5 of the biggest False Claims Act developments in 2014

This year, there have been a number of significant False Claims Act developments that affected the healthcare industry, according to a recent report from the law firm Epstein Becker Green.

Here are five of the biggest FCA developments in 2014, according to the report.

1. Reverse false claims. Under the 60-day repayment rule, any entity that receives an overpayment from the state or federal government must report the overpayment within 60 days. Although the 60-day repayment rule, which is part of the Patient Protection and Affordable Care Act, went into effect about three years ago, cases based on violations of the rule — called reverse false claims cases — began working their way through the system this year. For instance, in June, the federal government intervened in an FCA lawsuit alleging Continuum Health Partners in New York City and several hospitals that were formerly part of Continuum's network had failed to return more than $1 million in Medicaid overpayments to the government within the 60-day period required by the PPACA.

2. Public disclosure bar. As amended by the PPACA, this rule bars whistle-blower's qui tam actions if the fraud alleged in their FCA complaint has previously been disclosed to the public unless the whistle-blower was the original source of the information. This year, a court made a unique ruling in regard to this provision in the case of U.S. ex rel. Guardiola v. Renown Health. In that case, the whistle-blower, who was Reno, Nev.-based Renown Health's director of clinical compliance, alleged the system had improperly submitted short-stay inpatient claims to Medicare, which should have been billed as lower-cost outpatient claims. Although Renown Health requested the case be dismissed because the information had previously been disclosed in recovery audit contractor reports, which were shared with Renown Health providers and their staff, the court disagreed and allowed the case to proceed. The court held the nonemployees who had access to the information were "economically linked to Renown," and therefore had an "economic incentive" to protect the information.

3. Worthless services theory. In October, the Seventh U.S. Circuit Court of Appeals reaffirmed its view that healthcare services being below appropriate standards does not constitute a claim under the FCA. According to the worthless services theory, a healthcare provider defrauds Medicare or Medicaid by submitting claims for healthcare services that are of little or no value to the patient. For example, in the case the Seventh Circuit was reviewing, the trial court had upheld the worthless services theory and instructed the jury "that if the nursing home billed Medicare $200 for services worth only $120, that was a false claim." The nursing home appealed the case, and the Seventh Circuit rejected the theory by stating, "Services that are 'worth less' are not worthless."

4. Anti-retaliation provision. Under the FCA's anti-retaliation provision, employers are prohibited from retaliating against employees for acts associated with bringing FCA actions. The Fraud Enforcement and Recovery Act of 2009 altered the provision by not expressly prohibiting retaliation from whistle-blowers' employers. Instead, the updated rule stated employees, contractors or agents are entitled to "all relief necessary" to make them whole.

After the FERA update, the courts were divided on whether it provided for individual liability with supervisors being held personally liable for retaliating against whistle-blowers. However, according to the Epstein Baker report, there is now an "emerging district court consensus against individual liability." For instance, this year, the U.S. District Court for the Eastern District of Virginia held the 2009 amendments "were not intended to create individual liability for retaliation."

5. Government knowledge defense. Under the government knowledge doctrine, there is an inference that a defendant lacked knowledge of their wrongdoing when there is evidence of government knowledge and approval of facts underlying an allegedly false claim. This year, the Ninth Circuit upheld this doctrine in the case of U.S. ex rel. Gonzalez v. Planned Parenthood of Los Angeles et al. In that case, a whistle-blower alleged Planned Parenthood had overbilled the government by more than $200 million. However, in letters between Planned Parenthood and officials from the state of California, Planned Parenthood provided the billing procedures it was following, and the state remained silent on the issue. Therefore, the court dismissed the case and stated even if the claims submitted were false "there could be no knowing falsity" due to the contents of the letters and the state's decision not to act after receiving the information.  

More articles on the False Claims Act:

15 latest healthcare industry lawsuits, settlements
Judge calls whistle-blower a 'bounty hunter,' dismisses FCA suit against pharmacy
Rite Aid pays $2.99M for allegedly using gift cards to get Medicare, Medicaid business 

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