The recent decision in United States v. Regence Blue Cross (10th Cir 12/05/2006) illustrates the power of qui tam, or private, civil lawsuits under the False Claims Act (FCA). Under the FCA, an action can be commenced either by the United States itself, or as a “qui tam” action, by a private person acting “for the United States Government” against providers “in the name of the Government.” The false claim may take many forms: overcharging for a product, failing to perform a service, delivering less than the promised amount of goods or services, underpaying money owed to the government, and charging for one thing but delivering another, to list just a few examples. The legal definitions of a false claim can be found in section § 3729 of the Act.

In this case, a former employee sued more than seven years after alleged violations were committed. Specifically, the plaintiff claimed that her former employer, three managers, and a related laboratory presented false Medicare claims to the Government, submitted a false budget payment request to the Health Care Financing Authority (“HCFA”), fraudulently avoided adverse contract action by HCFA by backdating and falsifying documents to manipulate its contract performance ratings, and retaliated against her under the FCA’s “whistleblower” protections and in violation of State law.

The employee’s job included reviewing claims submitted by medical service providers, including laboratories. After complaining internally that a laboratory was presenting false claims for Medicare reimbursement, and that Regence had failed to take appropriate action to stop this “fraud,” Ms. Sikkenga filed a qui tam suit. While the trial court had dismissed all Ms. Sikkenga’s claims, the 10th Circuit reversed, permitting some of Sikkenga’s fraud claims as well as her state law claim to proceed.

While the final determination on Ms. Sikkenga’s is yet to be made, this case highlights why we continue to see increases in qui tam actions. A company or individual that has made a false claim may be liable for triple damages, a civil fine of $5,500 to $11,000 per false claim, and the attorney’s fees of the citizen whistleblower. Individuals or companies that cause someone else to submit a false claim can also be found liable under the False Claims Act.
The standard of proof in a False Claims Act case is “preponderance of the evidence”, i.e., the claim is more likely true than not. This is the same burden of proof ordinarily applicable in most civil cases, and is easier to meet than the “beyond a reasonable doubt” standard used in criminal cases.

So what should you do? Recognize the new importance of business ethics and corporate compliance policies and training, teach supervisors and staff about ethical obligations, and have clear complaint policies and procedures in place for responding to whistleblowers.

For an example of how whistleblowers and the False Claims Act interact, read this article, Home Health Care Industry Reels from Medicare Scandal. Whistleblowers can bring qui tam lawsuits against providers and benefit hugely. In this particular case, the whistleblower benefits as follows:

The False Claims Act permits individuals to file qui tam lawsuits against companies that defraud the government. Liable companies pay as much as three times the government’s losses plus penalties for each false claim. When the government joins the case, whistleblowers are entitled to 15 percent to 25 percent of the government’s recovery.

The government, Diaz, and the defendants last year entered into a settlement agreement that led to $33,872,626.03 being repaid to the government. As a result of her whistleblower status, Diaz received 20.75 percent of that recovery. The case remained under seal during the ongoing investigation, and was unsealed last Oct. 10. (AJ)

What were the fraudulent activities that yielded such a repayment?

In her qui tam lawsuit, Diaz alleged that Perez employed “marketers” (also known as “cappers”) who recruited patients for home health services — whether the services were needed or not — and then billed Medicare for tens of millions of dollars’ worth of home health services that were never provided. Cappers were paid as much as $400 per enrolled patient, according to the lawsuit. Often patients were paid to enroll as well. Some of the patients also were cappers, getting paid to recruit other patients. The lawsuit said Perez paid kickbacks to doctors to get referrals.

Perez’s companies obtained the necessary physician certifications that home health services were required, even though the doctors generally didn’t see the patients they were certifying for the services, the lawsuit said. The doctors often made up diagnoses to qualify patients for Medicare and Medicaid, according to the lawsuit.

Patients received few, if any, visits, once they were enrolled. The companies billed Medicare and Medicaid for regular visits, falsifying documents to obtain payments. The companies also obtained many signatures from patients in advance, so they could use those signatures as needed for forms that Medicare and Medicaid periodically required.

Also, this week the defendent was sentenced to 46 months in prison and asked to pay Medicare an additional six million on top of the afore mentioned amount.

The fraud in this case appeared pretty evident, according to the prosecutor, given that the defendant’s home health business went from a start-up to one of the top agencies in California in only 18 months.