Maryland Bar Bulletin
Publications : Bar Bulletin : April 2013


Since assuming office, President Obama has made healthcare reform a top priority of his administration. This has included a substantial increase in the prosecution of fraudulent billing by medical providers who receive federal dollars from government-funded healthcare programs, such as Medicare and Medicaid. 

This past February, for example, the Obama administration announced a record $4.2 billion recovery in fiscal 2012 as a result of the federal government’s efforts to combat healthcare billing fraud. This bodes well for whistleblowers and their lawyers, who received $284 million of this recovery as a result of federal qui tam lawsuits filed under an anti-fraud statute known as the False Claims Act (FCA).

The FCA allows a private citizen whistleblower (referred to as a relator) with knowledge of fraud against the federal government to file a qui tam lawsuit on behalf of himself and the United States. Whistleblowers can receive between 15-30 percent of any amount recovered by the government. Because the FCA provides for treble damages and significant civil penalties, as well as attorneys’ fees and costs, recoveries are often in the multi millions of dollars. Any company or individual who knowingly makes a false statement for the purpose of obtaining or retaining funds from or owed to the government may be liable under the FCA. 

Depending on the circumstances, the statute of limitations for an FCA claim is generally six years from the date of violation.

Fraud on the government is particularly rampant in the healthcare industry, which has given rise to approximately 80 percent of all FCA recoveries over the past decade. As a general matter, Medicare and Medicaid will only reimburse a provider for services or supplies considered by the government to be medically necessary. In order to legally claim reimbursement, healthcare providers who submit claims to the government for reimbursement must provide various types of information and maintain or obtain certain specified records that demonstrate medical necessity.  This is often shown by reference to what are known as CPT billing codes that link to specific diagnoses, procedures, or tests. However, if a healthcare provider submits a claim for payment to which it is not entitled, or falsifies documentation supporting the claim, then the provider may be violating the FCA. Some common forms of healthcare fraud follow:

  • Falsifying Records. Submitting claims for services or supplies that were never provided or billing for services that are not demonstrated by a patient’s records to be medically necessary, either because the records have been falsified or inadequately maintained.
  • Upcoding. Billing for an office visit or medical procedure under a CPT code with a higher rate of reimbursement than that allowed.
  • Unbundling. Billing related services or supplies under separate CPT codes in order to avoid cost savings that the government would otherwise be entitled to if billed as a group.
  • Off-Label Marketing. Marketing pharmaceuticals or medical devices for use in a manner not approved by the FDA.
  • Kickbacks. Providing unlawful monetary payments or other financial incentives to doctors or hospitals in exchange for referrals or for the prescription of particular pharmaceuticals or supplies.
  • Cost Report Fraud. Manipulating or falsifying data submitted to Medicare or Medicaid in “cost reports,” which are used to calculate government reimbursement rates.

If a client presents you with sufficient evidence of any of the above, the first step in bringing a qui tam lawsuit is to file a Complaint under seal in federal court. The Complaint should then be served on the Department of Justice (DOJ), along with a written disclosure of “substantially all material evidence and information” your client has about the case.

This disclosure statement will typically take the form of a memorandum with supporting exhibits (such as billing records or patient medical charts). It should outline in detail the law and facts of the case, including relevant background about your client and the defendant, as well as potential damages. The disclosure statement is perhaps the most important document you will prepare. It is your chance to convince the DOJ to intervene, which is more likely when a large amount of damages or a clear cut case of fraud is involved, so any disclosure statement should be drafted with this in mind. 

The DOJ will then begin its investigation, which often takes several years. Provided your case has some merit, the DOJ will typically contact you soon after filing to conduct an interview of your client. If, at the end of this investigation, the DOJ decides to intervene, the relator continues as a party, with the DOJ assuming primary responsibility for litigating the case. If the DOJ declines to intervene, the relator may choose to litigate the case, which proceeds like any other litigation.

Anna C. Haac is an attorney at the Washington, D.C. law firm of Tycko & Zavareei, LLP.

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Publications : Bar Bulletin : April 2013

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