What is a False Claims Act investigation?
January 29, 2023 · 8 min read
What is the False Claims Act?
The False Claims Act (FCA) was established in 1863 during the Civil War to combat fraud and abuse perpetrated by suppliers of the federal government. At that time, the law was referred to as “Lincoln’s Law.”
The FCA has evolved significantly in recent years and is now one of the main tools used by the government to fight fraud. The FCA penalizes individuals or entities that submit fraudulent claims to the government, cause fraudulent claims to be submitted, or conspire to submit fraudulent claims.
One of the noteworthy provisions of the FCA is the qui tam provision, also known as the whistleblower provision. The qui tam provision allows private citizens, also referred to as “relators”, to report details of alleged fraud to the government. The whistleblower “stands in the shoes” of the government to prosecute the claim. This action benefits the government and the taxpayer as well as potentially the relator, who may receive a share of what is recovered.
How does the FCA relate to a hospice agency?
The False Claims Act allows hospice agency employees, patients, families of patients, or any individuals with alleged knowledge of fraud or abuse by the agency to report the behavior. Under the qui tam provision of the FCA, the relator may be entitled to a percentage of recovered funds.
What are different types of false claims?
A claim is a request for money made to the government. A false claim is money that is obtained from the government due to false or fraudulent claims. False claims include claims where the service
- Has not been provided
- Is already included as part of a different claim (i.e., double billing)
- Is not coded correctly
- Is not supported by the patient’s medical record
Claims may also be false and are covered under the FCA if they result from a referral made in violation of the Federal Anti-kickback statue (Stark Law).
The False Claims Act also includes payment from the government based upon false certification.
False claims include claims that the hospice agency should have known were false or fraudulent.
What is a claim that a hospice agency “should have known” is false?
The FCA expressly includes claims that a hospice agency “should have known” were false or fraudulent. “Should have known” means deliberate ignorance or reckless disregard of truth. As such, a hospice agency cannot avoid liability by simply ignoring inaccuracy in their claims. Examples of “should have known” include:
- Ignorance of billing rules, i.e., lack of knowledge of the rules
- Failure to act on consistent trends that are indicative of inaccurate billing
- Failure to act on inaccuracies or system errors identified by outside or internal auditing teams
- Failure to correct inaccurate billing (impacting either past or future claims)
A hospice agency must understand the rules and take proactive measures — such as conducting internal audits within the organization — to ensure compliance and accurate billing.
How can False Claims Act matters be initiated?
There are two ways that FCA matters can be initiated:
- Initiated by the government: When a FCA matter is initiated by the government, this type of matter typically starts with an audit or an investigation by the government. The government would determine that there is a false claim made to it and would initiate a matter, usually by a subpoena or civil investigative demand (CID). The government would issue the CID directly to the hospice agency. CID is a form of subpoena that requires the hospice agency to engage in one-sided discovery. That is, the hospice agency is required to produce documents demanded, respond to interrogatories, and provide sworn oral testimony. However, the hospice agency may not conduct any discovery.
- Qui tam matter: this type of matter is initiated by a whistleblower, also known as a “relator,” typically through the filing of a sealed lawsuit in a federal district court. The hospice agency does not know about the qui tam lawsuit since the lawsuit is initially served on the government. The case remains under seal while it is investigated by the government.
What is the qui tam process?
Qui tam actions are initially filed under seal. That is, only the US Attorney and some members of the Department of Justice (DOJ) have knowledge of and access to documents related to the case. The relator serves the complaint on the government together with a written disclosure of all material evidence.
The purpose of the sealed qui tam action is to allow the DOJ time to evaluate the relator’s allegations and for the DOJ to decide whether it would like to take over primary responsibility for prosecuting the case. If the DOJ decides to take over primary responsibility for the case, the DOJ is said to “intervene.”
The complaint remains under seal for 60 days during which time the DOJ investigates the relator’s allegations. This 60-day period can be (and typically is) extended. In fact, the government may spend months – or even years – investigating the case.
While the DOJ conducts its investigation, it may issue a Civil Investigative Demand (CID). This form of subpoena requires the defendant (the hospice agency) to engage in one-sided discovery where the hospice agency must produce documents, respond to interrogatories, and provide sworn oral testimony, as demanded. The CID is “one-sided discovery” because the hospice agency may not conduct any discovery.
If the government decides to intervene, the government is then responsible for litigating the case and files its own complaint instead of the complaint that was filed by the relator. The relator remains a party to the complaint.
If the government declines to intervene, the relator may proceed in her own name subject to the government’s right to dismiss the claim or to intervene at a later date.
Whether or not the government decides to intervene, the government remains the real party of interest. (As a reminder, the relator is only “standing in the shoes” of the government.) As such, the government must agree to any decisions on the case. The relator may not agree to dismiss or settle the case without the government’s approval.
What are the key phases in a False Claims Act investigation?
- Phase 1: FCA investigation is triggered. Triggers may include:
- Qui tam (whistleblower) lawsuit
- Call to OIG hotline
- Information identified during audit or claim review
- Complaints
- Data mining
- Phase 2: Formal investigation launches. Investigation may involve:
- Review of corporate filings
- Interview current or former employees
- Review financial records
- Electronic surveillance
- Physical surveillance of employees or of company premises
- DOJ civil investigative demand (CID), or the like
- Government search warrant or raid
- Phase 3: Litigation or resolution
Who are common whistleblowers?
Anyone can be a whistleblower and anyone may report alleged fraudulent activity to the government. The most common relators are:
- Business partners
- Current or former employees
- Competitors
- Patients
- Individuals who mine CMS data to identify anomalies/FCA claims
How can a hospice agency reduce the chance of qui tam lawsuits?
Any complaints or concerns that are raised – by employees, vendors, patients, or competitors, or any other individuals should be investigated and treated with concern as these have the potential to reveal compliance issues that need to be resolved by the hospice agency.
Employee complaints – whether from departing or active employees – are often an excellent source of information on potential compliance issues. A hospice agency should have a clearly established method – that is clearly and often communicated to employees – for employees to raise concerns. It should also have an organized process to diligently investigate and address any concerns raised by employees.
- Internal complaints:
- There must be an organized process – that is communicated regularly to employees – for employees to raise concerns
- All concerns must be investigated
- Have a plan to address any issues that are identified
- Take any necessary corrective actions
- Follow up with the individual who raised the complaint
- Provide training, as needed
- Departing employees
- Treat employees fairly as they leave
- Conduct exit interviews to identify any potential compliance concerns – investigate any issues that may be identified
- Potential releases (e.g., recovery from FCA claims)
Employees must feel that there is a process for raising concerns and that their concerns are heard. Employees should not fear retaliation for raising concerns. A hospice agency should be diligent and careful to respond to all employee complaints that are raised internally or to any complaints that are raised when employees leave the organization.
What are the financial benefits of avoiding FCA violations?
False claims act matters can be quite costly for a hospice organization. In addition to returning the payments associated with the false claims identified and incurring the costs associated with attorney fees to defend the matter, the hospice agency potentially faces the following significant costs:
- Treble damages: The FCA has a treble damages provision which provides that a hospice agency that is found to have violated the FCA statute may be liable to pay three times the amount of the actual false claim amount
- Penalty per claim: Under the FCA, a civil penalty may be assessed for each false claim that is submitted. The civil penalty dollar amount per claim has increased with inflation and currently may be as much as $23,000 per claim.
