August 1999 Bulletin

Guard against qui tam bounty hunters

Compliance plan is effective method of preventing False Claims Act litigation

By Rick L. Hindmand

Health care providers are increasingly becoming the targets of self-appointed bounty hunters who hope to become rich by filing lawsuits to recover for overpayments under Medicare, Medicaid or other government programs.

The federal False Claims Act empowers nearly anyone to file a lawsuit in the name of the United States government to recover for false or fraudulent claims. Such whistleblower cases are known by the term qui tam, which is an abbreviation of a Latin phrase meaning, "Who sues on behalf of the King as well as for himself."

As a reward for filing a qui tam case, a whistleblower is entitled to a portion (up to 30 percent) of any recovery by the government, plus attorneys' fees, expenses and costs, subject to certain limitations.

The stakes in a qui tam action can be staggering. The False Claims Act authorizes civil penalties of $5,000 to $10,000 for each false claim submitted, in addition to three times the damages sustained by the government.

The False Claims Act applies to a broader scope of conduct than the name implies. While the Act applies to "knowingly" false or fraudulent claims, the statute defines "knowingly" to include claims that are submitted in deliberate indifference or reckless disregard of the truth. Therefore, false claims liability can exist even without the intent to defraud the government. For example, a physician who delegates authority to submit claims, but fails to supervise the process or review the claims could face exposure. Moreover, attorneys for the government and for whistleblowers have attempted, with some success, to stretch the coverage of the False Claims Act to include violations of Stark II and the anti-kickback statute.

The potential for a qui tam award provides a strong incentive for anyone with relevant information to file a qui tam action. Former employees have played a particularly prominent role as whistleblowers and, in some cases, have received extravagant financial rewards, including $29 million for one employee and $52 million for three whistleblowers in another case. Some of the largest qui tam recoveries have been obtained in cases filed by former employees who became frustrated by their inability to correct improper billing activities that they observed.

While there is no way to achieve immunity, orthopaedists can take some steps to minimize their exposure to qui tam claims.

The most crucial safeguard is the implementation of an effective compliance plan. Particular emphasis should be placed on uncovering and investigating questionable practices, thereby allowing the orthopaedist to correct the situation with respect to future claims and to determine the best approach to minimize the exposure with respect to past claims.

Employees should be encouraged to report their concerns within the practice and to cooperate with any investigation. Please keep in mind that if an employee desires to pursue a qui tam action, he or she will have a financial incentive to withhold evidence of false claims so that he or she can assert the matter as part of a qui tam action. Moreover, an employee who feels that his or her concerns are being addressed will generally be less likely to file a qui tam action out of frustration.

In no event should an employee be fired or disciplined for expressing his or her concerns about questionable conduct, because the False Claims Act prohibits an employer from retaliating against employees for investigating or reporting false claims. In addition, retaliation may prevent the practice from dealing with the issue and may even cause the employee to file a qui tam action.

The confidentiality of internal investigations should be maintained to the extent possible, in order to minimize the risk that employees may use information developed through the investigation as the basis for a qui tam action. A recent trend has been the filing of qui tam actions by compliance officers against their hospitals.

An additional safeguard would be to conduct exit interviews to elicit any concerns which departing employees may have regarding compliance issues. Consideration also should be given to requiring departing employees to state in writing that they are not aware of any violations.

The False Claims Act provides rich financial incentives to whistle-blowers and continues to be expanded by creative attorneys. Accordingly, orthopaedists should assume that the walls have eyes and ears and that the temptation to dig for gold may be too much for their employees and associates to resist. Compliance is not only ethical, but also smart.

This article should not be interpreted to express legal or other advice.

Rick L. Hindmand is a Chicago health care attorney at Harris, Kessler & Goldstein


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