False Claims Act (FCA) vs. Health Care Fraud Statute
“Understanding the Difference and Applicability”
by Sean Weiss, Partner & VP of Compliance
When learning about the various laws within our industry, two of the most prominent are the False Claims Act and the Health Care Fraud Statute. The False Claims Act (FCA) is a Federal statute setting criminal and civil penalties for falsely billing the government, over-representing the amount of a delivered product, or under-stating an obligation to the government. The False Claims Act may be enforced either by the Justice Department or by private individuals in a qui tam proceeding. The Health Care Fraud Statute is the government’s most-powerful tool in health care fraud investigations (18 U.S.C. Section 1347, the federal health care fraud statute). This statute’s prohibitions are extraordinarily broad, and its penalties are extremely severe.
In the past 2 years, there has been a dynamic shift by prosecutors with what they charge providers when it comes to trying to secure Plea or Settlement Agreements or indictments. For the longest time, the False Claims Act (Federal Law 31 U.S.C. § 3279 to 3733) was that upon which we built our defense strategies. It contains the following: “The Act establishes liability when any person or entity improperly receives from or avoids payment to the Federal government. The Act prohibits:
- Knowingly presenting, or causing to be presented a false claim for payment or approval;
- Knowingly making, using, or causing to be made or used, a false record or statement material to a false or fraudulent claim;
- Conspiring to commit any violation of the False Claims Act;
- Falsely certifying the type or amount of property to be used by the Government;
- Certifying receipt of property on a document without completely knowing that the information is true;
- Knowingly buying Government property from an unauthorized officer of the Government, and;
- Knowingly making, using, or causing to be made or used a false record to avoid, or decrease an obligation to pay or transmit property to the Government.
Certain claims are not actionable, including:
- certain actions against armed forces members, members of the United States Congress, members of the judiciary, or senior executive branch officials;
- claims, records, or statements made under the Internal Revenue Code of 1986 which would include tax fraud
There are unique procedural requirements in False Claims Act cases. For example:
- a complaint under the False Claims Act must be filed under seal;
- the complaint must be served on the government but must not be served on the defendant;
- the complaint must be buttressed by a comprehensive memorandum, not filed in court, but served on the government detailing the factual underpinnings of the complaint.”
On May 20, 2009, the Fraud Enforcement and Recovery Act of 2009 (FERA) was signed into law. It includes the most significant amendments to the FCA since the 1986 amendments. FERA enacted the following changes:
- Expanded the scope of potential FCA liability by eliminating the “presentment” requirement (effectively overruling the Supreme Court’s opinion in Allison Engine Co. v. United States ex rel. Sanders, 128 S. Ct. 2123 (2008));
- Redefined “claim” under the FCA to mean “any request or demand, whether under a contract or otherwise for money or property and whether or not the United States has title to the money or property” that is (1) presented directly to the United States, or (2) “to a contractor, grantee, or other recipient, if the money or property is to be spent or used on the Government’s behalf or to advance a Government program or interest” and the government provides or reimburses any portion of the requested funds;
- Amended the FCA’s intent requirement, and now requiring only that a false statement be “material to” a false claim;
- Expanded conspiracy liability for any violation of the provisions of the FCA;
- Amended the “reverse false claims” provisions to expand liability to “knowingly and improperly avoid[ing] or decreas[ing] an obligation to pay or transmit money or property to the Government;”
- Increased protection for qui tam plaintiffs/relators beyond employees, to include contractors and agents;
- Procedurally, the government’s complaint will now relate back to the qui tam plaintiff/relator’s filing;
- Provided that whenever a state or local government is named as a co-plaintiff in an action, the government or the relator “shall not [be] preclude[d]… from serving the complaint, any other pleadings, or the written disclosure of substantially all material evidence;”
- Increased the Attorney General’s power to delegate authority to conduct Civil Investigative Demands prior to intervening in an FCA action.
With this revision, the FCA now prohibits knowingly:
- Submitting for payment or reimbursement a claim known to be false or fraudulent.
- Making or using a false record or statement material to a false or fraudulent claim or to an ‘obligation’ to pay money to the government.
- Engaging in a conspiracy to defraud by the improper submission of a false claim.
- Concealing, improperly avoiding or decreasing an ‘obligation’ to pay money to the government.”
While the FCA is still used, more and more cases are being pursued under The Health Care Fraud Statute (Criminal) since the requirements are broader and make it easier to secure indictments or plea/settlement agreements at a much more expeditious pace with expenditure of less resources. Under this statute (18 U.S.C. § 1347), a person can be held liable for a scheme to intentionally (1) defraud any healthcare benefit program or (2) use false statements to obtain funds held by a federal healthcare program. The penalties are steep: up to 10 years in prison and a fine up to $500,000 or twice the amount of the fraud.
(a)Whoever knowingly and willfully executes, or attempts to execute, a scheme or artifice—
(1) to defraud any health care benefit program; or
(2) to obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any health care benefit program,
in connection with the delivery of or payment for health care benefits, items, or services, shall be fined under this title or imprisoned not more than 10 years, or both. If the violation results in serious bodily injury (as defined in section 1365 of this title), such person shall be fined under this title or imprisoned not more than 20 years, or both; and if the violation results in death, such person shall be fined under this title, or imprisoned for any term of years or for life, or both.
(b) With respect to violations of this section, a person need not have actual knowledge of this section or specific intent to commit a violation of this section. ***This is what makes this Statute such a powerful tool for prosecutors***
One of the other difficulties with the FCA is that, and I am paraphrasing, if reasonable persons can disagree on whether or not the claims was submitted accurately; then the standard of an FCA has not been met. There is also significant argument around what “Reckless Disregard” means to the courts. In reading an article published in the Columbia Law Review, the question was posed
“Can defendants be reckless if the laws they break are unclear? The Eighth Circuit says no: A defendant cannot be reckless if there is any “inherent ambiguity” in the relevant law. Its reasoning suggests that textual ambiguity alone is enough to foreclose liability completely. This Note argues to the contrary: if all other elements of the FCA are satisfied, defendants may be held liable even if the law is unclear. The clarity of the law is only one factor that may help determine whether the defendant acted recklessly. The question is not simply whether the law is ambiguous, but whether the defendant’s interpretation of it is “reasonable.” Given the purpose and history of the FCA, what is “reasonable” involves more than just the text of the law: It also includes the totality of the circumstances that may warn the defendant that it is breaking the law. Otherwise, defendants could exploit whatever ambiguity they could find even if they intended to defraud the government, a result the Eighth Circuit’s decisions may support. But this would undermine the clear purpose of the FCA, obliterate decades of precedent on the meaning of “reckless disregard,” and effectively write out “deliberate ignorance” and “actual knowledge” from the text of the FCA.”
(If you are interested in reading the entire article click here: https://columbialawreview.org/content/reasonable-but-wrong-reckless-disregard-and-deliberate-ignorance-in-the-false-claims-act-after-hixson/) This article explores all of the critical questions and lays out compelling arguments as well as provides case law for review.
What to do next…
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