui tam relators, 31 U.S.C. 3732(b);
  • added a revised jurisdictional bar for qui tam suits based on matters of public knowledge, 31 U.S.C. 3730(e);
  • expanded the applicable statute of limitations, 31 U.S.C. 3731(b); and
  • created an authorization for government use of civil investigative demands, 31 U.S.C. 3733.

The 1986 Amendments have clearly succeeded in many respects. While FCA claims reportedly recovered about $40 million a year prior to 1986, the Government has since recovered more than $44 billion in FCA settlements and judgments. Moreover, whistleblowers have initiated 80% of these cases.

Indeed, as Senator Grassley, one of the chief architects of the 1986 Amendments, has aptly noted, “[t]he False Claims Act is the government’s premier tool to recover government money lost to fraud and abuse.”

It is free to speak with our nationally recognized whistleblower attorneys:


Whistleblowing in Nursing

By Susan Schneider Thomas

Nurses have long been a crucial part of the healthcare system, and they can be just as crucial when it comes to reporting fraud within that system.

As insiders and observers of many healthcare procedures and billing practices, nurses have much-needed visibility into wrongdoing being committed by hospitals, physician-practice groups, drug manufacturers, home healthcare providers, nursing homes and more.

Nurses have been instrumental in reporting:

  • Off-label marketing by drug reps;
  • Improper use of laboratory or other tests to churn up payments;
  • Upcoding of services provided, to increase payment levels;
  • Claims of home-health visits that did not really occur;
  • Billing for doctors’ services when the doctors were not present for the procedures; and
  • Improper care of children in state-run mental health facilities.

Nurses have a natural affinity toward reporting corrupt and fraudulent healthcare practices because of the possibilities of poor patient care and the draining of public funds that could otherwise support the legitimate needs of beneficiaries of the system.

Healthcare Fraud and the False Claims Act

The federal and state False Claims Acts are designed to weed out fraudulent billing and recover funds for the public fisc – allowing government healthcare programs to operate more effectively and have more funds available to provide healthcare to millions of Americans.

Only false or fraudulent claims on government healthcare programs are covered under these statutes, not other types of false claims such as suspected fraud on private insurance companies.

If fraudulent conduct is reported and results in a payment by the wrongdoer, the whistleblower is credited for the reporting and becomes eligible for an award of anywhere from 15-30% of the amount of the government’s recovery (part of which will typically be paid out as attorneys’ fees).

Nurse Whistleblower Risks and Challenges

It would be irresponsible, however, to not recognize the risks and challenges that nurses – like many other whistleblowers – might face. First, no one likes to have his or her judgments or actions questioned, and one might argue that doctors are high up on that list.

Second, nurses are generally accustomed to working as part of a team, where other members might either be complicit in the suspected wrongdoing or simply not want the distraction and finger-pointing that often accompanies an investigation of fraudulent conduct.

Third, some locales might have a fairly tight-knit healthcare community, where word of someone’s whistleblowing activities could impact his or her ability to find alternative employment opportunities. Finally, nurses might observe problematic healthcare practices, but not have information or documentation about actual billing practices.

Documenting Fraud

Nurses who observe medical practices or billing that they believe to be fraudulent should carefully document the wrongdoing they see, with details about times, dates, persons involved and especially anything they can see about false billing.

Given the potential pitfalls about violating healthcare privacy rules and general limitations on copying employers’ documents, it is advisable to consult with legal counsel early in that process.

The American Nurses Association provides the following sound advice: “Seek the counsel of someone you trust outside of the situation to provide you with an objective perspective, and consult with your state nurses association or legal counsel if possible before taking action to determine how best to document your concerns.”

Depending upon the situation and your relationship with co-workers, you might want to consider working with another employee, especially someone who might be observing the questionable conduct from a different department or perspective.

For example, a clinical nurse might reach out to someone in the billing department, subject to concerns about being “outed” or even beaten to the punch about reporting suspected fraud. A nurse who observes a seeming pattern of unnecessary testing and billing might want to work with someone else who can corroborate the suspected fraud or possibly provide a longer timeline.

Contact an Experienced Whistleblower Attorney

Even when the morality and ethics of reporting problematic conduct seems clear, there can be complications in terms of assessing whether particular conduct actually violates any state or federal billing regulations, and there are always concerns about potential retaliation. Reach out to experienced legal counsel to discuss your particular situation and to get help deciding how you want to proceed.

It is free to speak with our nationally recognized whistleblower attorneys:


 

What Happens During a Medicaid Fraud Investigation?

By Shauna Itri

What is Medicaid Fraud?

Medicaid is a health insurance program for low-income individuals that is jointly funded by the State and Federal government. Medicaid covers children, the elderly, blind and/or disabled and other people who are eligible to receive federally assisted income maintenance payments. On occasion, individuals, doctors, medical professionals, hospitals and/or companies are charged with committing Medicaid fraud by knowingly misrepresenting the truth to obtain unauthorized benefits.

Medicaid Fraud and the False Claims Act

While Medicaid fraud can be pursued by the government sua sponte, many times a Medicaid fraud investigation is initiated by the filing of a False Claims Act case. If an individual or group of individuals has evidence of Medicaid fraud, they can seek to file a lawsuit under the Federal or State False Claims Acts. The False Claims Act allows for individuals with such evidence and knowledge to file cases with the government. If the government recovers money from such a case, the individual may be entitled to an award or a percentage of the recovery

Commencing a Medicaid Fraud Investigation

If the individual or group of individuals has a meritorious case and an attorney files a False Claims Act case on their behalf, an investigation into the case commences. The Medicaid fraud investigation is initiated by the filing of a case and the serving of the complaint and all material evidence on the government. After the government is served, the government reaches out to the plaintiff-whistleblower’s attorney to schedule an interview. During that interview, the government assess the credibility of the whistleblower and gathers information to assist in its investigation.

Medicaid Fraud Investigation

After the interview is complete, the government conducts an investigation while the False Claims Act case is under seal. During the investigation, the prosecutor assigned to the case will likely reach out to the government agency involved to obtain the agency’s thoughts/opinion on the case, gather and review the government’s own claims data to assess the size of the case, and decide on a plan to investigate the facts.

In order to investigate the facts, the government might issue a “civil investigatory demand” or “CID” to the alleged defendants to obtain documents, while simultaneously seek and interview former employees. If the government wishes, it might reach out to the alleged defendant to interview or depose current company employees or present the allegations in the complaint to the defendant (without disclosing the whistleblower’s identity or the fact that a case has been filed) and ask the defendant to respond.

Concluding a Medicaid Fraud Investigation

At the conclusion of the government’s investigation of a Medicaid False Claims Act case, the government will make a decision as to whether or not it will intervene or pursue the case or decline the case. At that time, the case comes out from under seal and, if the case goes forward, the alleged defendant is served with the complaint. If the case is declined and the whistleblower does not seek to litigate the case, the case is voluntarily dismissed by the government and whistleblower.

It is free to speak with our nationally recognized whistleblower attorneys:


Florida False Claims Act

By Jonathan DeSantis

In 1994, the Florida Legislature adopted the Florida False Claims Act (“FFCA”),[1] which, generally speaking, “authorizes a private person or the State to initiate a civil action against a person or company who knowingly presents a false claim to the State for payment.”[2]

Like the federal False Claims Act, the FFCA authorizes a private person, known as a relator, to bring qui tam claims on the State’s behalf.If successful, the relator receives between 15-30% of any recovery.[3] Thus, anyone who knows about potential fraud involving state money in Florida should evaluate whether such knowledge can provide the basis for claims under the FFCA.

The Basics of the Florida False Claims Act

As various state and federal courts have noted, the FFCA largely mirrors the federal False Claims Act, and courts applying the FFCA frequently look to cases interpreting the federal statute for guidance.[4] While the federal statute prohibits the presentation of false claims to the federal government or false claims involving federal funds, the FFCA “affords a general ability to avail the judicial process for false claims presented to the State.”[5]

Specifically, anyone who “[k]nowingly presents or causes to be presented a false or fraudulent claim for payment or approval” commits a violation of the FFCA.[6] “Claim” means:

[A]ny request or demand, whether under a contract or otherwise, for money or property, regardless of whether the state has title to the money or property, that:

Is presented to any employee, officer, or agent of the state; or

Is made to a contractor, grantee, or other recipient if the state provides or has provided any portion of the money or property requested or demanded, or if the state will reimburse the contractor, grantee, or other recipient for any portion of the money or property that is requested or demanded.[7]

“State” is broadly defined as “the government of the state or any department, division, bureau, commission, regional planning agency, board, district, authority, agency, or other instrumentality of the state.”[8] However, it is not necessary that a false claim be presented directly to a state agency to be actionable under the FFCA. A claim that is presented to an entity that utilizes state funds to pay the claim is also a false claim under the FFCA.[9]

FFCA claims are often brought in the same lawsuit as claims under the federal False Claims Act.[10] For example, a relator may allege that a doctor presented false claims to Medicaid. Because Medicaid is jointly funded by the federal and state governments, the relator would likely pursue claims under both statutes.[11]

Differences Between the FFCA and the Federal False Claims Act

As discussed above, the FFCA contains provisions that correspond to the federal statute with a few differences.[12]

One interesting procedural provision of the FFCA is that it requires all FFCA-only lawsuits (those without companion claims under the federal False Claims Act) to be filed in state court in Leon County.[13] This is unusual given that lawsuits, including those under the federal False Claims Act, must generally be filed in a geographic jurisdiction that has some relationship to the case or the defendant.[14]

For example, even if a relator living in Key West pursues FFCA claims based on conduct that exclusively occurred in Key West by a business that is only located in Key West, the relator still must file the FFCA lawsuit in Leon County. On the other hand, lawsuits pursuing claims under both the FFCA and the federal False Claims Act are filed in federal court.[15]

Another unique provision in the FFCA is that it specifically provides that it “shall be liberally construed to effectuate its remedial and deterrent purposes.”[16] As one court explains, this means that courts “must interpret the statute in a manner that implements the plain meaning of the law, while ensuring that contextual boundaries honor the Legislature’s intent to assure that false claims are vigorously pursued and that the courts do not unduly interfere with the State’s statutory prerogatives to obtain restitution for its losses and to punish those persons and entities which seek to wrongfully defraud the State through double and triple recoveries.”[17]

[1] 1994 Fla. ALS 316, 1994 Fla. Laws ch. 316, 1994 Fla. HB 551 (May 31, 1994).

[2] State v. Barati, 150 So. 3d 810, 811 (Fla. 1st DCA 2014); see also Myers v. State, 866 So. 2d 103, 103 (Fla. 1st DCA 2004) (explaining that the FFCA “authorizes civil actions by individuals and the state against persons who file false claims for payment or approval with a state agency”).

[3] Fla. Stat. § 68.085.

[4] See e.g. Barati v. State, 198 So. 3d 69, 78 (Fla. 1st DCA 2016), review denied, No. SC16-834, 2016 WL 4429843 (Fla. Aug. 22, 2016), and cert. denied, 137 S. Ct. 1085, 197 L. Ed. 2d 198 (2017), reh’g denied, 137 S. Ct. 1618, 197 L. Ed. 2d 741 (2017) (“Federal case law interpreting the Federal FCA is persuasive here, as the Florida Legislature patterned the State’s qui tam statute after the federal law.”);  U.S. ex rel. Heater v. Holy Cross Hosp., Inc., 510 F. Supp. 2d 1027, 1034 n. 5 (S.D. Fla. 2007) (“The Florida FCA, is modeled after and tracks the language of, the federal False Claims Act. The parties do not dispute that the same standard is applied to the evaluation of the claims under both statutes.”) (internal quotation marks and citation omitted); United States v. All Children’s Health Sys., Inc., 2013 WL 6054803, at *7 n. 8 (M.D. Fla. Nov. 15, 2013) (“Conclusions as to the federal False Claims Act apply equally to the Florida False Claims Act because the Florida version mirrors the federal False Claims Act.”).

[5] Stevens v. State, 127 So. 3d 668, 669 (Fla. 1st DCA 2013).

[6] Fla. Stat. § 68.082(2)(a).

[7] Fla. Stat. § 68.082(1)(a).

[8] Fla. Stat. § 68.082(1)(f).

[9] See Fla. Stat. § 68.082(1)(a) (defining claim in relevant part as a claim “made to a contractor, grantee, or other recipient if the state provides or has provided any portion of the money or property requested or demanded, or if the state will reimburse the contractor, grantee, or other recipient for any portion of the money or property that is requested or demanded”).

[10] See e.g. Barys ex rel. U.S. v. Vitas Healthcare Corp., 298 F. App’x 893, 897 n. 1 (11th Cir. 2008); McShea v. Sch. Bd. of Collier Cty., 58 F. Supp. 3d 1325 (M.D. Fla. 2014); United States v. Educ. Mgmt. Corp., 871 F. Supp. 2d 433 (W.D. Pa. 2012).

[11] See  Fla. Office of the Attorney General, Medicaid Fraud Control Unit, available at http://www.myfloridalegal.com/pages.nsf/Main/EBC480598BBF32D885256CC6005B54D1 (“Under Florida’s False Claims Act, people who blow the whistle on Medicaid Fraud are entitled to share in any funds recovered by the state.”).

[12] See Barati v. State, 198 So. 3d at 78 (“Federal case law interpreting the Federal FCA is persuasive here, as the Florida Legislature patterned the State’s qui tam statute after the federal law, with some notable and significant differences…”).

[13] Fla. Stat. § 68.083(3).

[14] 31 U.S.C. § 3732 (providing that actions under the federal False Claims Act “may be brought in any judicial district in which the defendant or, in the case of multiple defendants, any one defendant can be found, resides, transacts business, or in which any act proscribed by section 3729 occurred”).

[15] 31 U.S.C. § 3732 (granting jurisdiction to federal courts to hear claims under the federal False Claims Act and related claims under corresponding state false claims acts).

[16] Fla. Stat. § 68.091(1).

[17] Barati, 198 So. 3d at 77.

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What are the Penalties for Violating the Federal False Claims Act?

By Russell Paul

If someone violates the False Claims Act (“FCA”), the repercussions are extensive and severe. They include civil monetary penalties, damages, expenses, permanent exclusion from the Medicare and Medicaid programs, and, under the Anti-Kickback Statute, criminal penalties.

Civil Monetary Penalties

With civil monetary penalties, the government assesses a penalty on a per claim basis. This means that each individual false claim carries its own penalty. Thus, for a court to impose a civil penalty, it must first determine how many distinct violations occurred.

For example, a single Medicare reimbursement form (CMS Form 1500) may include several distinct claims for payment. Even though each individual claim on the form may be a false claim (i.e., that particular service was never performed), most courts consider the entire form submitted to the Government to be a single false claim. United States v. Krizek, 192 F.3d 1024, 1026 (D.C. Cir. 1999)

The current minimum penalty per claim is $10,957, and the current maximum penalty per claim is $21,916.

These per claim amounts are adjusted annually by comparing the cost of living adjustment for each of the two preceding Octobers, rounded to the nearest dollar. The Supreme Court has held that a district court has discretion in determining the amount awarded as civil penalties. United States v. ITT Continental Baking Co., 420 U.S. 223, 230 (1975) However, penalties that are too high when compared to the gravity of the violation may violate the Excessive Fines Clause of the Eighth Amendment, which limits the government’s power to extract payments, whether in cash or in kind, as punishment for an offense.

Damages

Damages are calculated by taking the amount the False Claims Act violator received from the federal government and multiplying that amount by three. 31 U.S.C. § 3729(a)(1) This is referred to as “treble damages.”

Expenses

The violator is also liable for the costs to the federal government for bringing the civil action. 31 U.S.C. § 3729(a)(3)

In addition, a successful relator is entitled to the reimbursement of attorneys’ fees, costs, and expenses whether the government intervenes in the case [31 U.S.C. § 3730(d)(1)] or declines and the relator litigates the matter to a successful conclusion herself.  [31 U.S.C. § 3730(d)(2)]

Permanent Exclusion from the Medicare and Medicaid Programs

A violator may be permanently excluded from the Medicare and Medicaid programs. This means that the provider who violated the FCA could not treat the more than 55 million Medicare and Medicaid beneficiaries. The Office of Inspector General (OIG) publishes the names of excluded individuals on its website.

Rather than being excluded from Medicare and Medicaid, the violator can be forced to sign a Corporate Integrity Agreement (CIA) with the government. CIAs have many common elements, but each one addresses the specific facts at issue and often attempts to accommodate and recognize many of the elements of preexisting voluntary compliance programs. A comprehensive CIA typically lasts 5 years and includes requirements to:

  • hire a compliance officer/appoint a compliance committee;
  • develop written standards and policies;
  • implement a comprehensive employee training program;
  • retain an independent review organization to conduct annual reviews;
  • establish a confidential disclosure program;
  • restrict employment of ineligible persons;
  • report overpayments, reportable events, and ongoing investigations/legal proceedings; and
  • provide an implementation report and annual reports to OIG on the status of the entity’s compliance activities.[1]

The Anti-Kickback Statute and Criminal Penalties

The federal Anti-Kickback Statute (“Anti-Kickback Statute” or AKS”) is a criminal statute that prohibits the exchange (or offer to exchange), of anything of value, in an effort to induce (or reward) the referral of federal health care program business. See 42 U.S.C. § 1320a-7b.

The Anti-Kickback Statute is broadly drafted and establishes penalties for individuals and entities on both sides of the prohibited transaction. Conviction for a single violation under the Anti-Kickback Statute may result in a fine of up to $25,000 and imprisonment for up to five years. See 42 U.S.C. § 1320a-7b(b). Individuals who violate the AKS, such as the CEO, CFO or Medical Director of a healthcare entity, may be subject to these criminal penalties.

[1] https://oig.hhs.gov/compliance/corporate-integrity-agreements/index.asp

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What is Medi-Cal Fraud?

By Susan Schneider Thomas

Medi-Cal is the name of the State of California’s Medicaid program, as well as certain state healthcare programs. Medi-Cal is administered by the California Department of Health Services and accounts for more than $40 billion in annual expenditures – nearly one-quarter of the state’s entire budget. Medi-Cal provides health coverage for approximately one out of every six Californians.

Medi-Cal fraud is any type of fraud perpetrated on the Medi-Cal program, whether by healthcare providers or beneficiaries. Individuals who claim benefits beyond what they are entitled to should be reported directly to the State Attorney General’s Office or the Bureau of Medi-Cal Fraud and Elder Abuse. If the fraud is a more pervasive scheme by a healthcare provider, however, you should contact an attorney to explore possible actions under California’s False Claims Act (the “Act”), Cal. Gov’t Code §§ 12650-12656.

The assistance of an experienced and qualified attorney is critical because of the procedural complexities of the Act, the concern about protecting yourself from possible retaliation, and the potential for a monetary recovery based on your role in reporting and prosecuting the alleged wrongdoing.

Private Citizens Can Initiate Actions Under the California False Claims Act

The Act’s qui tam provision permits a whistleblower to file an action to recover money for the State. Lawsuits initiated by private whistleblowers have resulted in some of the most significant recoveries under the Act.

Your lawsuit would be filed under seal to permit the Attorney General or local prosecuting authority to investigate and, if warranted, intervene in the action. This means that your identity is not made publicly known during the period that the case remains under seal, which is typically between one to three years.

If the government decides to intervene in your case, you could be eligible to receive 15-33% of the proceeds of the action or settlement of the claim, depending upon the extent to which you and your lawyers substantially contributed to the prosecution of the action. Further, if the government decides not to intervene, you have the right to continue to prosecute the case on the government’s behalf, making you eligible for up to 50% of any recovery.

Will I Be Protected Against Retaliation If I File A Lawsuit?

Although no statute can actually prevent a retaliatory action by your employer, California has a well-developed structure designed to deter such actions and allow for significant recoveries if you can prove that your employer violated the statutory prohibitions.

In addition to provisions under the California False Claims Act itself, there are also protective provisions in the California’s Whistleblower Statute, Cal. Labor Code §§ 1102.5-1105 and under the California Health and Safety Code § 1278, et seq. (protecting medical staff, doctors and nurses from retaliation due to reporting activities that affect patient care and safety).

What Types of Conduct Violate the False Claims Act?

Unfortunately, the range of illegal conduct is as broad as the imagination and determination of the people trying to steal money from this important State healthcare program.  Among the more typical schemes are:

  • Billing for medical services or procedures that the patient never actually received;
  • Billing for more expensive services than the ones the patient received (known as “upcoding”);
  • Billing both a government healthcare program and a private medical insurance provider for the same claim;
  • Actually providing and billing for services that the patient doesn’t need (involving both monetary fraud and likely patient harm);
  • Providing goods that are not what they are represented to be; or
  • Charging government healthcare programs marked-up prices for medical devices or supplies.

In addition to these fairly straightforward schemes, there are various statutes and regulations that prohibit payments (of cash or other incentives) for the purpose of soliciting patients or contracts covered by government healthcare programs or regulate referrals of business to labs, clinics or other entities in which a healthcare provider has a financial stake.

Have Evidence of Medi-Cal Fraud?

If you observe conduct that doesn’t seem legitimate, or you are pushed to provide care or bill in ways that do not seem appropriate, contact a qui tam lawyer to evaluate whether the conduct you see is fraudulent and illegal.

It is free to speak with our nationally recognized whistleblower attorneys:


NIH Grants: A Risk Area for Fraud

By Sherrie Savett

Background

The National Institutes of Health (“NIH”) awards billions of dollars to support medical and scientific research in the area of health and diseases. NIH invests approximately $32.3 billion each year in research grants to recipient organizations.[1] There are strict requirements for grant approval. Only 7 – 15% of NIH grant applications or resubmissions are successful. Grant funding is for a limited time, typically only lasting for 2 – 4 years.

Grant Application Requirements

Drafting a new federal grant application takes a significant amount of time and effort. For a new grant application, resubmission or renewal (“grant application”), the principal investigator (“PI”), faculty and other research staff (e.g., postdoctoral fellows, staff scientists and research associates) may spend hundreds of hours compiling, drafting, revising and finalizing the information included in the grant application.

The grant application requires a description of the research project, the key personnel who will work on the research, a detailed budget and a specific research plan which explains all the scientific data in detail. It is not uncommon for a grant application to be hundreds of pages. The most labor intensive part of the application is obtaining the scientific data, which involves considerable research into the scientific literature and the design of experiments that support a research hypothesis.

In a grant application, the requested budget includes the compensation for the key personnel who will be working on the grant research. The salaries of the researchers typically make up a significant portion of the costs of the grant. Salaries of researchers are often 60% or more of the grant amount requested. The portion of a researcher’s salary charged to a grant is expressed as a percentage of the researcher’s time and effort he plans to devote to the grant research out of the researcher’s total professional activity.

Total professional activity, which includes new grant applications and research, teaching, and other administrative activities, equals 100% and is not based on a 40 hour work week. For example, if the researcher’s total salary is $100,000 and he plans to spend 6 months (50% effort) working on a particular grant’s research, then the grant application would request $50,000 in grant funding to cover the cost of his salary.

NIH Grant Regulations and Reporting System

Under the law, a grant recipient institution may only charge a federal grant for the percentage of a researcher’s salary commensurate with the time and effort actually expended by the researcher for work on that grant.  2 C.F.R. § 200.430(a)(1); see also NIH Grants Policy Statement, at IIA-84 (Oct. 2017), available at https://grants.nih.gov/grants/policy/nihgps/nihgps.pdf (providing that “[c]ompenstaion costs are allowable to the extent that they are reasonable, conform to the established policy of the organization consistently applied regardless of the source of funds, and reasonably reflect the percentage of time actually devoted to the NIH-funded project”). This ensures that the federal government gets the full benefit of the research commitment for which it is paying..

The recipient institution must follow certain effort reporting procedures and requirements to confirm that each researcher’s time and effort spent on awarded grants is accurately allocated among the grants (if working on multiple grants) and reasonably reflects the individual’s actual work on each grant.

It is the responsibility of each institution to insure compliance with these standards. Generally it is the institution, and not the researchers, that submits the application and ongoing reports to the government. The monthly reporting forms should make very clear the following:

  • What time is spent on awarded grants;
  • What time is expended on new grant applications or renewals;
  • What time is spent on administrative responsibilities (e.g. department chairs) and teaching.

Time spent on #2 and #3 may not be included in the percentage of work efforts attributable to the proposed grant or in the requests for payment. A research organization or  university that does not make this clear to its faculty, and who  submits requests for payment to the government containing time and effort related to items 2 and 3 above, is committing fraud and filing false claims.

Grant Fraud Damages

Courts have found that the damages for grant fraud are the entire amount of the grant awarded, although given the limited amount of decisions on this issue, it is possible that a court could calculate damages differently under the specific circumstances of a case.[2] A false claim could impair the ability of the institution to obtain future grants. Treble damages and statutory penalties starting at approximately $11,000 per false claim can quickly compound the damages.[3]

In assessing False Claim Act damages, and in attempting to settle such cases, the compromise position could be to develop a “fraud factor,” which is an estimate of how much the government overpaid for the time and effort actually spent compared to what was represented and paid by the government in the NIH grant.

Grant “Cost Principles”

The federal regulations controlling awards of grants are found under 2 C.F.R. Subtitle A, Chapter II, Part 200. These regulations include “Cost Principles” to help assess whether a specific cost can be allocated to a federal grant.  2 C.F.R. §§ 200.400, 200.401.

Specifically, these principles “must be used in determining the allowable costs of work performed by the non-Federal entity under Federal awards.”  Id. at § 200.401(a). The grant recipient who receives the award, has the burden of “administering Federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the Federal award.”  Id. at § 200.400(b).

Costs must meet certain minimal conditions “in order to be allowable under Federal awards,” including that the costs must “[b]e necessary and reasonable for the performance of the Federal award.” 2 C.F.R. § 200.403.

Specifically, “[a] cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost.” Id. at § 200.404.

Cost Principles and Employee Compensation

There is a specific section of the cost principles discussing compensation paid, in any form, to employees for performing activities under the award.  2 C.F.R. § 200.430. As a baseline requirement, compensation must be “reasonable for the services rendered and conform[] to the established written policy of the non-Federal entity consistently applied to both Federal and non-Federal activities.”  Id. at 200.430(a)(1).

Moreover, the regulations provide that “[c]harges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed,” including adherence to certain minimal documentation standards, including that the records must:

(i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated;

(ii) Be incorporated into the official records of the non-Federal entity;

(iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities . . . ;

(iv) Encompass both federally assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity’s written policy;

(v) Comply with the established accounting policies and practices of the non-Federal entity (See paragraph (h)(1)(ii) above for treatment of incidental work for IHEs.); and

(vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity.

(viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes [subject to certain requirements.]

 Id. at § 200.430(i).[4] If the organizational fails to adhere to these documentation requirements, the Government may require the generation of “personnel activity reports.” Id. at § 200.430(i)(8).

Thus, the cost principles establish certain effort reporting procedures and requirements to ensure that the government is paying for and receiving the amount of time and effort promised by the grant recipient. In general, compensation for a researcher’s time and effort is allowable to the extent it reasonably reflects the actual activity of the researcher for work on the grant.

Just-in-Time Reports

Before the government approves a grant application, the government may request a “Just-in-Time Report” from the applicant. NIH Grants Policy Statement, at I-73 (explaining that “just-in-time” procedures “allow certain elements of an application to be submitted later in the application process, after review when the application is under consideration for funding”).

This report requests additional information including “other support” information concerning both active and pending grant awards for the key personnel in the pending application. This report will show whether the PI, faculty and other research staff have time to perform the work on the new, proposed grant in light of their commitments to work on already-awarded grants.

When NIH asks for other support information, it is “requested for all individuals designated in an application as senior/key personnel – those devoting measurable effort to a project.”  Id.  The government will review this information to ensure that “[s]ufficient levels of effort are committed to the project.”  Id.  Applicants are responsible for verifying that the information submitted in the Just-in-Time Reports are accurate. Id.

Conclusion

NIH Grant Fraud has been identified as a risk area for fraud by the HHS Office of Inspector General (“OIG”). The OIG has identified effort reporting as a particular risk area for fraud in connection with federal research grants.

They view it as a critical risk area because “many researchers have multiple responsibilities . . . that must be accurately measured and monitored” and that throughout the researcher’s workday, it may be hard to keep track of the time and effort spent on activities. Thus, the OIG stresses that “institutions need to be especially vigilant in accurately reporting the percentage of time devoted to projects.”  HHS-OIG, “Draft OIG Compliance Program Guidance for Recipients of PHS Research Awards” 70 Fed. Reg. 71312 (Nov. 28, 2005).

[1] National Institutes of Health, Budget, available at https://www.nih.gov/about-nih/what-we-do/budget (“The NIH invests nearly $32.3 . . .  billion annually in medical research for the American people.”); National Institutes of Health, Impact of NIH Research, available at https://www.nih.gov/about-nih/what-we-do/impact-nih-research (“NIH is the largest public funder of biomedical research in the world, investing more than $30 billion in taxpayer dollars to achieve its mission to enhance health, lengthen life, and reduce illness and disability.”).

[2] See e.g. U.S. ex rel. Feldman v. van Gorp, 697 F.3d 78 (2d Cir. 2012) (“This approach rests on the notion that the government receives nothing of measurable value when the third-party to whom the benefits of a governmental grant flow uses the grant for activities other than those for which funding was approved. In other words, when a third-party successfully uses a false claim regarding how a grant will be used in order to obtain the grant, the government has entirely lost its opportunity to award the grant money to a recipient who would have used the money as the government intended.”); United States v. Karron, 750 F. Supp. 2d 480, 492 (S.D.N.Y. 2011) (“The courts that have directly addressed this issue have reasoned that when a grant is provided to a disqualified participant, the government loses all benefit of its bargain.”).

[3]  Pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended by the Debt Collection Improvement Act of 1996, 28 U.S.C. § 2461 and 64 Fed. Reg. 47099, 47103 (1999), the civil monetary penalties under the FCA are $5,500 to $11,000 for violations occurring on or after September 29, 1999 but before November 2, 2015. See 28 C.F.R. § 85.3. . Pursuant to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 and 81 Fed. Reg. 42491 (2016), the civil monetary penalties under the FCA were adjusted to $10,781 to $21,563 for violations occurring on or after November 2, 2015. See 28 C.F.R. § 85.5.

[4] See also U.S. Department of Health and Human Services, NIH, NIH Grants Policy Statement, Oct. 1, 2013 (stating that salaries of research personnel are only allowable to the extent that they “reasonably reflect the percentage of time actually devoted to the NIH-funded project.”).

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Medicare Fraud: Billing for Services Not Rendered

By Jonathan DeSantis

Imagine the following scenario: a patient with Medicare sprains her ankle and sees a doctor for one 15 minute appointment. The doctor then bills Medicare as if he had seen the patient for five 15 minute appointments over the course of a month. The doctor figures that Medicare will never notice, and this is an easy way to get extra money. This article addresses this scenario and explains why the doctor would be subject to liability under the False Claims Act (“FCA”).

Medicare and False Claims Act Basics

Medicare is a national healthcare program administered by the federal government that provides healthcare coverage to Americans over the age of 65 and younger Americans suffering from certain disabilities. Unfortunately, Medicare fraud is extremely common, and the FCA is one of the powerful tools used to combat and deter Medicare fraud.

Under the FCA, it is illegal for anyone to submit “a false or fraudulent claim” for Medicare reimbursement.[1] Additionally, the FCA allows individuals with knowledge of Medicare fraud to sue on the Government’s behalf to recover the fraudulently obtained funds. As an incentive for bringing the claims, the FCA also allows individuals to keep a portion of the recovery.[2] There are various types of Medicare fraud that can form the basis for FCA claims, and this article addresses one type of Medicare fraud:  when a doctor or other medical provider bills Medicare for services that are not actually provided.

Medicare Billing Procedure

When a medical provider treats a Medicare beneficiary, the provider must submit a bill to Medicare in order to get paid. Generally speaking, providers submit an electronic claim form to Medicare that uses procedure codes, known as HCPCS or CPT codes,[3] to tell Medicare what services were provided to the Medicare beneficiary.[4] Providers must certify that the information provided to Medicare in connection with reimbursement claims is true, accurate, and complete.[5]

Medicare then reviews the claim based on the information submitted by the provider, and if Medicare determines that a claim is covered, it reimburses the provider. In doing so, Medicare must rely on the information submitted by the provider, including that the services the provider says were performed were actually performed.[6]

Given the enormous size of Medicare, it simply does not have the resources to scrutinize every claim submitted by a provider. Thus, it is critically important that providers submit accurate information when making reimbursement claims.

False Claims Act Liability for Billing Medicare for Services Not Rendered

Claims submitted for Medicare reimbursement by providers can violate the FCA in various ways. The most straightforward type of false claims is when a provider bills Medicare for services that the provider did not actually provide to a Medicare beneficiary.[7]

Using the example from above, if a doctor sees a patient for a single office visit but  bills Medicare as if the doctor had seen the patient for five office visits, then the doctor is attempting to get paid for four office visits that never occurred. These claims are obviously false because the doctor is representing to Medicare that he performed services (the four extra office visits) that he never performed.

As Medicare explains to medical providers, “[w]hen you submit a claim for services performed for a Medicare patient, you are filing a bill with the Federal Government and certifying you earned the payment requested and complied with the billing requirements.”[8] A provider clearly does not earn payment for services that he or she never provided, and thus, if a provider attempts to do so, the provider is subject to liability under the FCA.

[1] 31 U.S.C. § 3729(a)(1).

[2] 31 U.S.C. §§ 3729, 3730.

[3] HCPCS stands for the Healthcare Common Procedure Coding System.  CPT stands for Current Procedural Terminology.

[4] See generally CMS, Medicare Billing: 837P and Form CMS-1500, available at https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/Downloads/837P-CMS-1500.pdf.

[5] CMS Form 1500, available at https://www.cms.gov/Medicare/CMS-Forms/CMS-Forms/Downloads/CMS1500.pdf.

[6] CMS, Avoiding Medicare Fraud & Abuse: A Roadmap for Physicians (Aug. 2016) available at https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/Downloads/Avoiding_Medicare_FandA_Physicians_FactSheet_905645.pdf (“The Federal Government relies on physicians to submit accurate claims when requesting payment for Medicare-covered health care items and services.”).

[7] Id. (“Examples of improper claims include . . . [b]illing for services that you did not actually render.”); see also Dep’t of Justice, U.S. Files Lawsuit Against Husband-And-Wife Owners of Suburban Health Care Company for Allegedly Defrauding Medicare out of Millions of Dollars (Oct. 17, 2017) available at https://www.justice.gov/usao-ndil/pr/us-files-lawsuit-against-husband-and-wife-owners-suburban-health-care-company-allegedly (discussing a recent settlement agreement in an FCA case that partially involve this type of allegation).

[8] Id.

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What is the Medicare Fraud Strike Force?

By Susan Schneider Thomas

Although fraud against the federal and state governments occurs in many different industries, there is always a lot of attention paid to healthcare fraud because it involves such enormous government expenditures, and it has such a huge impact on the beneficiaries of government healthcare programs.  That impact can be through compromised healthcare or fraud of government resources that constricts the government’s ability to provide services.  The federal Medicare Fraud Strike Force Teams are one example of the resources that the federal and state governments bring against individuals or companies that attempt to defraud government healthcare programs.

What Do Medicare Fraud Strike Force Teams Do?

Medicare Fraud Strike Force Teams combine federal, state, and local law enforcement resources to target and prosecute healthcare fraud, waste, and abuse.  Strike Force teams utilize sophisticated data analytics and cutting-edge investigative tools to pinpoint and prosecute unscrupulous doctors, other healthcare providers, and the many institutions and entities that provide healthcare, including:

  • hospitals
  • medical laboratories
  • pharmaceutical and medical device manufacturers
  • ambulatory surgical clinics
  • ambulance companies
  • hospice care providers
  • home health agencies
  • physical therapy practices

Although these teams currently only operate in limited locations identified as having substantial instances of healthcare fraud, the entire program demonstrates the government’s commitment to weeding out and penalizing the entities and individuals who defraud government healthcare programs.

Medicare Fraud Strike Force Teams and Other Government Agencies

Strike Force Teams can bring together the efforts of the Department of Justice and its local Offices of the United States Attorneys, as well as the Federal Bureau of Investigation, the Office of the Inspector General, and others. These teams have been successful at analyzing data and market intelligence to identify fraud and prosecute the wrongdoers.

One useful impact of the collaboration among different agencies is that credible fraud allegations can be brought to the attention of the Centers for Medicare & Medicaid Services (CMS), which can suspend payments to the suspected perpetrators. If the fraud is proven and sufficiently serious, the perpetrators can be excluded from further participation in federal healthcare programs.

Report Suspected Healthcare Fraud

If you have information about suspected healthcare fraud, please contact Berger & Montague immediately so we can investigate and help to evaluate your potential claims.  Your suspicions may be aroused by conduct you observe at work, like constant pressure to bill at the highest possible rates, regardless of services actually needed or provided.

You may see billing patterns for prescription drugs or medical devices that do not jive with what you had seen at a prior place of employment, like irresponsibly high prescribing rates for opioids that are not needed or possibly not even dispensed.

Perhaps you are a client of or a provider to a company whose practices appear to violate federal regulations or healthcare standards, such as an employee at a nursing home who is always pressured by an ambulance transport company to certify that patients are not ambulatory – even when they are.

Or perhaps you’re the person who sees a physician provide false certifications authorizing home healthcare services for thousands of Medicare beneficiaries, leading to hundreds of millions of dollars in false claims being submitted to the government.

Once we have sufficient information from you, we can work with you to bring meritorious claims to the attention of the federal government – and possibly put you in a position to be rewarded for your efforts through the Federal False Claims Act.  The government’s enforcement efforts are often triggered by or vastly assisted by information that people in the industry can provide.

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