The healthcare industry faces an onslaught of lawsuits over allegations of improper billing practices and insurance claim denials. The federal government has added further fuel to the fire with new rules that encourage state-level enforcement agencies to take a more active role in protecting patients from healthcare fraud. These rules are expected to lead to an increase in the number of lawsuits filed against healthcare providers.
“There is no question that we’ll see an increase in qui tam or whistleblower type suits because of the False Claims Act amendments,” said Ileana Hernandez of Manatt, Phelps & Phillips. “I think that’s good because you’re going to have healthcare providers who are more proactive in trying to prevent fraud and come up with better compliance programs.”
The new rules, which went into effect on August 1, 2009, allow whistleblowers—also referred to as “relators” under the False Claims Act (FCA)—to file lawsuits alleging fraud against the government. The FCA prohibits the submission of false or fraudulent claims for payment to, or approval by, federal agencies and allows whistleblowers who file qui tam suits under the statute to receive a portion of funds recovered as a result.
Proving an allegation that a healthcare provider knowingly submitted a claim to Medicare or Medicaid that was false or did not meet the program’s requirements can be difficult. However, the amended FCA provides a safe harbor to providers who self-report any potential violations and take prompt action to correct them.
“There are many healthcare providers that are voluntarily disclosing fraud or instances of noncompliance with various laws or regulations,” said Hernandez. “They’re taking a proactive approach, which is a great thing. But, there are still going to be healthcare providers who have criminal conduct, and they have to be held accountable.”
The New Rules for False Claims Act Cases
The new rules expand the definition of “claim” that can form the basis of an FCA claim. Previously, only those claims submitted to Medicare, Medicaid, or other federal healthcare programs fell under the purview of the FCA. The new rules expand that definition to include claims submitted to any federal agency for payment.
“The government has found that there are some other types of claims it wants to be covered by the False Claims Act,” said Hernandez. “One is any claim that’s submitted to a federal agency, like the Department of Defense or the Postal Service. The second has to do with any claim that is submitted in violation of a state Medicaid plan.”
The rules also expand the definition of “knowing” to include anyone who had actual knowledge of certain pieces of information when they signed off on the claim. This could consist of knowledge that a claim was false or misleading, but it could also mean knowing about any violation of state law.
“Before, you had to have actual knowledge that the claim was false or fraudulent,” said Hernandez. “Now, they’ve added this new standard—knowledge at the time of submission.”
The rules also provide safe harbor for providers who self-report any potential violations and promptly correct them.
“Providers have an incentive to be proactive now because if they happen to learn about the existence of a claim—not necessarily that it’s false, but just that there is some noncompliance or something that falls short of their compliance obligations—they have an obligation to go back and fix it,” said Hernandez.
Hernandez closed by stating that the rules provide a clear framework for healthcare providers to prevent fraud in their organizations.
“I think that these new rules are going to help us all in the battle against healthcare fraud,” she said. “They would have been preferable earlier, but they’re here now, and I think they’ll be beneficial.”