Articles Posted in Health Care Fraud

Very important amendments to the nation’s major whistleblower law, the False Claims Act, cleared the House Judiciary Committee today. The False Claims Act Corrections Act of 2007 is intended to restore the False Claims Act to its originally intended usefulness. It will eliminate many “loopholes” that dishonest government contractors have used to avoid liability.

Our whistleblower lawyer blog has often written about the False Claims Act, the qui tam law that empowers private citizens to report fraud as whistleblowers or “relators,” and to share in the government’s recovery of damages. We have tracked the development of the Senate version of the new whistleblower law amendments, the False Claims Act Correction Act (S. 2041), since it was proposed last September by a bipartisan group that included Senators Grassley, Durbin, Leahy, Specter and Graham.

Taxpayers Against Fraud (with which I am proud to be associated) summarizes its key provisions as follows:

The Justice Department has announced that Besler & Company, Inc., a New Jersey health care consulting firm, and its principal Philip Besler, have agreed to settle allegations of fraud against the federal Medicare program, which were initiated by two qui tam whistleblower cases. The settlement is for $2.875 million, plus interest, paid to the federal government.

The settlement concludes that the Besler firm counseled hospital clients to improperly increase charges to Medicare patients, so that they would obtain enhanced reimbursement from Medicare.

Medicare pays supplemental reimbursements or “outlier payments” to hospitals when the cost of care is unusually high. Congress enacted the supplemental outlier payment system to ensure that hospitals possess the incentive to treat inpatients whose care requires unusually high costs.

Some of the many types of health care fraud that this whistleblower lawyer blog has followed involves “durable medical equipment” (DME). The sale of wheelchairs, walkers, oxygen supplies and equipment, hospital beds, orthotics, prosthetics, and various medical devices is yet another opportunity for dishonest suppliers to defraud taxpayers.

This week, the Centers for Medicare & Medicaid Services (CMS) announced an initiative designed to improve care, save $1 billion annually, and lower Medicare beneficiaries’ out-of-pocket costs–by promoting competition in the sale of durable medical equipment.

Seventy new areas across the country have been added to the second phase of a competitive bidding program. One goal is to “prevent unscrupulous suppliers from participating in Medicare.”

2007 has been a most significant year for whistleblowers. The whistleblower lawyer blog attorneys look back on some of the milestones:

1. As soon as Congress authorized the first meaningful IRS Whistleblower Rewards Program to pay tax whistleblowers 15-30% of IRS recoveries from those who violate the tax laws by statue effective on December 20, 2006, beginning in January our whistleblower lawyers submitted some of the first IRS Whistleblower claims in the nation under the new law. Our IRS Whistleblower cases have continued to grow throughout the year.

2. Our IRS whistleblower submissions have led to criminal and civil investigations over tax cheating, and our whistleblower clients are in a position to receive 15-30% of the amount of collected proceeds (including penalties, interest, additions to tax, and additional amounts) recovered by the IRS.

Fraud affecting health care is a frequent topic of our whistleblower lawyer blog. A new report on TRICARE, the U.S. Military’s health care system, shows that medical fraud continues, as honest whistleblowers and their lawyers continue the fight against government fraud.

More than 200 “qui tam” whistleblower cases were mentioned in the annual report of the Program Integrity Office of TRICARE, and more than 200 whistleblower cases have been brought each year since 2002.

The Report outlines numerous types of health care fraud, including double billing, upcoding, kickbacks, illegal drug marketing practices, and quality of care violations. The Report notes that TRICARE obtained judgments for $36.7 million for 2006, including a settlement with Tenet Healthcare Corporation for more than $20 million.

Our whistleblower lawyer blog attorneys have written extensively about Georgia’s enactment of the new State False Medicaid Claims Act, a new whistleblower law that an attorney with our law firm helped enact. This qui tam whistleblower law has applicability to anyone who files a false or fraudulent claim for reimbursement with the State’s Medicaid program.

A classic example of this would be filing false claims for reimbursement for unnecessary and/or unauthorized laboratory tests. If a health care provider submits false or fraudulent claims for reimbursement under the State Medicaid program for performing lab tests which are not properly authorized by a medical physician, or do not otherwise meet Medicaid standards for reimbursement, such a submission could constitute a false claim against the Medicaid program, thus entitling any whistleblower reporting that claim to a reward for reporting Medicaid fraud. One such case, recently filed by the State of Massachusetts, indicates just how expensive such claims may be for the taxpayer.

Last week, in Boston, Boston Clinical Laboratories, Inc. was alleged to have submitted 66,000 false Medicaid claims for urine drug screens in circumstances where they were not ordered by an authorized prescriber or were ordered for non-medical purposes. According to allegations made by the Massachusetts Attorney General, many of these laboratory urine screens were to monitor sobriety tests for the individuals and were not approved for medical reasons. Under state regulations, eligible Medicaid claims are limited to laboratory services prescribed by a physician and must serve a medically necessary purpose. Court ordered and Social Service Agency drug testing, as well as testing for resident sobriety in out-patient treatment facilities, are not covered under the Medicaid program.

This Part 6 is the final installment by whistleblower lawyer blog of an article explaining why the major qui tam whistleblower statutes, the federal False Claims Act, has led to a wave of new state False Claims Acts. It is part of a recently published article by whistleblower lawyer blog author Michael A. Sullivan, and this article is reprinted with the permission of the Georgia Bar Journal.

This Part 6 describes the new state whistleblower laws and how states have fared to date in recovering taxpayer money wrongfully through fraud and false claims. It also discusses some interesting new approaches that some states have taken in improving on the federal False Claims Act with their own statutes.

V. Other States’ Experiences With Their Own False Claims Acts

As noted, in 2007 Georgia, New York, and Oklahoma joined the 16 other states that have a False Claims statute, and at least a dozen other states are considering similar laws. [58] The financial incentives of the Deficit Reduction Act of 2005 have not only prompted states that had lacked False Claims statutes to enact them, but also have caused many states wishing to qualify for the additional funds to amend their existing False Claims statutes.

In essence, while states may enact “tougher” or more comprehensive laws than the federal False Claims Act, states with “weaker” or less effective laws-as judged by the standards of the Deficit Reduction Act-will not qualify for the additional funds. [59]

Seven of the first ten states whose statutes were scrutinized by the Office of Inspector General (OIG) quickly learned this lesson when OIG disapproved their state statutes. [60] These included California (which lacked a minimum penalty), Florida (which omitted “fraudulent” from its definition of claims), Indiana (which did not make defendants liable for “deliberate ignorance” and “reckless disregard”), Louisiana (which did not permit the state to intervene in cases, set too low a percentage for whistleblowers to recover, and set no minimum penalty), Michigan (which omitted penalties and liability for decreasing or avoiding an obligation to pay the government, i.e., a “reverse false claim”), Nevada (which had a statute of limitations too short and a minimum penalty too low), and Texas (which did not permit the whistleblower to litigate the case if the state did not, and which provided for lower percentage shares to whistleblowers and lower penalties). Most of these states have gone back to the drawing board to correct these deficiencies.

In sum, the Deficit Reduction Act has set minimum standards for state False Claims Acts for states wishing to receive these additional funds. In plain English, the state laws must protect at least Medicaid funds, and they must be at least as effective as the federal False Claims Act, especially in rewarding and facilitating qui tam actions for false or fraudulent claims, with damages and penalties no less than those under the federal Act. [61]

A. How Other States’ False Claims Acts Compare to the New Georgia Statute

Many state False Claims laws have been in transition in 2007. States whose laws have been “disapproved” by OIG have begun to amend their statutes to meet the requirements for obtaining the additional funds under the Deficit Reduction Act, as Florida and Texas already have done in 2007. While these laws are in flux, some significant differences from Georgia’s new State False Medicaid Claims Act are likely to remain.

First, the majority of state False Claims statutes protect the state’s funds generally, rather than protecting only state Medicaid funds, as Georgia’s new State False Medicaid Claims Act is limited. Just as the federal False Claims Act is not limited to health care fraud, but encompasses fraud against the government generally (except for Internal Revenue violations, which are now covered by the new IRS Whistleblower program), [62] many states have used these statutes to protect public funds in general from fraud. Those states include California, Delaware, Florida, Hawaii, Illinois, Indiana, Massachusetts, Montana, Nevada, Oklahoma, Virginia, and Tennessee.

In addition, several states-including Hawaii, Massachusetts, Nevada and Tennessee- have expanded on the federal Act’s four commonly-used theories of liability listed above. These state laws create a new legal theory for holding liable a person or entity who is the “beneficiary” of the “inadvertent submission” of a false or fraudulent claim, if that person or entity fails to disclose (and presumably correct) the false claim after discovering it. [63]

Moreover, Tennessee’s False Claims Act reaches beyond false or fraudulent “claims” and imposes liability for false or fraudulent “conduct” that apparently does not necessarily involve “claims” submitted to the state. This state law adds a new category of liability for “any false or fraudulent conduct, representation, or practice in order to procure anything of value directly or indirectly from the state or any political subdivision.” [64]

Because states have this leeway under the Deficit Reduction Act to pass laws that may be “tougher” or more “effective” than the federal Act, some states have set the statutory penalties higher than the federal level of $5,500 to $11,000 per claim. For instance, under the New York law enacted in 2007, penalties range from $6,000 to $12,000 for each false or fraudulent claim. [65]

Some other states authorize a higher percentage of the state’s recovery that a relator (whistleblower) may receive, instead of the percentages that the federal False Claims Act authorizes (which the Georgia statute also uses): 15-25% of the recovery in cases in which the government intervenes, and 25-30% in cases in which the government does not intervene. For example, Nevada’s percentages are 15-33% in intervened cases, and 25-50% in non-intervened cases; Tennessee’s are 25-33% in intervened cases and 35-50% in non-intervened cases; and Montana’s range from 15-50%. [66]

B. Notable Results Obtained by States Under Their False Claim Statutes

Most qui tam cases filed under the state False Claims statutes have related to health care. Many are “global” Medicaid cases that were first developed in federal courts as Medicare and Medicaid fraud cases and that concerned a nationwide fraud which had been investigated by multiple federal and state jurisdictions. [67] Each state that enacts a False Claims Act that meets the minimum requirements is in a position to join the process.

Most of the state settlements have come from “piggy backing” on federal law enforcement efforts and from joining in global settlements. [68] Experience with some of the newer state statutes is too recent to evaluate, but many states have reported the desire for more resources to develop such cases. [69]

Texas’s experience is worth special mention because the Texas Attorney General’s Office has been especially effective in pursuing cases involving false claims in health care. Texas’s statute has allowed it to recover more than $216 million in health care fraud cases since 1999.

Because the Texas Attorney General’s Office has been a leader in recovering damages for health care fraud by using the Texas statute, it was perhaps ironic that OIG initially “disapproved” the highly successful Texas law before it was amended in 2007 to comply with the Deficit Reduction Act standards. [70]

California, whose statute is not limited to health care, recovered $43.1 million in 2005 in a state False Claims action alleging fraud in the installation and monitoring of heating and cooling equipment in San Francisco schools. [71] In 2001, California recovered $31.9 million in an action alleging fraudulent billing during construction of the Los Angeles subway system. [72] Similarly, California recovered $30 million in 2000 in a matter alleging the knowing sale of defective computers to the state and political subdivisions. In 1998, California recovered $187 million in an action alleging the improper retention of unclaimed municipal bonds. [73]

We do not know with any precision the dollar amount of fraud that affects any particular state’s government spending, or how much of that fraud can be prevented through effective use of a state False Claims Act. For now, New York, Oklahoma, and Georgia have joined the list of states that will see how much of at least their Medicaid fraud losses can be recovered through the new state False Claims Acts.


We hope that our article on the False Claims Act and the new state False Claims Acts has been useful. If you would like, please feel free to call us to discuss any questions you may have at 800-228-9159, or email us through our website link here (or directly to
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Some of the country’s leading attorneys in qui tam whistleblower cases and IRS Whistleblower cases will gather for the “First Annual Whistleblower Law Symposium,” which will take place at the Georgia State Bar Headquarters on Thursday, September 20, beginning at 9:00 a.m. (See Agenda below). This Whistleblower Law Symposium is organized and co-chaired by the authors of this whistleblower lawyer blog, Michael A. Sullivan and Richard W. Hendrix.

The presenters will include the very successful Pat O’Connell of the Texas Attorney General’s Office, whose group has recovered more than $216 million in health care fraud cases since 1999; and Jim Breen, who has represented relator Ven-A-Care of the Florida Keys Inc. in many very substantial qui tam cases, including the action that led to last week’s announcement by DOJ of a settlement with Aventis Pharmaceuticals Inc.

In addition, Steve Cowen of King & Spalding, LLP will chair a discussion of issues in defending False Claims Act cases; Marlan Wilbanks and other relators’ counsel will speak as well; and Charlie Richards of the Georgia Attorney General’s Office and Georgia’s Inspector General Doug Colburn will discuss the new Georgia State False Medicaid Claims Act.

We will also discuss the bill introduced last week by Senators Grassley, Durbin, Specter, and Leahy to make substantial modifications to the federal False Claims Act, the “False Claims Act Correction Act of 2007.” (See

Further, my partner Richard Hendrix and I will explain and discuss the new IRS Whistleblower Program created by Congress in December 2006. I spent several hours this past week in Washington with the Director of the new IRS Whistleblower Office, Stephen Whitlock, to prepare for and appear in a panel discussion to explain the new IRS Whistleblower Program. I also enjoyed lunch with the lead IRS official responsible for IRS Whistleblower claims in the financial services industry, Stuart Mann, and with Nicole Cammarota, an IRS official who is working on the new regulations. There is a great deal of excitement about this new IRS Whistleblower program, which rewards citizens who report large tax fraud, tax evasion, and other tax law violations to the IRS. (Our firm is pursuing a variety of IRS Whistleblower cases across the country.)

For anyone who believes that taxpayers pay too much to allow fraud against the federal and state governments, these exciting new developments in the law are important.

We are excited to be hosting this Whistleblower Law Symposium, and to discuss recent developments in the False Claims Act, the new state False Claims Acts, and the new IRS Whistleblower Program. The Agenda for the Symposium is below.
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Yesterday I enjoyed leading a panel discussion of the new State False Claims Acts, at the Southeastern Health Care Fraud Conference in Atlanta. Of particular interest to this audience was the new Georgia State False Medicaid Claims Act that became law in May 2007, which has qui tam whistleblower provisions similar to the federal False Claims Act.

Our audience of health care attorneys heard a detailed account of Florida’s successes with its State False Claims Act by Mark S. Thomas, the Chief of Staff and Special Counsel of the Florida Agency for Health Care Administration. We also learned how the Georgia Attorney General’s Office plans to implement the new State False Medicaid Claims Act in remarks by Charles M. Richards, Senior Assistant Attorney General of the Georgia State Health Care Fraud Control Unit.

Other excellent presentations were made in this seminar organized by my friends Steve Cowen of King & Spalding, LLP, and Joe Whitley of Alston & Bird, LLP. I am grateful to Joe and Steve for the opportunity to participate and explain the False Claims Act, the new Georgia State False Medicaid Claims Act and other state False Claims Acts, some of which have added interesting new wrinkles to health care compliance, by creating new theories of liability not found in the federal Act. (An article explaining some of the new thoeries of liability that these new State False Claims Acts introduce will appear in the October Georgia Bar Journal.)

Medicaid Fraud Recovery Announced by Missouri Attorney General

False and fraudulent billings were uncovered in a Missouri Medicaid fraud investigation that has produced a recovery by the Missouri Attorney General’s Office’s Medicaid Fraud Control Unit. Billings like this typically violate the False Claims Act or the various state False Claims Acts.

Prescriptions that had not been authorized by physicians were submitted and paid for by the Medicaid program. Once the suspicious activity was reported, the Attorney General’s Office’s investigation followed and produced a recovery of $462,926 from apparently a single pharmacy in DeKalb County, Missouri, the Randolph Drug Store in Maysville.

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