Skip to Content

Blog

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.

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


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

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


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.”).

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


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.

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


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.

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


Prestigious Universities and Research Institutions Commit Grant Fraud Too

By Sherrie Savett

Major universities rely on government grant money to supplement their revenues from tuition, endowments, and contributions.  Purely research entities which are not full universities and where there is little or no tuition revenue depend even more heavily on government grant money, especially in the area of medical and scientific research.  The National Institutes of Health (“NIH”) provides major grant money to such institutions to promote medical and scientific research.

False Time and Effort Reporting

The frauds often occur in the area of “effort reporting”.  In applying for and receiving ongoing funding for multi-year grants, the NIH requires accurate reporting of the amount of effort expected to be expended by the principal investigators (“PIs”) and the other researchers on a specific grant.

If a PI exaggerates the amount of time and effort (usually required to be expressed as a percentage of all the PI’s working time) to be spent on an existing awarded grant, the government is being defrauded because it is not getting the benefit of its bargain.

The grant application is evaluated based on many things, but one important element is the amount of the PI’s time that will be spent on the research.  If the PI or his top assistants represent, for example, that a 50% effort is to be expended on a particular grant each year over a multi-year period, but in fact only 35% is spent, the government is being defrauded.

False Claims Motivated by Institutions

Most PIs have multiple responsibilities outside of fulfilling the research promised in an awarded or several awarded grants.  For example, PIs have teaching and administrative responsibilities and are also urged to, or in some entities required to, write new grant proposals to keep the flow of government money coming into the university or research institution.

The government grant payments may only cover awarded grants and not new grant applications or applications for renewals of existing awarded grants.  NIH grants do not cover teaching and administrative time, unless it is directly related to the approved grant.

If an institution puts pressure on its PIs to cover 100% of their salaries (a maximum of approximately $185,000 per year) and also expects such PIs to write and research new grant applications and perform administrative duties, there is a high probability of fraud which violates the False Claims Act (FCA).  These false claims are motivated by the institutions.

Compliance functions must be enforced strictly within these universities and research institutions to avoid false effort reporting, which leads to cheating the government out of the crucial research that was the basis for the grant awarded.  If the accounting functions and forms within the institution seeking the government grant funds are ambiguous or vague about which time is allocated to the active government grant versus other functions, the institution is likely to be held responsible for FCA violations which involve return of grant money unlawfully obtained, treble damages, and statutory damages of over $11,000 for each false claim.

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


The Anti-Kickback Statute vs. The Stark Law

By Russell Paul

There is much confusion between the Federal Anti-Kickback Statute and the Stark Law because both laws deal with remuneration related to improper referrals. But there are fundamental distinctions between the two laws.

Anti-Kickback Statute [42 U.S §1320a-7b(b)]

The federal Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b), (“AKS”) arose out of congressional concern that remuneration provided to those who can influence healthcare decisions would result in goods and services being provided that are medically unnecessary, of poor quality, or harmful to a vulnerable patient population. To protect the integrity of the Medicare and Medicaid programs from these harms, Congress enacted a prohibition against the payment of kickbacks in any form.

First enacted in 1972, Congress strengthened the statute in 1977 and 1987 to ensure that kickbacks masquerading as legitimate transactions did not evade its reach.  See Social Security Amendments of 1972, Pub. L. No. 92-603, §§ 242(b) and (c); 42 U.S.C. § 1320a-7b, Medicare-Medicaid Antifraud and Abuse Amendments, Pub. L. No. 95-142; Medicare and Medicaid Patient and Program Protection Act of 1987, Pub. L. No. 100-93.

The AKS prohibits any person or entity from offering, making, soliciting, or accepting remuneration, in cash or in kind, directly or indirectly, to induce or reward any person for purchasing, ordering, or recommending or arranging for the purchasing or ordering of federally-funded medical goods or services.

The AKS was amended to expressly state that a violation of the AKS constitutes a “false or fraudulent” claim under the False Claims Act.  42 U.S.C. § 1320(a)-7b(g).

Physician Self-Referral Law [42 U.S.C. § 1395nn]

The Stark Law prohibits physicians from referring patients to receive designated health services (DHS) payable by Medicare or Medicaid from entities with which the physician or an immediate family member has a financial relationship, unless an exception applies. Immediate family members of the physician are defined as spouse, natural or adoptive parents, children, siblings, step- siblings, in-laws, grandparents, and grandchildren.

Specifically, the Stark Law does the following:

  1. It prohibits a physician from making referrals for certain designated health services payable by Medicare to an entity with which he or she (or an immediate family member) has a financial relationship (ownership, investment, or compensation), unless an exception applies.
  2. It prohibits the entity described above from presenting or causing to be presented claims to Medicare (or billing another individual, entity, or third party payer) for those referred services.
  3. It establishes a number of specific exceptions for financial relationships between a physician and an entity that do not pose a risk of program or patient abuse.

 

The following items or services are considered designated health services under the Stark Law:

  1. Clinical laboratory services.
  2. Physical therapy services.
  3. Occupational therapy services.
  4. Outpatient speech-language pathology services.
  5. Radiology and certain other imaging services.
  6. Radiation therapy services and supplies.
  7. Durable medical equipment and supplies.
  8. Parenteral and enteral nutrients, equipment, and supplies.
  9. Prosthetics, orthotics, and prosthetic devices and supplies.
  10. Home health services.
  11. Outpatient prescription drugs.
  12. Inpatient and outpatient hospital services.

 

Civil penalties for physicians who violate the Stark Law include fines as well as exclusion from participation in Federal healthcare programs. There are certain codified exceptions, with detailed criteria that must be met.

In addition, if claims are submitted to government payers as a result of a self-referral arrangement that violates the Stark Law, those claims are considered false claims, and the parties to the arrangement may be liable under the False Claims Act.

While these statutes both aim to eliminate malfeasance in the healthcare sector, they each have important differences.

Prohibited Physician Behavior

Under the AKS, the physician cannot pay, offer, solicit, or receive anything of value aimed at awarding the referral of patients to, or generating business for, a federal healthcare program.  This contrasts with the Stark Law, which prohibits a physician from referring a patient to a healthcare entity in which he or she has a financial interest, unless he or she falls under one of the exceptions set out in the statute.

Prohibited Items or Services

The AKS prohibits referrals for any kind of item or service where a kickback is involved, while the Stark Laws prohibits only the referral of designated health services where a financial interest is involved.

Prohibited Referrals

The AKS prohibits any kind of referral, while the Stark Law only prohibits a referral from a physician.

Penalties Allowed

Penalties under the AKS include criminal and civil and administrative penalties, whereas violations under the Stark Law are civil only.

Intent Required

The AKS requires proof of actual unlawful intent. The Stark Law is a strict liability statute – no intent is required to be shown.

Exceptions to the Statutes

The AKS contains voluntary safe harbors, while the Stark Law contains mandatory exceptions.

Implicated Government Healthcare Programs

The AKS applies to all federal healthcare programs, and the Stark Law applies only to Medicare and Medicaid.

Below is a comparison chart made available by the Department of Health and Human Services:

Anti-Kickback Statute vs. Stark Law Chart

[1]

[1] https://oig.hhs.gov/compliance/provider-compliance-training/files/starkandakscharthandout508.pdf

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


 

What is the Stark Law?

By Russell Paul

Section 1877 of the Social Security Act (the Act) (42 U.S.C. 1395nn) is also known as the physician self-referral law and is commonly referred to as the “Stark Law”:[1]

The Stark Law was enacted in 1989 with the simple purpose of curbing physician self-referral. It was originally titled the Ethics in Patient Referrals Act, which was dubbed Stark I after Rep. Pete Stark, a Democrat from California, who sponsored the initial bill.

The original statute simply sought to ban physician self-referral for designated services when a patient was covered by Medicare or another government payer. Self-referral occurs when physicians refer patients for designated health services to hospitals, labs, and other entities from which they or an immediate family member benefit financially, including from owning part of such hospital, lab, or other entity.

Stark I was originally intended to eliminate any financial motivation for physicians to send patients for unnecessary testing that could raise overall healthcare costs.  Stark I was expanded in January 1995, when Stark II went into effect.

Over the next decade, CMS published a series of regulations implementing Stark I and Stark II. Today, there is a widespread group of regulations and statutes collectively named Stark Law.

Stark Law Basics

In essence, the Stark Law does the following:

  1. It prohibits a physician from making referrals for certain designated health services (DHS) payable by Medicare to an entity with which he or she (or an immediate family member) has a financial relationship (ownership, investment, or compensation), unless an exception applies.
  2. It prohibits the entity described above from presenting or causing to be presented claims to Medicare (or billing another individual, entity, or third party payer) for those referred services.
  3. It establishes a number of specific exceptions for financial relationships between a physician and an entity that do not pose a risk of program or patient abuse.

Stark Law Designated Health Services

The following items or services are considered designated health services under the Stark Law:

  1. Clinical laboratory services.
  2. Physical therapy services.
  3. Occupational therapy services.
  4. Outpatient speech-language pathology services.
  5. Radiology and certain other imaging services.
  6. Radiation therapy services and supplies.
  7. Durable medical equipment and supplies.
  8. Parenteral and enteral nutrients, equipment, and supplies.
  9. Prosthetics, orthotics, and prosthetic devices and supplies.
  10. Home health services.
  11. Outpatient prescription drugs.
  12. Inpatient and outpatient hospital services.

Stark Law Exceptions

The Stark Law has numerous exceptions, each of which has detailed requirements. Many of the exceptions require that any compensation paid to a physician not take into account the value or volume of a physician’s referrals or other business generated between the parties to a gainsharing agreement. Many exceptions also require the arrangement to be commercially reasonable and compensation to be at fair market value.

Stark Law Violation

Any provider or organization that violates Stark must repay all Medicare funds paid under the improper arrangement, and the organization could face Medicare exclusion and False Claims Act liability as well.

In addition, if claims are submitted to government payers as a result of a self-referral arrangement that violates the Stark Law, those claims are considered false claims, and the parties to the arrangement may be liable under the False Claims Act.

Whistleblowers who pursue such actions would be entitled to up to 30 percent of the government’s recovery. The penalties that can be levied under the False Claims Act range from $10,781 to $21,563 per claim.

[1] https://www.cms.gov/Medicare/Fraud-and-Abuse/PhysicianSelfReferral/index.html

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


A Relator’s Reliance is Irrelevant in a Public Disclosure Bar Inquiry

By Sherrie Savett and Jonathan DeSantis

The False Claims Act (“FCA”) contains a public disclosure bar which, generally speaking, prohibits a relator from pursuing FCA claims where the false or fraudulent conduct on which the claims are based has already been publicly disclosed.[1]  Various courts have concluded that the public disclosure bar applies even where a relator did not know about the public disclosures and did not rely upon the public disclosures in bringing FCA claims. Ordinarily, this rule harms relators but, as addressed below, it can work in relators’ favor in some circumstances.

The Public Disclosure Bar

The public disclosure bar provides that “[t]he court shall dismiss an action or claim . .  . if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed” through certain sources, including media and government reports.[2]  The critical questions under the public disclosure bar are whether the underlying fraud was publicly disclosed and if so, whether a relator’s claims are substantially similar to the disclosed fraud.[3]  If yes, then a court is required to dismiss a relator’s claims, even if the claims are otherwise meritorious.  To answer these questions, courts ask “whether the disclosures in question exposed all the essential elements of the alleged fraud.”[4]

A Relator’s Knowledge of or Reliance Upon Public Disclosures is Irrelevant

Courts have consistently and repeatedly held that a relator’s knowledge of or reliance on public disclosures is irrelevant in determining whether the public disclosure bar applies.[5] Put differently, the public disclosure bar applies even if a relator independently discovered the underlying fraudulent conduct without reference to any public disclosures. Under these circumstances, a relator does not in any way benefit from the public disclosures, and the relator’s lawsuit is not in any way derived from the public disclosures; still, the public disclosure will preclude the relator from moving forward with FCA claims.[6]

Typically, this rule works against relators, because it means that a relator cannot pursue an otherwise meritorious FCA lawsuit even where the relator did not base his or her claims on publicly disclosed materials. For example, if a newspaper article discussed all of the material elements of a fraud and a relator later files an FCA case based upon the same fraudulent conduct disclosed in the newspaper article, it is irrelevant that the relator never read the newspaper article and thus did not rely upon the newspaper article at all in forming his or her FCA claims.

Using the Rule to a Relator’s Advantage

However, this rule could actually benefit relators in certain circumstances best illustrated through the following hypothetical:

  • During the deposition of a relator in an FCA lawsuit, a clever defense attorney asks the relator artful questions meant to engender responses suggesting that a public disclosure revealed a defendant’s fraudulent conduct. For example, a defense attorney might ask: “Isn’t it true that a reasonable person could discern from this newspaper article that this company was engaged in the fraud you are alleging?”
  • Perhaps fooled by the clever question or not appreciating the ostensible significance of his or her response with respect to the public disclosure bar inquiry, the relator responds affirmatively.
  • Actual review of the newspaper article illustrates that it does not reveal the essential element of the defendant’s fraud. Put differently, there is no way that anyone could have known the defendant was engaged in fraud from the newspaper article.
  • The defendant then uses isolated snippets of the relator’s testimony in a subsequent motion seeking dismissal of the lawsuit under the public disclosure bar.

Under the above-described rule, a court should reject the relator’s deposition testimony as irrelevant to the public disclosure bar inquiry. If a relator’s knowledge of or reliance upon public disclosures is irrelevant, it follows that a relator’s own testimony as to the contents or significance (or lack thereof) of a public disclosure is also irrelevant.

Rather, courts must look to the public disclosures themselves and ask whether they disclose all of the essential elements of the fraud alleged by the relator. Simply put, public disclosures either disclose all of the essential elements of a defendant’s fraudulent conducts or they do not, and a relator’s testimony cannot change the contents or significance of the public disclosures.

Conclusion

In conclusion, a relator’s characterization of his or her knowledge of or reliance upon publicly disclosed materials is irrelevant to the public disclosure bar inquiry.  Whether there is a public disclosure which can bar an FCA claim depends on an analysis of the public disclosure itself. Consequently, courts should reject attempts by defendants in FCA cases to use a relator’s own testimony as evidentiary support for a public disclosure bar argument.

 

[1] 31 U.S.C. § 3730(e)(4). The public disclosure bar is subject to exceptions, including when the Government opposes dismissal on public disclosure grounds or a relator satisfies the “original source” exception.  These exceptions are beyond the scope of this article.

[2] Id.

[3] E.g. United States ex rel. Shea v. Cellco P’ship, 863 F.3d 923, 933 (D.C. Cir. 2017); United States ex rel. Colquitt v. Abbott Labs., 858 F.3d 365, 373 (5th Cir. 2017).

[4] U.S. ex rel. Kester v. Novartis Pharm. Corp., 43 F. Supp. 3d 332, 347 (S.D.N.Y. 2014) (internal quotation marks omitted).

[5] See e.g. U.S. ex rel Mistick PBT v. Hous. Auth. of City of Pittsburgh, 186 F.3d 376, 388 (3d Cir. 1999) (“All of the other circuits that have reached this question have disagreed with the Fourth Circuit and have held that ‘based upon’ means ‘supported by’ or ‘substantially similar to,’ so that the relator’s independent knowledge of the information is irrelevant.”).

[6] See e.g. U.S. ex rel. Biddle v. Bd. of Trustees of Leland Stanford, Jr. Univ., 161 F.3d 533, 540 (9th Cir. 1998).

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