Recent Trends & Developments Under the False Claims Act: Considerations for Avoiding Litigation

Healthcare litigation in general and — because of recent legislative developments, including the Patient Protection and Affordable Care Act — litigation in the context of the False Claims Act is on the rise in terms of the number of cases filed as well as in terms of recoveries, according to a session entitled Recent Trends and Developments Under the False Claims Act for Healthcare Providers and Medical Device Manufacturers at the McGuireWoods Healthcare Litigation Conference in Chicago April 8.

David Pivnick, an attorney with McGuireWoods and moderator of the session, said the number of healthcare fraud cases and the government's return on investment in investigating them has doubled in the past 10 years. Whistle-blower, or qui tam, cases have grown the most. Qui tam cases are False Claims allegations brought by an individual or private citizen on behalf of the government. The whistle-blower, or relator, then receives a portion of the recovery.

"Of the more than $3 billion ROI for the government, between 60 to 70 percent annually is coming out of the healthcare industry, two thirds of which is pharmacy and device and one third of which is hospitals, ambulatory surgery facilities and physicians," said Mr. Pivnick. "The government is really focusing on healthcare fraud and abuse."

Jeffrey Rogers, a partner at McGuireWoods LLP, said clients who are served with a subpoena should already be ready. "Get a head start and be prepared before someone shows up with subpoena. If someone does, the first thing you do is to give it person in charge of calling your in-house or outside council. Get your lawyer involved."

According to Mr. Rogers, additional considerations after being served a subpoena include what, or if, to tell employees, beginning the legal hold process and ensuring any contact with the government, federal or state, is conducted in a way that preserves or enhances credibility.

William Boland, a partner at McGuireWoods, shared some wisdom for clients on the receiving end of a False Claims lawsuit, particularly if it is filed by a whistle-blower.

"The vast majority of qui tam cases are brought by disgruntled former employees. But the government sees good guys versus bad guys, which is something the senior business executives must understand," said Mr. Boland.

For clients dealing with a False Claims lawsuit, he advised leaders conduct an internal investigation of the issue, internal investigation of compliance programs, check the status of the case, examine insurance policies, determine whether there are 12B or rule 9 motions to make and identify experts in the law and economics of the case from the start.

Further, more activities associated with reimbursement or technical activities are increasingly subject to False Claims allegations. Under the PPACA, if hospitals violate the Stark Law or Anti-Kickback Statute, the law automatically categorizes claims resulting from those relationships as false claims. Thus, an FCA case can stem from a documentation error or other technical error. 

"Historically, suits were more about activities, but now we see provider analyses and outliers triggering issues in areas like medical necessity and coding," Chris Rohn, managing director of PricewaterhouseCoopers, said. "Looking forward, the complexity of the system with mergers and vertical integration of payers and providers will make conditions more ripe for kickback or Stark allegations. When arrangements involve federal funds, having compliance programs in place is vital."

Another important consideration in managing False Claims suits is to understand state requirements may differ from federal requirements. "There is a lot of risk associated with state False Claims [Act] laws," said Christopher Haney, director of Chicago-based law firm Duff & Phelps. "Twenty-nine states have False Claims Acts, which are mostly the same as on a federal level but may have different priorities and processes around intervention and communication," he said. "We're seeing lots of cooperation across states, which are doing a great job of working together. This means state officials will be prepared," he added.

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