Federal and state fraud and abuse laws enable the government to take legal action to recover damages and penalties when healthcare providers submit false claims for payment. The federal Deficit Reduction Act of 2005 requires large health care entities to implement certain policies to educate employees about the fraud and abuse laws and the whistleblower protections afforded by such laws.
INTRODUCTION
The Deficit Reduction Act of 2005 ("DRA") added a provision to the federal Social Security Act mandating that all states amend their Medicaid State Plans to require that all entities receiving or paying $5 million or more in Medicaid funds annually must implement certain compliance policies. These policies should describe federal and state laws regarding false claims, false statements, and whistleblower protections, as well as the entity's own policies and procedures to detect fraud and abuse. See 42 U.S.C. § 1396a(a)(68). The policies must apply to the entity's employees (including management), as well as its contractors and agents. In addition, if an entity has an employee handbook, the handbook also must be amended to include a description of the same issues. (Note, however, that if an entity does not have an employee handbook it is not required to create one in order to comply with the DRA.) If an entity fails to meet these new State Plan requirements, it could face sanctions including exclusion from participating in Medicaid or loss of its Medicaid funding.
DRA REQUIREMENTS
Section 6032 of the DRA, "Employee Education about False Claims Recovery," adds to the long list of provisions that must be included in each state's Medicaid Plan. With the passage of the DRA, State Plans must now require all entities that receive or pay $5 million or more in Medicaid funds, as a condition of such payments, to establish written policies enumerating "detailed information" about the following topics, to provide education for employees, contractors, and agents:
- The federal False Claim Act
- Administrative remedies for false claims and statements
- State laws pertaining to civil or criminal penalties for false claims and statements
- Whistleblower protections under such federal and state laws
- How these laws function to prevent and detect fraud, waste and abuse
- The entity's own policies and procedures for detecting and preventing fraud, abuse and waste, and the entity's whistleblower protections.
False claims laws are intended to combat fraud and abuse in government health care programs, by enabling the government to take legal action to recover damages and penalties when healthcare providers submit false claims for payment. These laws also provide financial incentives to encourage whistleblowers to come forward and bring "qui tam" suits, as well.
The Federal False Claims Laws
Under the federal False Claims Act, 31 U.S.C. §§ 3729-3733, any person or entity that knowingly submits a false or fraudulent claim for payment of United States government funds is liable for significant penalties and fines. The fines include a penalty of up to three times the government's damages, civil penalties ranging from $5,500 to $11,000 per false claim, and the costs of the civil action against the entity that submitted the false claims. Generally, the federal False Claims Act applies to any federally funded program, including claims submitted by healthcare providers to Medicare or Medicaid.
A similar federal law is the Program Fraud Civil Remedies Act of 1986 (the "PFCRA"), 31 U.S.C. §§ 3801-3812. It provides administrative remedies for knowingly submitting false claims and statements. A false claim or statement for purposes of the PFCRA includes submitting a claim or making a written statement that is for services that were not provided, or that asserts a material fact that is false, or that omits a material fact. A violation of the PFCRA results in a maximum civil penalty of $5,000 per claim plus an assessment of up to twice the amount of each false or fraudulent claim.
Federal Qui Tam Suits
The federal False Claims Act includes a "qui tam" provision, commonly referred to as the "whistleblower" provision. This provision allows a private person with knowledge of a false claim to bring a civil action on behalf of the government, to recover the funds paid by the government as a result of the false claims. If the qui tam suit is ultimately successful, the whistleblower who initially brought the suit may be awarded a percentage of the funds recovered. However, the court may reduce or eliminate entirely the whistleblower's share of the proceeds if the court finds that the whistleblower planned and participated in the violation, or is convicted of criminal misconduct related to his or her role in the preparation or submission of the false claims.
Protection of Whistleblowers in False Claims Actions
The federal False Claims Act also contains a provision that protects a whistleblower from retaliation by his or her employer. This applies to any employee who is discharged, demoted, suspended, threatened, harassed, or discriminated against in his or her employment as a result of the employee's lawful acts in furtherance of a false claims action. The whistleblower may bring an action in the appropriate federal district court and may be entitled to reinstatement with the same seniority status, two times the amount of back pay, interest on the back pay, and compensation for any special damages as a result of the discrimination, such as litigation costs and reasonable attorneys' fees.
New Hampshire's "Medicaid Fraud and False Claims" Law
New Hampshire has a state version of the False Claims Act that mirrors many of the provisions of the federal False Claims Act. See N.H. Rev. Stat. Ann. §§ 167:61 to 167:61-e. The actions that trigger civil penalties under the New Hampshire Act are identical to those of the federal False Claims Act. However, under the New Hampshire Act, a person or entity may also be liable if he or she is a beneficiary of an inadvertent submission of a false claim to the state, subsequently discovers that the claim is false, and fails to disclose the false claim to the state within a reasonable time after discovery of the false claim. The New Hampshire Act also differs from the federal False Claims Act in that it does not apply to any claim (or aggregate of claims submitted by one person) of less than $5,000 in value.
The New Hampshire Act also has a whistleblower provision. Like the federal False Claims Act, the New Hampshire law includes provisions to prevent employers from retaliating against employees who report their employer's false claims. New Hampshire has also adopted several other false claims statutes that are intended to prevent fraud and abuse in the New Hampshire Medicaid program. These laws generally prohibit the filing of any false or fraudulent claim or documentation in order to receive compensation from the Medicaid program.
WHO MUST COMPLY WITH THE DRA?
All for-profit and not-for-profit government agencies, organizations, units, corporations, partnerships or other business arrangements (including Medicaid managed care organizations) that receive or pay at least $5 million in Medicaid funds annually must implement the policies and handbook revisions noted above. Entities that do not individually meet the $5 million threshold may be required to comply if they, along with, for example, affiliates or a parent company, pay or receive an aggregate of $5 million annually from Medicaid.
The federal Centers for Medicare & Medicaid Services ("CMS"), held a public teleconference on January 11, 2007, to provide additional guidance for entities to comply with the "Employee Education about False Claims Recovery" provisions of the DRA. During that call, CMS confirmed that entities need not hold additional compliance training or education programs for employees, contractors, or agents about false claims; however, entities should communicate about and distribute any new policies and employee handbook provisions created pursuant to the DRA to employees, contractors, and agents to ensure that they are "educated" about the false claims information.
In addition, CMS clarified that the types of "contractors" that must be informed of the entity's policies are those who directly provide Medicaid-covered health care services or items, perform coding or billing, or monitor health care. An entity may accomplish this by sending letters to existing contractors to notify them of the entity's policies. In addition, an entity could include a provision about the applicable laws and entity policies in any new or renewal service agreements.
CONCLUSION
CMS has taken the position that the DRA effective date is January 1, 2007. Most states, however, have not yet amended their State Plans to address the requirements added to the Social Security Act by the DRA, and additional guidance is anticipated from CMS to clarify many requirements. While the express language of the DRA applies to Medicaid State Plans and not directly to entities, covered entities should implement and distribute the relevant policies and employee handbook revisions as necessary to comply, in good faith and on an interim basis, with the basic DRA requirements. Doing so will help to ensure that they are in compliance, in the event that an amended State Plan has a retroactive effective date without a later compliance or enforcement date for entities. Compliance - on an interim or final basis - should not impose a significant burden on entities, as the policies and handbook revisions do not implement any new rights for employees, but merely inform them of laws and the entity's own policies that have been in place since before the DRA was enacted.
This article is intended to serve as a summary of the issues outlined herein. While it may include some general guidance, it is not intended as, nor is it a substitute for, legal advice. Your receipt of Good Company or any of its individual articles does not create an attorney-client relationship between you and Sheehan Phinney Bass + Green or the Sheehan Phinney Capitol Group. The opinions expressed in Good Company are those of the authors of the specific articles.
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