Supreme Court to review False Claim Act lawsuits
The U.S. Supreme Court may give health care providers a huge gift in the near future by ending the qui tam False Claims Act lawsuits that have proven so damaging to providers and so lucrative to whistle-blowers.
The court announced recently that it will determine in the coming months whether a private individual who files a qui tam lawsuit actually has standing to bring such a case. If the court determines that whistle-blowers have no standing in the suit, the ruling could essentially put an end to a method that prosecutors have found effective in rooting out health care fraud.
"We’re going full steam ahead with our arguments," says Bill Boyce, JD, an attorney with Fulbright & Jaworksi who represented St. Luke’s Episcopal Hospital in Houston in a qui tam lawsuit. The Fifth Circuit panel recently ruled the qui tam statute unconstitutional, saying it infringes on the executive branch’s power to protect government interests.
Although the circuit court immediately vacated the ruling and scheduled another hearing to determine the constitutionality of the law, Boyce says the challenge to the statute shouldn’t be taken lightly.
"We’ll just have to see whether the Supreme Court or the Fifth Circuit comes out with a decision first," Boyce says. "The court has indicated to us that everything is still on the table in terms of constitutional challenges. There’s a lot up in the air right now, but we feel like the circuit court’s initial ruling gives us reason to be optimistic about seeing the whole thing thrown out as unconstitutional."
The game’s afoot
The debate over the constitutionality of qui tam lawsuits is not a new development. Since a 1986 amendment to the False Claims Act greatly expanded the rights and powers of whistle-blowers, critics have argued the lawsuits are unconstitutional. The Fifth Circuit ruling in November breaks with five different circuit courts over the last 13 years which have held that the qui tam statute is constitutional. That conflict among federal circuit courts suggests there might be change afoot.
But it is far from certain that the Supreme Court will make any change in the way qui tam lawsuits currently are used against fraud.
One attorney whose practice depends almost entirely on qui tam suits tells Healthcare Risk Management he is not worried. It is merely curious that the Supreme Court has agreed to consider the case, says John Phillips, JD, an attorney with the law firm of Phillips & Cohen in Washington, DC. Phillips & Cohen specializes in representing whistle-blowers in False Claims Act cases. The firm’s cases are responsible for about two-thirds of the $1.3 billion the government has collected through whistle-blower lawsuits in the last five years.
"I don’t think any serious analyst of the law thinks there is any serious risk that this law will be struck down as unconstitutional," he says. "It’s been around since the Civil War, and the idea that it would all of a sudden be ruled unconstitutional in 2000 is just not credible."
Phillips says it would be "a big deal if they threw it out, but I don’t think that will happen. It would destroy my entire practice if they did, and I’m not worried about it."
Intent not necessary
The standing of the whistle-blower is an all-important point because a lack of standing could rob the False Claims Act of its power. The lawsuits depend on whistle-blowers coming forward, and the motivation for whistle-blowers can be strong because they are awarded 15% to 25% of money recovered if the government joins the case, and up to 30% if the government declines to intervene. The reward provision, which Congress strengthened in the 1986 amendment, and the job protection provisions of the law are the primary reasons for the growing success and use of the False Claims Act.
In the health care field, there have been False Claims Act lawsuits and investigations for practices such as upcoding and unbundling, billing for services not provided, billing for services that aren’t medically necessary, substandard services, improper cost reporting, and grant or program fraud.
Lawsuits also have been filed for kickbacks, but the courts are divided on whether this is a False Claims Act violation or whether it is only a violation of the federal anti-kickback statute.
The False Claims Act is especially troubling to health care providers because it has a tremendous reach. The law has a 10-year statute of limitations, and here is an important point that may keep risk managers awake at night: Government and private attorneys do not have to prove the fraud was intentional. They only have to prove that improper claims were submitted "with reckless disregard of the truth."
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