The CMS Clarifies the Mandatory Whistleblower Reforms

The salutary intent of the Deficit Reduction Act was to require that employers educate employees about the Federal False Claims Act and, hopefully, address fraud and abuse by employer entities receiving $5 million dollars or more in federal funds under the Medicaid program. When the Deficit Reduction Act was passed in 2005, a debate emerged about whether the DRA education provisions mandating employee education about the Federal False Claims Act applied directly to healthcare providers and/or whether states receiving Medicaid had to pass implementing legislation to make the provision effective. In December of 2006, the Centers for Medicare and Medicaid Services (CMS) set the record straight. An “entity” includes a government agency, organization, unit, corporation, partnership or other business arrangement (including any Medicaid managed care organization, irrespective of the form of business structural or arrangement by which it exists) whether for profit or not for profit, which receives or makes payments under a state plan approved under Title XIX or under any waiver of such plan, totaling at least $5 million annually. In short, states do not have to implement legislation to make the provision effective and any entity receiving $5 million or more annually in Medicaid benefits must implement the mandatory education provision.

The education provisions are aimed at employees who might be in a position to know about employer misconduct. To reduce false claims for Medicaid payments, Congress clearly envisioned that employees with knowledge about false claim damages might blow the whistle on their employers thereby deterring employers from engaging in fraud. Even though there seemed to have been a debate after enactment of the Deficit Reduction Act that states would have to implement the legislation in order to make its provisions effective, in December of 2006, the CMS sent out letters advising that this was not the case and making it clear that all entitles receiving $5 million or more annually in Medicaid payments must implement the mandatory compliance provisions by January 1, 2007.

Obviously, what we are hoping here at our firm is that after January of 2007, hospital employees and other healthcare professionals may report their employers to law firms like ourselves if they have knowledge of fraudulent Medicaid billing and if their employer has not educated them about the False Claims Act. As we view the law, if the employer fails to educate the employees about the provisions of the federal False Claims Act, that in and of itself can constitute a false claim because participation in the Medicaid program in terms of reimbursement is conditioned upon full compliance with all mandatory provisions. In short, if an employer/hospital or other healthcare provider makes claim for reimbursement after January 1, 2007 and they do not have the mandatory compliance provisions in place educating their employees about the False Claims Act, then any claim for reimbursement could in and of itself be fraudulent on that basis alone. Obviously, only time will tell how effective these provisions are at deterring fraud and the hope is that it works. If it does not, cases in this area could prove to be interesting.