American Health Lawyers Association 2015 Fundamentals of Health Law Introduction to the False Claims Act
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American Health Lawyers Association 2015 Fundamentals of Health Law Introduction to the False Claims Act: The Government’s Favorite Fraud Fighting Weapon Michael E. Paulhus Jennifer S. Lewin Ramsey B. Prather TABLE OF CONTENTS1 I. False Claims Act Basics 1 II. Defense—Materiality 3 III. Defense—Intent 8 IV. Defense—Falsity 10 V. Defense—Public Disclosure Bar. 15 VI. Defense—First-to-File Bar 18 VII. Defense—Federal Rule of Civil Procedure 9(b) 18 VIII. Defense—Constitutional 22 IX. Collateral Issues. 24 Appendix Recent Amendments to the FCA 27
False Claims Act Basics.The False Claims Act (“FCA”) is codified at 31 U.S.C. §§ 3729-3733. The FCA’s origins trace back to the Civil War when Congress passed legislation to curb perceived abuses in armament sales to the Union Army. The FCA was little used until Congress made substantial amendments in 1986. In 2009, Congress passed the Fraud Enforcement and Recovery Act of 2009 (“FERA”), which contains the most significant changes to the Act since the 1986 amendments. Congress made additional changes to the FCA in 2010, by the Patient Protection and Affordable Care Act (“PPACA”), including important changes to the public disclosure bar and original source provisions, as well as the definition of overpayment for purposes of the “reverse false claims” provision. On July 21, 2010, the President signed into law H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (the “Financial Reform Act”), which further amended the FCA to strengthen the anti-retaliation provisions in 31 U.S.C. § 3730(h). This paper provides an overview of key provisions of the FCA, changes made by recent legislation, and strategies relevant to health lawyers defending FCA actions. Liability Provisions.After FERA, the FCA imposes liability upon any person who, inter alia: (a)(1)(A)—“knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval;” (a)(1)(B)—“knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim;” (a)(1)(C)—“conspires to commit a violation of subparagraph (A), (B), (D), (E), (F), or (G);” (a)(1)(G)—“knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government.” 31 U.S.C. § 3729. FCA penalties and damages are substantial. Pursuant to 31 U.S.C. § 3729(a), violations of the FCA are punishable by: (1) statutory civil penalties of $5,500-$11,000 per false claim and (2) treble damages. There are four primary elements of an FCA violation: (1) knowledge (or intent); (2) materiality; (3) causation; and (4) the existence of a false claim. The FCA defines “knowingly” to mean acting: (1) with actual knowledge; (2) in reckless disregard; or (3) with deliberate ignorance of the truth or falsity of the claim. “Recklessness,” which sets the lowest bar for proving scienter, is not defined in the statue. Whistleblower Provisions.Private citizens (“relators”) may file complaints alleging violations of the FCA. These suits are called “qui tam” actions. Initially, a qui tam complaint is filed under seal. The number of whistleblower actions has been steadily increasing in recent years. Pursuant to 31 U.S.C. § 3730(e)(4), prior to FERA if the information providing the basis for the relator’s allegations had been publicly disclosed, the relator’s action was jurisdictionally barred unless the relator was an “original source” of the information, meaning the relator had direct and independent knowledge of the underlying facts. After PPACA, the jurisdictional bar is removed and to be an “original source” the relator must have knowledge that is “independent of and materially adds” to the underlying facts or voluntarily provide information to the government prior to a public disclosure. Once a whistleblower files an FCA action, the Department of Justice (“DOJ”) must decide whether to “intervene” (i.e., take over and prosecute the action). DOJ has by statute 60 days after service to investigate the claims and decide whether to intervene, although it typically requests an extension of time to reach its decision. If the government does not intervene, the case is unsealed and the relator may proceed on his/her own with some government monitoring. If the government intervenes, the case is unsealed, and the government takes the lead in the case with the relator taking a secondary role. Many cases are resolved prior to unsealing. The relator receives a certain percentage of the government’s recovery if the relator prevails in the action, either through litigation or in a settlement. These percentages can range from 0% under certain circumstances to 30%, depending on whether the government has intervened. See 31 U.S.C. § 3730(d). The government and relator may also recover attorney’s fees and costs from the defendant. If the defendant prevails, it may recover attorney’s fees from the relator if the claim was frivolous, vexatious, or brought primarily for the purpose of harassment. The FCA also punishes retaliation against certain relators. Codified at 31 U.S.C. § 3730(h), the provision prior to FERA and the Dodd-Frank Financial Reform Act, prohibited discrimination against an employee “in the terms and conditions of employment by his or her employer because of lawful acts … in furtherance of an action under [the FCA].” Download 124.46 Kb. Share with your friends:
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