This post is a courtesy of Fox Rothschild attorney William H. Maruca, Esq., and was first published as an Alert on Fox’s website.
A bipartisan bill introduced this summer would impact residential and behavioral health facilities and other health care providers sued under the federal False Claims Act (FCA), making defense of these actions more expensive and difficult.
The False Claims Amendments Act of 2021 was designed in part to undo the result of the U.S. Supreme Court’s 2016 ruling in Universal Health Services, Inc. v. United States ex rel. Escobar, which allowed providers to argue that an alleged misrepresentation or violation was not “material” if the government agency continued to pay claims in some circumstances.
The bill would also force providers to pay for certain discovery costs incurred by the government and would limit the ability of the Justice Department to dismiss FCA cases without a hearing.
Residential and behavioral health providers, like all providers, will face greater obstacles in defending FCA actions if this bill is enacted. Even without these changes, FCA suits are extremely expensive to defend and expose providers to penalties that frequently reach the millions.
The False Claims Act
The FCA is a Civil War-era statute that provides that any person who knowingly submits false claims to the government is liable for up to three times the government’s damages plus a penalty for each false claim, currently between $11,803 and $23,607. The FCA allows private citizens (“relators”) to file whistleblower suits on behalf of the government (called “qui tam” suits) against those who have defrauded the government and receive a portion of the government’s recovery.
False claims can include fictitious or misrepresented services as well as claims based on false records and claims submitted while a provider is in violation of one or more technical requirements of payment including the Anti-Kickback Statute and the Stark Self-Referral Statute.
The Escobar case has been interpreted to allow defendants to argue that the government’s continued payment of claims can be cited as evidence that a violation was not “material” and would not be sufficient to support a false claims allegation. The bill would shift the burden of proof to the defendant to prove by “clear and convincing evidence” that that the violation was not, in fact, material to the government’s payment of the claims.
The bill also would require defendants to reimburse the government for costs associated with irrelevant, disproportional or unduly burdensome discovery. This rule is designed to discourage broad “fishing expeditions” by defendants seeking to ferret out evidence that a government agency knew about the alleged violations and did not consider them material. The defendants would need to pay the government’s costs unless they can show the information requested is “relevant, proportionate to the needs of the case, and not unduly burdensome on the government.” The burden of proof of the relevance and proportionality of discovery is on the defendant.
Dismissal of FCA Claims
The federal government can either intervene in a whistleblower’s FCA case or decline to do so, in which case the whistleblowers can generally still proceed at their own expense. The Justice Department has the authority to dismiss meritless or frivolous cases. The bill would require the Justice Department to demonstrate its reasons for dismissal and offer the whistleblower a hearing in which they would have the opportunity to show that the reasons for the government’s dismissal are fraudulent, arbitrary and capricious, or contrary to law.
The best defense is to detect and remedy any compliance issues before they result in whistleblower litigation or government enforcement. A robust and well-implemented compliance program is your most effective preventive medicine. See The Importance of Updating Compliance Programs for Skilled Nursing, Assisted Living and Other Residential Care Facilities.
Your compliance plan should address the seven essential elements identified by the Office of Inspector General in its compliance guidance documents:
- written policies, procedures and standards of conduct
- designation of a compliance officer and compliance committee
- effective training and education
- effective lines of communication
- internal monitoring and auditing
- enforcing standards through well-publicized disciplinary guidelines
- prompt responses to detected offenses
Contact your Fox Rothschild attorney to review your current compliance efforts and determine if updates or modifications are needed.