Qui Tam Suits on the Rise

The False Claims Act provides that any person who knowingly submits a false claim for payment to the federal government is liable for a criminal or civil penalty and treble damages. In 1986, Congress amended the law to add a qui tam provision. The term “qui tam” comes from the Latin phrase “qui tam pro domino rege quam pro se ipso in hac parte sequiter,” or “he who sues on behalf of the king as well as himself.”

The qui tam provisions of the False Claims Act enable a private party to bring suit against a provider who has submitted false claims. If the lawsuit is taken over by the government, the instigator (called a relator) will be entitled to a percentage of the recovery (usually 5 to 20 percent).

The number of qui tam lawsuits has increased tremendously. Fifteen years ago, fewer than 10 percent of qui tam recoveries related to health care actions. Today, about half of all qui tam recoveries spring from the health care industry. The number of whistleblower filings has increased from approximately 50 to more than 500 filings annually.

HIPAA amended this rule dramatically, effective Jan. 1, 1997. One amendment prohibits submitting a claim for an item or service based on incorrect coding, where the person knows — or should know — the claim will result in greater payment than is proper. Another amendment expressly characterizes claims submitted for service that were not medically necessary as false.

Perhaps the most important amendment clarified CMS’ longstanding position that a provider may not claim ignorance as a defense against the “knowledge” requirement of the false claims law. If a provider demonstrates a “reckless disregard” of the accuracy of the submission or acted in “deliberate ignorance” of the truth or falsity of the claim, then the provider may not claim ignorance as a defense. In other words, proof of actual intent to defraud is no longer necessary under the civil provisions of the False Claims Act.

A provider who puts forth insufficient effort to ensure accurate billing, or who allows patterns of mistakes to continue because of lax supervision or inattention to the rules, may be held accountable for submitting false claims.

Another trend that generates whistleblowers is the government’s contention that claims submitted for services rendered poorly also constitute false claims. So far, the government has only used this theory to pursue egregious examples of poor quality service.

Finally, whistleblower activities often occur because of contract issues and financial relationships. For example, a national home care company settled a qui tam lawsuit that alleged that several of its medical advisor relationships were sham consulting contracts designed to induce referrals.

The company contended that its consulting agreements were legitimate because they required the provision of legitimate and useful services for a reasonable fee. The government contended that the consulting contracts did not reference any listing of necessary duties, nor did they provide any mechanism for verifying that such duties were rendered, time spent, etc. Essentially, the alleged flaw in the company’s medical advisor contracts was that they left out supporting information.

The home care company settled its lawsuit for $1.65 million, and various other physician defendants paid an additional $370,000. The qui tam whistleblower received about $455,000.

Since the financial costs under the various fraud and abuse laws frequently involve fines and penalties additional to repayment, the potential reward for a qui tam relator can be substantial, and thus provide a strong incentive to become a whistleblower. Today, more than 50 percent of all Department of Justice recoveries originate from whistleblowers.

Whistleblowers have become as costly to health care providers as any other national or regional fraud initiative or investigative tools used by the government. In terms of volume of litigation, whistleblower activity accounted for more than 55 percent of all cases filed in 1996. These numbers have certainly increased in subsequent years, and will continue to grow.

Neil Caesar is president of the Health Law Center (Neil B. Caesar Law Associates, PA), a national health law practice in Greenville, S.C. He also is a principal with Caesar Cohen Ltd., which offers compliance training, outsourcing and consulting and the author of the Home Care Compliance Answer Book. He may be reached by e-mail at [email protected] or by telephone at 864/676-9075.