Whistleblowing On Healthcare & Procurement Fraud

Whistleblowers have powerful rights under the False Claims Act.  Charles A. Lamberton is a leading Pittsburgh whistleblower attorney and represents individuals who need help blowing the whistle on corporate fraud, as well as those who have already blown the whistle and suffered retaliation at work. If you feel you are in a position to report bad actors and need help figuring out where to start, read on to learn more about being a corporate whistleblower.

The False Claims Act (FCA)  allows any person who discovers that a government contractor is defrauding the federal government to report it and then sue the wrongdoer, following specialized procedures, on behalf of the U.S. government. In general, the FCA covers fraud involving any federally funded contract or program, except tax fraud. Some common examples are:

• A contractor falsifies test results or other information regarding the quality or cost of products it sells to the government;
• A health care provider bills Medicare and Medicaid for services that were not provided or were unnecessary;
• A grant recipient charges the government for costs unrelated to the grant.

In FCA lawsuits, known as qui tam suits, the government has the right to intervene and join the private citizen's lawsuit. If the government can collect from the fraudulent contractor, the law allows the whistleblower to share in the proceeds. If the government declines, the individual may proceed on their own. The FCA also contains an anti-retaliation provision that protects those who make FCA-protected disclosures or file a qui tam suit. Some states have passed similar laws concerning fraud in state government contracts.

The FCA dates back to the Civil War. It was initially enacted in 1863 to control fraud in federal contracts, which at the time was designed to stop war profiteers from selling the Union Army faulty war supplies. In 1943, Congress passed amendments that resulted in an increasingly narrow application of the qui tam provisions, and, as a result, very few cases were successfully brought by whistleblowers. In the following years, the FCA and the qui tam provisions withered from their occasional use. In 1986, as an increasing amount of fraud, especially in the burgeoning defense industry, was going undetected and unaddressed, the law was again amended to strengthen the incentives for private citizens to uncover and fight fraud. Since 1986, the FCA settlements and judgments have totaled over $12 billion. In the fiscal year 2003 alone, a record $2.1 billion was recovered under the FCA.

The FCA contains two sections highly relevant to whistleblowers:

• A qui tam provision: Private citizens and "original sources" (i.e. whistleblowers) may file suit on behalf of the U.S. government to recover the damages incurred by the federal government as a result of contractor fraud or other false claims. In return for filing the suit, whistleblowers are entitled to a significant portion of the proceeds, should they prevail. This can lead to a significant monetary award for the whistleblower if he or she follows the complex enforcement procedures required by the FCA.;

• An anti-retaliation provision: The discharge or harassment of a whistleblower who makes FCA-protected disclosures or files a qui tam suit is against the law. The anti-retaliation section permits the whistleblower to file a wrongful discharge suit for double back pay and other damages.

Actions that violate the FCA include:

• knowingly presenting (or causing to be presented) to the federal government a false or fraudulent claim for payment;
• knowingly using (or causing to be used) a false record or statement to get a claim paid by the federal government;
• conspiring with others to get a false or fraudulent claim paid by the federal government; or
• knowingly using (or causing to be used) a false record or statement to conceal, avoid, or decrease an obligation to pay money or transmit property to the federal government.

Included in the definition of a false statement is where a company submitting a claim to the government to be reimbursed for goods and services they provided did not comply with the government contract in providing those goods or services.

In the recent case of United Health Services, Inc. v. Escobar, a claim was brought by the parents for the death of their bipolar child who was prescribed medication by a nurse under the supervision of a non-board-certified psychiatrist.

The Supreme Court held, under a theory of “implied certification,” that a defendant can be liable under the FCA for submitting a claim that makes specific representations about the goods or services provided, but fails to disclose that it didn’t comply with material statutory, regulatory, or contractual requirements (in this case, having the nurse work under the supervision of a certified psychiatrist).

The failure to comply makes those representations misleading with respect to those goods and services and therefore violates the FCA, even if those requirements were not expressly designated as conditions of payment. Simply put, this case affirmed the “implied certification” theory saying that federal contractors are responsible for complying with all material rules that govern their work.

Conduct which does not violate the FCA includes:

• Waste and mismanagement by government contractors;
• Tax fraud

There are several different common types of fraud involving federal government contractors which violate the FCA. Fraud by defense contractors is perhaps the most traditional type of government contract fraud the FCA is used to combat. However, the government buys a wide array of goods. Types of government contractor fraud violating the FCA include:

• Procurement Fraud: Procurement refers to the process by which the government buys goods or services from contractors. Traditional procurement fraud cases include delivering goods of inferior quality or in violation of inspection, testing, or other technical requirements.

• Contract Compliance Violations: When the certification of regulatory and statutory compliance necessary to obtain a contract is false, claims for payment under that contract may violate the FCA. Similarly, a contractor may violate the FCA by failing to meet contract performance requirements and failure to provide goods and services in conformance with federal statutes and regulations included within federal government contracts.

• Labor, Environmental, Anti-Kickback, and Competitive Bidding Violations: The FCA is an enforcement device for contract terms requiring compliance with other federal laws. Government contractors must abide by certain public policies like environmental protection laws, equal employment opportunity, small business procurements, federal wage laws, and competitive bidding laws.

Violations of Medicare laws and the Medicare Fraud and Abuse Statute also violate the FCA. Hospitals, nursing homes, doctors, home health care agencies, durable goods providers, pharmacies, and laboratories that seek and receive reimbursement for Medicare and Medicaid funds are government contractors subject to the False Claims Act. Some of the ways a health care provider can violate the FCA include:

• knowingly billing for services not rendered;
• misrepresenting the type of goods or services rendered;
• misrepresenting the nature of the patient's illness;
• failing to provide correct data on annual hospital or nursing home cost reports to the government, if the errors were knowing or intentional; or,
• providing substandard care.

Healthcare workers and families of nursing home or hospital patients should pay particular attention to the services provided. Nursing home patients are particularly vulnerable, as patients cannot themselves investigate or actively pursue whether public Medicare and Medicaid funds have been obtained fraudulently. Not only can vigilance improve the healthcare for patients and loved ones, but it also will help ensure that public Medicare and Medicaid monies are properly spent in accordance with the law and good medical practice.

Pharmaceutical fraud now accounts for the largest FCA recoveries by the U.S. Government and private citizens. There are many financial pressures upon pharmaceutical companies and their employees to ignore federal laws designed to prevent fraud and curb costs, especially with the advent of the Medicare prescription plan. Pharmaceutical fraud can take a variety of forms, such as:

• Charging for drugs not used and returned to pharmacy providers;
• Marketing, promoting, and selling drugs for uses other than those approved by the FDA;
• Marketing drugs to physicians through illegal means, such as providing financial or other incentives, such as expense-paid 'consulting' trips to doctors and providers who participate in drug marketing promotional meetings;
• Charging prices to the government that are higher than the law allows; and
• Providing substandard care.

Pharmacy-related violations can include the following:

• Partially filling prescriptions, but charging as if a full prescription was provided;
• Providing kickbacks to a medical provider in order to induce the provider to prescribe certain drugs;
• Prescribing unneeded medications, drugs, or treatment;
• Charging Medicare or Medicaid patients a higher rate than others for the same prescription;
• Knowingly providing defective products or services;
• Falsely diagnosing a more severe ailment than the one the patient actually has, known as 'upcoding' a diagnosis, thereby justifying a more expensive drug therapy or other treatment than that which the patient's health really requires;
• Inappropriate changes in patients' prescriptions from one drug to another as a result of kickbacks or for other improper reasons; and
• Falsely reporting drug research grant information to government agencies. 

Yes. While not as frequently pursued by the government, a lot of government funds are spent on research and other types of funding grants. False statements or false research reports can, however, violate the FCA. False statements in government loan applications also can violate the FCA.

No. The False Claims Act explicitly excludes "claims, records, or statements made under the Internal Revenue Code." However, if you would like to report tax fraud, you can call the IRS Fraud Hotline at 1-800-829-0433.

Qui tam (generally pronounced "key tam," rhymes with "ham") is a shorthand version of the Latin phrase:

"Qui tam pro domino rege quam pro se ipso," which means "Who sues on behalf of the King, as well as for Himself." It is the technical legal term that refers to the type of lawsuits brought under the False Claims Act, by a private citizen plaintiff on behalf of the federal government (rather than by the government itself).

Any persons or entities with evidence of fraud against federal programs or contracts may file a qui tam lawsuit, as long as the government or another private party has not already filed a lawsuit based on the same evidence. Merely giving the information to the government does not bar you from filing a lawsuit. However, if the government files a lawsuit based on the False Claims Act before you, you lose your right to file. More than one person or entity can join together and file a qui tam lawsuit.

The whistleblower who files a suit under the FCA is known as a "relator," instead of a plaintiff, the legal term for the person who brings the lawsuit. In FCA cases, the U.S. government (or the state in a state FCA case) is technically the plaintiff. So if you hear the words "qui tam relator," you will know that it refers to the private citizen whistleblower who brings the False Claims Act lawsuit.

Those who violate the False Claims Act can be required to pay three times the dollar amount that the government was defrauded (known as "treble damages") and civil penalties of $12,537 to $25,076 for each false claim. This can add up to millions, and even hundreds of millions of dollars.

Only by filing a qui tam lawsuit that results in a settlement or favorable judgment can a private party receive a recovery under the FCA. There are two requirements:

• Filing a qui tam lawsuit: in order to be eligible to recover money under the Act, you must file a qui tam lawsuit. It is not enough to merely inform the government about the FCA violation.

• A successful financial recovery: The person who files, the relator, receives an award only if -- and after -- the government recovers money from the defendant as a result of the lawsuit.

How much money can a private citizen whistleblower receive for bringing a qui tam action?

The relator (private citizen whistleblower) can receive between 15 and 30 percent of the total recovery from the defendant, whether through a favorable judgment or settlement, depending on whether the government intervenes:

• If the government intervenes and joins the relator's lawsuit, the relator generally is eligible to receive no less than 15 percent, and no more than 25 percent of the recovery, depending upon the relator's contribution to the lawsuit.

• If the government chooses not to intervene, the relator who proceeds with the lawsuit on his or her own can receive between 25 and 30 percent of the recovery.

If the U.S. government or another private party has already filed a FCA lawsuit based on the same fraud allegations as your lawsuit, the law bars you from bringing your lawsuit. Your suit cannot be based upon publicly available information. But if your allegations are different from those of the earlier suit, the "first to file" rule may not apply. Unfortunately, you and your attorney may have no way of knowing in advance of filing whether a lawsuit has already been filed, because cases must be filed under seal.

In general, you are not required by the False Claims Act to report the fraud, either to the government or your employer, before filing a qui tam action. However, there are circumstances in which you must, or would be wise to, inform the government before filing. You may wish to speak with an attorney about this issue.

No. You do not give up your right to bring a qui tam action by going to the government before filing your lawsuit. But if the government has already filed an FCA lawsuit based upon those allegations or transactions, you are barred from bringing a qui tam suit. This is known as the "first to file" rule. So, if you deliver your information to the government before filing a lawsuit, and the government beats you to the courthouse by filing an FCA action before you do, then you will have lost your right to bring a qui tam lawsuit. However, you can avoid this by filing promptly after informing the government, which is one reason why it is wise to speak with an attorney before reporting the fraud to the government.

If you file a qui tam action, the government will know your identity, and your name will likely be disclosed to the defendant at some point: the question is how long that process will take. Under the law, the defendant is not supposed to learn that you have filed the lawsuit during the initial period when the complaint is under seal. However, in practice, defendants sometimes figure out that an FCA case has been filed, as well as the identity of the relator. When the government announces its decision regarding intervention and the complaint is served on the defendant, the seal period is officially over and your identity will be revealed.

There are circumstances in which you may be able to file a qui tam action and then voluntarily dismiss it during the period under seal without having your identity ever revealed to the defendant, but there is no guarantee of anonymity. If you are seriously concerned about the disclosure of your identity, your attorney may be able to help you minimize that risk and prepare for the eventual disclosure.

Although fraudulent behavior is the subject, a qui tam suit is a civil action, not a criminal action. For that reason, imprisonment is not a potential sanction in a qui tam case.

However, filing a qui tam action may trigger a criminal investigation and prosecution by the government which could lead to criminal fines or jail time for the wrongdoer(s). Any criminal action does not necessarily result from the qui tam action and would be separate from it. You would have no control over the government's criminal action, but you may be asked for assistance.

Any employee who discovers wrongdoing that violates the FCA is protected from being:

• discharged,
• demoted,
• suspended,
• threatened,
• harassed, or
• in any other manner discriminated against in the terms and conditions of employment by his or her employer because of lawful acts done by the employee on behalf of his employer or others in furtherance of an FCA action.

The anti-retaliation provision was modeled after other whistleblower laws and operates under the basic principles underlying employment discrimination cases. The scope of whistleblower protection, however, is an issue that currently divides the courts. The U.S. Supreme Court is currently resolving the issue of when an FCA retaliation lawsuit must be filed: whether the deadline is the 6-year filing deadline applicable to other FCA lawsuits, or subject to the state filing deadline applicable to other employment cases.

In addition, many states have wrongful discharge or other employment laws that may provide remedies for such discrimination. You may wish to speak with an attorney in your state to learn about such state laws.

The anti-retaliation provision protects employees who engage in lawful acts in furtherance of a FCA action. This includes:

• investigation for,
• initiation of,
• testimony for,
• assistance in, or
• harassed because o
• an FCA action filed or to be filed.

The protection against retaliation extends to whistleblowers whose allegations could legitimately support an FCA case even if the case is never filed. However, the defendant must have some notice of the protected conduct: that the whistleblower was either taking action in furtherance of a qui tam action or assisting in an investigation or actions brought by the government. The whistleblower must also be able to show that the termination was in retaliation for the protected activities.

A False Claims Act qui tam case can include whistleblower claims and other legal claims based upon other state and federal laws.

A qui tam complaint must be filed in federal district court and be compliant with the Federal Rules of Civil Procedure. In addition, a copy of the complaint, along with a written disclosure statement of substantially all material evidence and information in the relator's possession, must be served on the Attorney General of the United States. The complaint should also be served on the U.S. Attorney for the district in which the action is brought.

The most important aspect of filing a qui tam complaint: the complaint must be filed under seal (and should be marked as such, so that all records relating to the case are kept on a secret docket by the Clerk of the Court). Until the seal is lifted by the court, the complaint and its contents must be kept strictly confidential. The complaint must not be served on the defendant until the court orders. If you violate the confidential filing requirements of the False Claims Act, your qui tam suit could be dismissed.

Under the False Claims Act, an action must be filed within the later of the following two time periods:

six years from the date of the violation of the Act; or three years after the government knows or should have known about the violation, but in no event longer than ten years after the violation of the Act. (One court has interpreted the second provision as requiring that the action be filed not later than three years after the qui tam plaintiff (rather than the government) knows, or should have known about the violation.)

After you file your qui tam complaint in federal district court and serve a copy of your complaint and disclosure statement on the U.S. Attorney General (and also on the U.S. Attorney for the district), your case remains under seal (as discussed above in question 21) for at least 60 days. As this 60-day seal period may be extended upon request by the government, it is not unusual for the seal period to last a year or more.

The government investigates your allegations while the lawsuit is under seal. At the end of the seal period, the government chooses either to intervene (join the lawsuit) and proceed with the action or to decline intervention.

If the government intervenes and proceeds with the action, the Department of Justice has primary responsibility for prosecuting the case. You, the relator, have the right to continue as a party in the action, and you (and your lawyer) may participate in the lawsuit (subject to certain limitations). The government may dismiss or settle the action even if you object, but only if the court consents after a hearing on the proposed dismissal or settlement.

If the government declines to intervene, you have the right to conduct the action on your own. The government may, however, intervene at a later date upon a showing of good cause, even after the seal period and investigation has passed.

After the government decides whether to intervene and the seal period ends, the complaint is served on the defendant. The lawsuit then proceeds generally in the same manner as any other federal civil litigation, except for the special issues raised by the qui tam concept.

The time period between filing of qui tam action and its final resolution varies greatly from case to case. You should, however, be prepared for a qui tam action to take several years. As with other complex federal civil litigation, defendants can delay the action by contentious, costly, and time-consuming discovery and motions. In addition, the duration of a qui tam action is extended by the initial period where the case is under seal, which lasts a minimum of 60 days and may last over a year. However, it is also true that some qui tam actions can be settled relatively quickly (i.e., within a year of filing), especially when the government decides to intervene.

Those who violate the FCA are liable for three times the dollar amount that the government is defrauded and civil penalties currently ranging from $12,537 to $25,076 for each false claim.

A qui tam plaintiff can receive between 15 and 30 percent of the total recovery from the defendant, whether through a favorable judgment or settlement. To be eligible to recover money under the FCA, you must file a qui tam lawsuit. Merely informing the government about the violation is not enough. You only receive an award if, and after, the government recovers money from the defendant as a result of your suit.

Under the anti-retaliation section of the FCA, any employee who is discharged, demoted, harassed, or otherwise discriminated against because of lawful acts by the employee in furtherance of an action under the Act is entitled to all relief necessary to make the employee whole, which may include reinstatement, double back pay, and compensation for any special damages, including litigation costs and reasonable attorneys' fees.

Yes. Although not all states have qui tam statutes, many do. Where there is a state qui tam action available more protection is also available.

Yes. Though the False Claims Act does not seem to bar pro se litigation (acting as a lawyer on your own behalf), several courts have ruled that a relator cannot prosecute a qui tam action on their own without a lawyer, since they would be acting as attorney for the government.

While the FCA has one of the strongest whistleblower protection provisions in the United States, it also has many complicated components and requirements which can harm those who pursue such a claim without counsel. Due to the potential for a significant financial recovery, it is usually possible to retain an attorney for a meritorious lawsuit.