Looking Back at Health Care False Claims Enforcement in 2015; Looking Ahead at Trends Driving Health Care False Claims Enforcement in 2016
On December 3, 2015, the U.S. Department of Justice (DOJ)—the principal public enforcer of the U.S. False Claims Act (FCA)—released its report of recoveries obtained under the FCA during its 2015 fiscal year. In FY 2015, the DOJ recovered more than $3.5 billion in settlements and judgments from civil cases involving fraud and false claims against the government. This is the fourth year in a row that the DOJ has recovered more than $3.5 billion in cases under the FCA, and brings total recoveries from January 2009 to the end of the fiscal year to $26.4 billion.
Of the $3.5 billion recovered last year, $1.9 billion—more than half of the total recovery—came from companies and individuals in the health care industry who were accused of providing unnecessary or inadequate care, paying kickbacks to health care providers to induce the use of certain goods and services, or overcharging for goods and services paid for by Medicare, Medicaid, and other federal health care programs. This $1.9 billion reflects federal losses only. In many of these cases, the DOJ played a salient role in recovering additional millions of dollars for consumers and state Medicaid programs.
Big recoveries for FCA violations in the health care industry are nothing new. Health care fraud recoveries in 2015 were actually slightly less than they were in 2014, when DOJ’s FCA recoveries for fraud against federal health care programs were about $2.3 billion in all. Health care fraud has been assuming an increasingly prominent role in FCA enforcement for decades. In 1987, the number of FCA cases that the DOJ filed involving fraud on federal health care reimbursement programs was a whopping zero. By 2011, it was over 400 cases. By the late 1990s, HHS cases began to represent a majority of all FCA cases.
The growth in health care FCA claims is mostly attributable to qui tam actions—that is, lawsuits alleging FCA violations that have been filed by private individuals acting on the government’s behalf, pursuant to 31 U.S.C. § 3729 et seq. In 1992, the number of qui tam filings exceeded for the first time the number of FCA claims filed by the DOJ. For the last decade, about 80 percent of all FCA recoveries in health care have resulted from qui tam lawsuits.
What can we expect by way of FCA enforcement trends in health care this year? Extrapolating from last year’s developments, there seem to be at least two safe bets:
1. Individuals will be in the cross-hairs like never before. In a memo issued in September 2015, the DOJ announced that it will aggressively pursue individuals in the health care industry who are responsible for corporate FCA violations. The memo, addressed to all federal prosecutors and issued by Deputy Attorney General Sally Quillian Yates (and therefore popularly referred to as the “Yates Memo”), states among other things that: (1) in order to qualify for any cooperation credit, corporations must provide to the DOJ all relevant facts relating to the individuals responsible for the misconduct; (2) criminal and civil corporate investigations should focus on individuals from the inception of the investigation; (3) absent extraordinary circumstances or approved departmental policy, the DOJ will not release culpable individuals from civil or criminal liability when resolving a matter with a corporation; (4) DOJ attorneys should not resolve matters with a corporation without a clear plan to resolve related individual cases, and should memorialize any declinations as to individuals in such cases; and (5) civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual's ability to pay.
All of this is likely to increase the incentives for employers in the health care sector to place the blame for FCA violations on the actions of "bad apple" employees, in an effort to escape corporate culpability. Those incentives were already powerful before the Yates Memo was issued.
2. Enforcement focus on physician compensation arrangements will likely continue. Physician compensation arrangements that violated the Stark Law, and that therefore violated the FCA as well (at least where federal money was directly or indirectly involved), were the focus of several big-dollar FCA recoveries in 2015.
In September of last year, the DOJ announced that Florida-based Broward Health had agreed to pay the federal government $69.5 million to settle allegations it violated the FCA by engaging in improper financial relationships with nine physicians. This case originated as a qui tam complaint brought by a physician-whistleblower, Dr. Michael Reilly, MD, an orthopedic surgeon in private practice, who alleged the health system carefully tracked the value of physician referrals and pressured physicians to increase referral volume when they lagged. Dr. Reilly's claim came about after he was offered an employment deal with Broward Health, but rejected it after his lawyer told him it was illegal.
Just one week after the Broward Health settlement was announced, Florida-based Adventist Health System reached a $118.7 million settlement with the DOJ and four states to settle similar allegations. The settlement resolved claims that the nonprofit health system had paid bonuses to employed physicians based on a formula that improperly took into account the value of the physicians' referrals to Adventist hospitals.
Then in October of 2015, the DOJ announced that it had settled its years-long battle with Tuomey Healthcare System in South Carolina. Trial in that case in 2013 yielded an astonishing $237 million jury verdict, which was subsequently upheld by the US. Court of Appeals for the Fourth Circuit in July of 2015. The DOJ settled the case for $72.4 million, and Tuomey was sold to Palmetto Health, a multi-hospital healthcare system based in Columbia, South Carolina. The basis of the DOJ’s complaint against Tuomey was that it illegally billed the Medicare program for services referred by physicians with whom the hospital had improper financial relationships.
Given all of the attention directed at these big settlements in 2015, physician compensation cases should continue to fuel FCA claims in 2016. It's not enough to have a written employment contract with compensation provisions that appear to comply with the Stark Law on their face. The government has signaled that it will not only scrutinize a written agreement memorializing a compensation arrangement, but will also scrutinize the parties' performance under the contract and the basis on which compensation is determined. Compliance is an on-going obligation throughout the term of a physician's employment.
The Tuomey and Adventist cases, which are only two among the many enforcement actions brought recently by the DOJ against non-profit providers, also make clear that the DOJ won't cut any slack to a hospital or health system just because it is non-profit. There is no "halo effect" that will shield a non-profit health care provider from a potentially devastating FCA claim.
More than 40 different federal laws contain provisions that outlaw retaliation against employees who “blow the whistle” on the misconduct of their employers. Although none of them single out employees of the health care industry for special protection, a number of them are relevant to doctors, nurses, physician assistants, nurse practitioners, billing and coding specialists and other medical and administrative employees of the health care industry.
This overview is intended to help health care whistleblowers identify when they might be victims of illegal retaliation in the workplace. It speaks at a high level, and thus does not provide an exhaustive explanation of every fact that would need to be present for an employee to make out a successful claim of retaliation under any of the laws discussed. It cannot be relied on as legal advice. Most a the laws discussed below require the filing of an administrative complaint before the filing of a lawsuit in court. Some require a plaintiff to try his or her complaint before an administrative law judge. Most prescribe a very short period in which to bring a claim. (In the case of the Occupational Safety and Health Act, as little as 30 days). You need to seek legal counsel, and fast, if you believe you are a victim of illegal retaliation and want to preserve your rights.
False Claims Act (FCA) (31 U.S. Code § 3730)
For the most part, I've organized the laws discussed in this article alphabetically, with one exception: The False Claims Act. This law—first enacted in 1863 to combat fraud by government contractors during the Civil War—is the federal government's primary tool for combating fraud against the government.
The health care industry has become a prime target of the government’s enforcement efforts under the FCA. In 2009, the U.S. Department of Justice (DOJ) and the U.S. Department of Health and Human Services (HHS) created a joint task force—the Health Care Fraud Prevention and Enforcement Action Team (HEAT)—to proactively find and prosecute waste, fraud, and abuse in Medicare and Medicaid. This effort has borne fruit: Of the record-setting $5.69 billion in settlements and judgments from civil cases involving fraud and false claims brought by the DOJ in FY 2014 under the FCA, recoveries from false claims against federal health care programs, including Medicare and Medicaid, accounted for nearly half of that amount.
Common false claim schemes in the health care industry that violate the FCA include:
The FCA provides whistleblowers the opportunity to file suit on behalf of the United States against violators of the FCA. If the government intervenes in the case and recovers money through a settlement or a trial, the whistleblower (or "relator") is entitled under the FCA to 15 percent to 25 percent of the recovery. If the government doesn't intervene in the case and the whistleblower chooses to pursue it anyway, the reward is between 25 and 30 percent of the recovery.
The FCA creates a cause of action for any employee, contractor, or agent who is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts done by that person (or others associated with whom that person is associated) in furtherance of a qui tam action or other efforts to stop one or more violations of the FCA. Making an internal complaint to your employer regarding suspected violations of the FCA should be enough to obtain protection.
Relief available to an aggrieved whistleblower includes reinstatement with the same seniority status that the whistleblower would have had but for the discrimination, two times the amount of back pay, interest on the back pay, and compensation for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorneys' fees.
Time to file a complaint: 3 years.
Age Discrimination in Employment Act (ADEA); 29 U.S.C. § 623(d)
The ADEA protects people who are 40 or older from discrimination in employment because of age. It also prohibits an employer from discriminating against an employee or applicant for employment because that individual has opposed a discriminatory practice made unlawful by the ADEA, or because the individual has made a charge, testified, assisted, or participated in any manner in an investigation, proceeding, or litigation under the ADEA. The ADEA also prohibits such actions when committed by an employment agency against any individual, and by a labor organization against a member or applicant for membership.
Time to file complaint: 180 days.
Americans with Disabilities Act (ADA); 42 U.S.C. § 12203(a)
The ADA requires that employers reasonably accommodate the known physical or mental limitations of an otherwise qualified individual with a disability who is an applicant or employee, unless doing so would impose an undue hardship on the operation of the employer's business. The ADA also prohibits discrimination against any individual because he or she has opposed any act or practice made unlawful by the ADA or because such individual made a charge, testified, assisted, or participated in any manner in an investigation, proceeding, or hearing under the ADA.
Time to file a complaint: 180 days.
Employee Polygraph Protection Act (EPPA); 29 U.S.C. § 2002(4)
The EPPA generally prevents employers from using lie detector tests for prescreening or during the course of employment (with some exceptions for certain industries and federal, state and local government). The EPPA prohibits an employer from discharging or otherwise discriminating against an employee or prospective employee because such individual (1) has filed a complaint, or instituted or caused to be instituted any proceeding under or related to the EPPA; (2) has testified or is about to testify in any such proceeding; or (3) has exercised any right afforded by the EPPA.
Time to file a complaint: 3 years.
Employee Retirement Income Security Act (ERISA); 29 U.S.C. § 1140
ERISA prohibits any person from discharging, fining, suspending, expelling, disciplining, or discriminating against a participant or beneficiary for (1) exercising any right to which he or she is entitled under the provisions of an employee benefit plan, section 1201 of title 29, U.S. Code, or the Welfare and Pension Plans Disclosure Act; or (2) giving information, testifying, or being about to testify in any inquiry or proceeding related to ERISA or the Welfare and Pension Plans Disclosure Act. In the case of a multiemployer plan, it is unlawful for the plan sponsor or any other person to discriminate against any contributing employer for exercising rights under ERISA or for giving information or testifying in any inquiry or proceeding before Congress related to ERISA.
Time to file a complaint: Depends. ERISA doesn’t provide a limitations period for retaliation claims, so a court will typically the state law limitations period corresponding to wrongful termination or retaliatory discharge, and sometimes the limitations period that benefits plan sponsors include in their benefit plan documents and summary plan descriptions.
Fair Labor Standards Act (FLSA) 29 U.S.C. § 215(a)(3); 29 U.S.C. § 218(c)(a)
The FLSA establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments. The FLSA prohibits an employer from discharging or otherwise discriminating against an employee because such employee filed a complaint or instituted any proceeding under the statute, testified or is about to testify in any such proceeding, or served or is about to serve on an industry committee.
The Patient Protection and Affordable Care Act (ACA) amended the Fair Labor Standards Act (FLSA) to provide additional protections for employees. Under the new section 18(c) of the FLSA, an employer is prohibited from discharging or otherwise discriminating against any employee because he or she has (1) received a premium tax credit or cost-sharing subsidy under the ACA; (2) provided, caused to be provided, or is about to provide or cause to be provided to the employer, the federal government, or a state attorney general information related to any violation of, or any act or omission the employee reasonably believes to be a violation of, any provision of title 29 of the U.S. Code (which contains federal employment and labor laws); (3) testified or is about to testify in a proceeding concerning such a violation; (4) assisted or participated in, or is about to assist or participate in, such a proceeding; or (5) objected to, or refused to participate in any activity, policy, practice, or assigned task that employee reasonably believed to be in violation or any provision of title 29 of the U.S. Code, or any order, rule, regulation, standard, or ban under such title. 29 U.S.C. § 218c(a).
Health care professionals are usually exempt from the protections of the FLSA under the executive, administrative or professional exemptions that exist under Section 13(a)(1) and regulations promulgated by the U.S. Department of Labor—but not always. For example, non-physician medical professionals who are paid by the hour rather than paid a salary may be entitled to overtime wages under the FLSA.
Time to file a complaint: 2 years; 3 years for a “willful” violation; for section 18 (c) violations, 180 days.
Family and Medical Leave Act (FMLA); 29 U.S.C. § 2615
The FMLA entitles eligible employees of covered employers to take unpaid, job-protected leave for specified family and medical reasons with continuation of group health insurance coverage under the same terms and conditions as if the employee had not taken leave. The FMLA prohibits an employer from discharging or otherwise discriminating against any individual because he or she (1) has opposed any practice made unlawful by the FMLA; (2) has filed a charge, or instituted or caused to be instituted any proceeding under or related to the FMLA; (3) has given or is about to give any information in connection with any inquiry or proceeding related to any right provided under the FMLA; or (4) has testified or is about to testify in any inquiry or proceeding related to any right provided under the FMLA.
Time to file a complaint: 2 years; 3 years for a “willful” violation.
Genetic Information Nondiscrimination Act (GINA); 42 U.S. Code § 2000ff–6
GINA prohibits group health plans and health insurers from denying coverage to a healthy individual or charging that person higher premiums based solely on a genetic predisposition to developing a disease in the future. It also prohibits employers from using individuals' genetic information when making hiring, firing, job placement, or promotion decisions. GINA also outlaws discrimination against any individual who has opposed any act or practice made unlawful by GINA or because such individual made a charge, testified, assisted, or participated in any manner in an investigation, proceeding, or hearing relating to GINA.
Time to file a complaint: 180 days.
National Labor Relations Act (NLRA); 29 U.S.C. § 158(a)(4)
The NLRA is a foundational statute of US labor law which guarantees basic rights of private sector employees to organize into trade unions, engage in collective bargaining for better terms and conditions at work, and take collective action including strike if necessary. The act also created the National Labor Relations Board, which conducts elections that can require employers to engage in collective bargaining with labor unions.
The Act does not apply to workers who are covered by the Railway Labor Act, agricultural employees, domestic employees, supervisors, federal, state or local government workers, independent contractors and some close relatives of individual employers. Employed physicians are not barred from engaging in protected collective bargaining activities under the NLRA, but the fact that managers and supervisors are not regarded as “employees” under the NLRA often prevents physicians from enjoying its protections.
Under section 8(a)(4) of the NLRA, it is an unfair labor practice for an employer to discharge or otherwise discriminate against an employee because he or she has filed charges or given testimony under the NLRA.
Time to file a complaint: 180 days.
Occupational Safety and Health Act of 1970 (OSH Act); 29 U.S.C. §660(c)
The OSH Act prohibits an employer from discharging or in any manner discriminating against an employee because such employee filed a complaint or instituted or caused to be instituted a proceeding under the OSH Act, or has testified or is about to testify in any such proceeding, or exercises any right or protection afforded by the OSH Act.
OSHA has issued standards for many common workplace health and safety risks in healthcare facilities, including blood-borne pathogens, ionizing radiation, and laboratory chemicals. In 2013, U.S. hospitals recorded nearly 58,000 work-related injuries and illnesses, amounting to 6.4 work-related injuries and illnesses for every 100 full-time employees—almost twice as high as the overall rate for private industry. In the summer of 2015, OSHA announced that it is expanding its use of enforcement resources in hospitals and nursing homes to focus on musculoskeletal disorders related to patient or resident handling, blood-borne pathogens, workplace violence, tuberculosis and slips, trips and falls.
Time to file a complaint: 30 days.
Title VII of the Civil Rights Act of 1964 (Title VII); 42 U.S.C. § 2000e-3
Title VII prohibits employment discrimination based on race, color, religion, sex and national origin. Title VII prohibits an employer from discriminating against any employee or applicant for employment because he or she has (1) opposed any practice made an unlawful employment practice by Title VII; or (2) made a charge, testified, assisted, or participated in any manner in an investigation, proceeding, or hearing under Title VII. Title VII also prohibits such actions when committed by an employment agency or joint labor-management committee against an individual, or labor organization against a member or applicant for membership.
Time to file a complaint: 180 days (up to 300 days in some states, including Maryland and the District of Columbia).
Sarbanes-Oxley Act of 2002 (SOX); 18 U.S.C. § 1514A
This statute will only apply if you work for a health care provider that is traded on a stock exchange, or is owned by, or owned in common with, a publicly-traded company. SOX prohibits publicly traded companies, including any subsidiaries or affiliates whose financial information is included in the consolidated financial statements of such companies, and nationally recognized statistical rating organizations from discharging, demoting, suspending, threatening, harassing, or in any other manner discriminating against an employee because such employee provided information, caused information to be provided, otherwise assisted in an investigation, or filed, testified, or participated in a proceeding regarding any conduct that the employee reasonably believes is a violation of SOX, any SEC rule or regulation, or any federal statute relating to fraud against shareholders, when the information or assistance is provided to a federal regulatory or law enforcement agency, any Member or committee of Congress, or a person with supervisory authority over the employee or investigative authority for the employer, regarding any violation of 18 U.S.C. §§ 1341 (mail fraud), 1343 (wire fraud), 1344 ( bank fraud), 1348 (securities fraud against shareholders), or any SEC rule or regulation, or any other federal law regarding fraud against shareholders.
Time to file a complaint: 180 days.
Uniformed Services Employment and Reemployment Rights Act (USERRA); 38 U.S.C. § 4311(b)
The purpose of USERRA is to protect civilian job rights and benefits for veterans, members of reserve components, and individuals activated by the President of the United States to provide federal response for national emergencies. USERRA prohibits an employer from discriminating or taking any adverse employment action against any person because such person has (1) taken an action to enforce a protection afforded by the statute; (2) testified or otherwise made a statement in or in connection with any proceeding under USERRA; (3) has assisted or otherwise participated in an investigation under USERRA; or (4) has exercised a right provided by USERRA.
Time to file a complaint: No limit.