Health Care Fraud Cases and 2009-2010 Amendments to False Claims Act Discussed at National Fraud and Compliance Forum

At the annual Fraud and Compliance Forum in Baltimore that runs through Tuesday, the nation’s top health care lawyers will be paying close attention to recent changes to the nation’s primary whistleblower law, the False Claims Act. The “qui tam” provisions of the False Claims Act allow private citizen whistleblowers (“relators”) to share in the government’s recovery of damages.

As a former defense attorney who now represents whistleblowers, I have been asked to present a program at this conference with Rick Shackelford of King & Spalding, to discuss these major amendments to the False Claims Act–the first since 1986. Congress acted decisively in three recent major bills to restore the False Claims Act to its intended strength, in the face of court decisions that created obstacles to its use.

The recent amendments were part of the Fraud Enforcement and Recovery Act of 2009, Pub. L. No. 111-21, 123 Stat. 1617 (“FERA”); the Patient Protection and Affordable Care Act, Pub. L. 111-148, 124 Stat. 119 (“PPACA”); and the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (the “Dodd-Frank Financial Reform Act”).

This week’s forum is sponsored by the American Health Lawyers Association and Health Care Compliance Association.

An updated discussion of the False Claims Act after these 2009 and 2010 changes will appear soon on this Whistleblower Lawyer Blog. A brief summary of those important changes to the Act is below:

Responding to variety of court decisions since 1986 that had limited the FCA’s effect, Congress again acted decisively in 2009 and 2010 with amendments, in three stages:

First, the 2009 Fraud Enforcement and Recovery Act (“FERA”) legislatively overruled judicial decisions that had limited the FCA’s reach, including Allison Engine Co. v. United States ex rel. Sanders, 128 S. Ct. 2123 (2008); United States ex rel. Totten v. Bombardier Corp., 380 F.3d 488 (D.C. Cir. 2004), cert. denied, 544 U.S. 1032 (2005); and United States ex rel. DRC, Inc. v. Custer Battles, LLC, 376 F. Supp. 2d 617 (E.D. Va. 2005), rev’d, 562 F.3d 295 (4th Cir. 2009). The major effects of the 2009 FERA amendments included the following:

1. The amendments expanded the definition of “claim,” and fraud directed against government contractors, grantees and other recipients is now plainly covered by the FCA.

2. Funds administered by the United States government (such as in Iraq) are now included within the FCA’s protections.

3. Retaining overpayments of money from the government is now an explicit basis of liability, which is an important broadening of the Act from the perspective of health care providers, among others.

4. Liability for “conspiracy” to violate the FCA is far broader, and now includes conspiring to commit a violation of any substantive FCA theory of liability.

5. Protection of whistleblowers and others against “retaliation” now extends not only to “employees,” but also to “contractors” and “agents”; and persons other than “employers” potentially may be held liable for retaliation.

6. In investigating, the government now has authority to use “civil investigative demands” more broadly to gather evidence and take testimony, and to share information more with state and local authorities and with whistleblowers/relators.

7. A standard definition of what is “material” now applies in False Claims Act cases.

8. The statute of limitations has been clarified in qui tam cases to facilitate the government’s asserting its own claims.

Second, in the 2010 Patient Protection and Affordable Care Act (“PPACA”), Congress made other important changes to the FCA. From a relator’s perspective, perhaps most significant was eliminating language in the “public disclosure” provision (section 3730(e)(4)(a)) that sometimes deprived the court of subject matter jurisdiction. Congress rewrote that provision so that the court no longer loses subject matter jurisdiction even if a “public disclosure” has occurred. Another change to this section was to empower the government to prevent dismissals based on “public disclosure” through the following language: “the court shall dismiss an action or claim under this section, unless opposed by the Government . . . .”

In addition, from a health care entity’s perspective, the most important FCA change in PPACA may be that it clarified and extended liability for overpayments identified but retained by providers in Medicare and Medicaid claims.

Third, in the July 2010 Dodd-Frank Financial Reform Act, Congress created a uniform three year statute of limitations for claims of “retaliation” pursuant to section 3730(h). It also corrected an apparent drafting error in FERA’s 2009 changes to the same section by restoring its intended breadth. The anti-retaliation provision now encompasses (a) not only the pre-FERA definition of “protected conduct” as “lawful acts done . . . in furtherance of [an FCA action]” (which FERA had mistakenly dropped from the statute), but also (b) FERA’s expansion of the definition of “protected conduct” to include “other efforts to stop 1 or more violations [of the FCA] . . . .” 31 U.S.C. § 3730(h).

These changes are intended to restore the False Claims Act to its intended strength as the nation’s primary anti-fraud civil statute. It owes its success to private citizen whistleblowers who report fraud against the government.