Last month, a bill (The False Claims Amendment Act of 2017, B22-0166) was introduced by District of Columbia Councilmember Mary Cheh that would allow tax-related false claims against large taxpayers. Co-sponsors of the bill include Chairman Jack Evans and Councilmember Anita Bonds.

Specifically, the bill would amend the existing false claims statute to expressly authorize tax-related false claims actions against persons that reported net income, sales, or revenue totaling $1 million or more in the tax filing to which the claim pertained, and the damages pleaded in the action total $350,000 or more.

The bill was referred to the Committee of the Whole upon introduction, but has not advanced or been taken up since then. Nearly identical bills were introduced by Councilmember Cheh in 2013 and 2016. Continue Reading DC Council Introduces False Claims Expansion – Taxpayers Beware!

The good, reassuring news about that “old dog” fraud and abuse as it enters an age of payment reform is that criminal liability for fraud still requires a specific intent to defraud the federal health care programs, anti-kickback liability still requires actual knowledge of at least the wrongfulness, if not the illegality, of the financial transaction with a referral source, and civil False Claims Act liability for Stark Law violations still requires actual knowledge, a reckless disregard for, or deliberate ignorance of the Stark Law violation. This should mean that good faith and diligent efforts to comply with law, including seeking and following legal counsel, still go a long way in managing an organization’s and individual executive’s risk under the fraud and abuse laws. The bad, unsettling news about fraud and abuse in an age of payment reform, however, is that (1) anxiety about reform and stagnating and declining physician incomes are propelling a spike in transactions between health systems and physicians at a time when qui tam plaintiffs and the law firms that represent them are aggressively challenging the legitimacy and common structures for these transactions; and (2) the Stark Law is largely indifferent to the good faith intentions of health systems to integrate and enter into coordinated care arrangements with physicians, and continues to impose on health systems heavy burdens of proof that the arrangements comply with ambiguous standards like fair market value, volume or value and commercial reasonableness. While financial transactions incident to the Centers for Medicare and Medicaid Services’ (CMS) innovative care delivery and payment initiatives, such as accountable care organizations (ACOs), medical homes and bundled payment arrangements can be protected by the fraud and abuse/Stark waivers discussed in Part B below, there are many other common transactions and arrangements with physicians still operating in a fee-for-service environment  (such as practice acquisitions, employment, “gainsharing,” service line co-management, pay-for-quality and non-ACO clinically integrated networks) that are not protected by the waivers. During this period of transition to transformation of the health delivery and payment system, the key areas of risk for health systems are their burdens of proof on the ‘big three” issues of:

  • Fair market value,
  • Volume or value, and
  • Commercial reasonableness.

Each is discussed separately below, and the industry practices for managing these risks. Please note that none of these practices are necessarily “best” or “normative” practices, but are what we have observed.

Read the full article here.

On July 12, 2015, Wisconsin governor Scott Walker signed into law the budget passed by the state legislature the previous week. The budget included a short rider that repeals Wisconsin’s 2007 False Claims for Medical Assistance Act, Wis. Stat. s. 20.931—the state’s version of the federal False Claims Act (FCA). Prior to its repeal, the law allowed relators to claim up to 30 percent of awards, and provided whistleblower protections and triple damages similar to the FCA.

No hearings or public discussions regarding the repeal took place, and the lawmakers who introduced the bill gave no explanation. The Wisconsin attorney general did not take a position on the law’s repeal, but a spokeswoman from his office stated that repeal of the law “will not have much impact—if any—given that there are numerous laws that allow the state to prosecute Medicaid fraud.” However, according to the U.S. Chamber of Commerce, the repeal will save Wisconsin the cost of investigating between 60 and 70 qui tam actions a year, of which it only intervened in a “small minority.”

Wisconsin’s repeal is interesting in that it bucks the trend of states passing their own versions of the federal FCA. We will continue to watch developments, if any, relating to this repeal.

On March 31, 2015, the Illinois Appellate Court issued an opinion affirming the dismissal of a qui tam lawsuit filed by a law firm acting as a whistleblower on behalf of the State of Illinois against QVC, Inc., under the Illinois False Claims Act.  The opinion affirmed an important precedent previously set by the court regarding the standard for dismissal of such claims when the State moves for dismissal, and established favorable precedent for retailers by holding that use tax voluntarily paid after the filing of a qui tam action does not qualify as “proceeds” of the action within the meaning of the Illinois False Claims Act.

Read the full article.

On March 21, 2015, the Maryland state senate passed a revised version of Bill No. 374, which, as previously noted, would create a state version of the federal False Claims Act (FCA) if signed into law.  As amended, however, the proposed statute is somewhat less plaintiff-friendly than before.  For example, it:

  • imposes an absolute 10-year statute of limitations, whereas the original bill allowed actions to be filed up to three years “after the date when facts material to the right of action . . . reasonably should have been known,” regardless of how long after the actual violation this was;
  • limits whistleblower protection, by narrowing the scope of actionable retaliatory conduct to omit the phrase “any other adverse action taken against an employee, contractor, or agent . . . .”; and
  • removes the possibility of the government obtaining attorney’s fees for successful actions.

See generally 2015 Md. Senate Bill No. 374.  The other house of the Maryland state legislature made similar amendments to its version of the bill on April 2, 2015.  See generally 2015 Md. House Bill No. 405.  The combined bills were sent to Governor Larry Hogan—who is expected to sign them into law—on April 8, 2015.  Until the law’s October 1, 2015 effective date, however, Maryland remains one of nine states with false claim laws that are only applicable in the health care context, along with Colorado, Connecticut, Louisiana, Michigan, New Hampshire, Texas, Wisconsin and Washington.

With respect to Washington, it is worth noting that the state’s Medicaid Fraud False Claims Act is set to expire on June 30, 2017.  See Wash. Rev. Code § 43.131.420 (2012).  As of now, the Act imposes civil penalties of $5,500–11,000, plus triple damages, for, inter alia, “[k]nowingly present[ing] . . . a false or fraudulent [Medicaid] claim for payment or approval,” and includes a qui tam provision and whistleblower protections.  See generally Wash. Rev. Code § 74.66 (2012).  Both of the state’s legislative houses have introduced bills to reauthorize and extend the law.  See Jan. 19, 2015 Washington Senate Bill No. 5287; Jan. 22, 2015 Washington House Bill No. 1067.  Legal practitioners, health care providers and other government contractors should keep a close eye on these developments and other legislation designed to add to or modify FCA analogs at the state level.

On February 6, 2015, both houses of the Maryland legislature introduced bills that would add Maryland to the growing list of states with their own version of the False Claims Act (FCA).  If signed into law, Maryland will, effective October 1, 2015, impose a $10,000 civil penalty and triple damages for, inter alia, “knowingly present[ing] or caus[ing] to be presented a false or fraudulent claim for payment or approval.”  Act of Feb. 6, 2015, § 8-102, 2015 Md. Senate Bill No. 374 (establishing Maryland False Claims Act); Act of Feb. 6, 2015, § 8-102, 2015 Md. House Bill No. 405 (same).  Maryland already has a False Health Claims Act, which imposes similar liability only for false claims submitted to Maryland state health plans or programs (including Medicaid).  See Md. Code, Health–Gen. § 2-602 (2010).

At present, 20 states (plus the District of Columbia) have their own versions of the federal FCA: California, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Massachusetts, Minnesota, Montana, Nevada, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Rhode Island, Tennessee and Virginia.  Note that several of these (e.g., New Mexico and Virginia) style their versions as Fraud Against Taxpayer Acts.  Eight additional states have narrower versions that, like Maryland (for the time being), address only fraud in the health care context: Colorado, Connecticut, Louisiana, Michigan, New Hampshire, Texas, Washington and Wisconsin.

Because of the obvious financial incentives represented by civil penalties and multiple damages, the number of states with their own FCAs is likely to continue growing.  Furthermore, federal law provides other financial incentives for states to establish FCAs.  See 42 U.S.C. § 1396h (2007) (states with FCA-like statutes meeting certain requirements entitled to 10 percent increase with respect to amounts recovered under state action brought pursuant to such a law).  Indeed, state lawmakers have pitched FCAs as effective means for narrowing budget deficits.

State law FCA claims are routinely brought alongside federal FCA claims.  Given that state law claims typically mirror claims under the federal statute, all such claims will usually be subject to dismissal on the same or similar grounds.  However, defense practitioners should familiarize themselves with any differences or nuances that may exist between the federal FCA and the state law analog at issue in a given case, particularly if such differences give rise to additional grounds to dispose of a complaint.  For example, Florida bars actions under its version of the FCA by relators who are former state employees if the action is based in part on information obtained in the course of state employment.  Compare Fla. Stat. 68.087(4)(b) (2013) with 31 U.S.C. § 3730(e) (2010).  Potential, additional grounds such as this for dismissal of state law FCA claims should not be overlooked.