Pre-Empting Healthcare Whistleblowers

Anderson Kill's Healthcare Newsletter

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PUBLISHED ON: October 1, 2004

Whistleblowing in the healthcare field is a growth area. In the 2003 fiscal year, the government collected $ 1.48 billion in suits initiated by whistleblowers under the federal False Claims Act. The healthcare industry has accounted for the lion’s share of the recoveries. Here are some SAQs (Seldom Asked Questions) on why you should care about whistleblowing and what you can do about it.

What kind of “whistleblowing” are we talking about?

The Federal False Claims Act provides for penalties against those who file false claims with the government and gives a portion of the government's recovery to qualifying individuals who have provided the information on which the government's recovery is based. (These whistleblower suits are also called "qui tam" actions, a Latin shorthand for "one who brings the action for himself as well as the king.")

Why should healthcare executives care about this?

Big bucks are involved and healthcare entities are especially vulnerable. Healthcare entities, such as hospitals, laboratories, nursing homes, and physician practice groups submit a high volume of claims to the government. A false claim is punishable by a penalty of $5,000 to $10,000 per claim, plus three times the damages sustained by the government.

What range of damages are we talking about?

For example, $641 million was recovered from HCA Inc. (formerly Columbia/HCA) to settle claims of over-billing and kickbacks. The whistleblowers’ combined take was $154 million. ACalifornia hospital system paid $51 million to settle allegations that unnecessary cardiac procedures were performed. SmithKline Beecham Clinical Laboratories paid $325 million based on allegations that lab tests were either not needed or not performed.

But we don’t submit false claims.

Are you sure? There are important issues lurking beneath the surface here. First, although the statute exacts penalties only where the false claim is submitted “knowingly,” the definition of “knowing” includes “reckless disregard of truth or falsity” and “acts in deliberate ignorance of truth or falsity.” In other words, even if a healthcare entity did not intentionally sit down and decide to defraud the government, a court or jury might later decide that it had been reckless or culpably ignorant.

Second, claims can be considered “false” in ways that are not obvious. For example, courts have recognized a “certification theory” of liability under the False Claims Act. Suppose that in order to get paid, a healthcare provider must represent that it has complied with certain federal statutes or regulations, or with certain contractual terms. If it is later proven that these provisions were not complied with, then the prior representation may be held false, subjecting the entity to the treble damages and penalties provided in the False Claims Act. Since such false certifications may have occurred over a several year period involving numerous claims, the potential exposure can be daunting. For example, it has been held that items and services must be “reasonable and necessary” in order to obtain payment under Medicare and that the submission of a claim implicitly certifies compliance with this requirement. In addition to allegations that the items or services provided were unnecessary, false claims can be based upon allegations that the claim overstated the level of service provided, or that the claim billed for services that were not provided.

What can we do?

There are several steps that health care providers can take to prevent a whistleblower suit.

  • The most important is to have a working internal compliance program for reporting possible or suspected problems. This is probably the most effective prophylactic measure that can be taken.
  • Act on information that is received. Conduct an investigation to determine whether there is a potential problem. If the conclusion is that there is no problem, document what was done and the results. If there is a potential problem, take action to correct the situation.
  • Keep employees gruntled. Since disgruntled employees are the most likely persons to bring whistleblower actions, to the extent that employees (and other potential whistleblowers) feel valued, and that their concerns have been treated with respect—even where there is disagreement—they are less likely to resort to a whistleblower suit.