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Analysis

Don't Ignore Intermountain's Long-Shot Bid to Deflate the False Claims Act

By Steven Porter  
   May 15, 2019

There are important lessons to be learned from the case, even though the nonprofit health system has signaled it expects to back away from its pending Supreme Court petition.

The number of healthcare fraud lawsuits filed under qui tam provisions of the False Claims Act has swelled steadily over the past three decades, putting pressure on hospitals and other healthcare organizations that do business with the U.S. Department of Health and Human Services.

The law is designed to give whistleblowers an incentive and protections to come forward with allegations of fraud in federal programs, such as Medicare and Medicaid. But some contend qui tam litigation, which allows individuals to sue on the U.S. government's behalf, has gone too far.

In fiscal year 1988, there were just five new HHS-related qui tam FCA cases filed, according to data released by the U.S. Department of Justice. Thirty years later, in fiscal year 2018, there were 446 such new cases. And that was by no means an outlier.

"There is no question that healthcare providers are dealing with whistleblower lawsuits in increasing frequency like never before," says Jason P. Mehta, JD, a Bradley partner based in Tampa, Florida, who defends businesses and individuals involved in FCA cases and other matters.

"For most healthcare providers, it's a question of when, not if, they're going to have to deal with one of these whistleblower lawsuits," Mehta tells HealthLeaders.

This proliferation of these lawsuits is especially noteworthy because the DOJ intervenes in only about 20% of these cases. It's one thing for a hospital to be accused of fraud by both a whistleblower and the DOJ; it's another thing entirely for a whistleblower's lawsuit to proceed even after the DOJ declined to get involved.

Intermountain Healthcare, based in Salt Lake City, Utah, has been fighting one such case for nearly seven years. The nonprofit system appealed all the way to the U.S. Supreme Court, saying heavily regulated industries "are forced to bear the brunt of overzealous litigation."

Related: Intermountain Signals Intent to Settle False Claims Dispute Pending Before Supreme Court

Intermountain argues the allegations in this case were insufficiently particular and that the FCA's qui tam provisions are unconstitutional. It has sought to use the case as a vehicle to rein in whistleblower litigation. But the health system may face long odds for procedural and precedential reasons. Intermountain failed to raise its constitutional claims at the District Court level, so it forfeited the ability to raise them on appeal, according to the Tenth Circuit Court's decision. And the parties disagree as to whether the health system's arguments contradict a decision the court reached in 2000 on a related matter.

After arguing last January that its appeal is legally sound, Intermountain told the Supreme Court late last month that it expects to back away from the pending petition without the justices deciding whether to take the case because a settlement in principle has been reached.

That doesn't mean, however, that healthcare executives can afford to disregard it.

"Regardless of what the Supreme Court does or does not do, this should be an early warning sign for healthcare providers out there that the stakes are very high," Mehta says.

What You Can Do Proactively
 

Since whistleblower claims are nearly inevitable for most healthcare organizations, leaders should be taking steps now not only to prevent FCA violations but also to anticipate them. That demands more than simply waiting to see how Intermountain's case shakes out, Mehta says.

"Healthcare providers should be monitoring these developments. They should be monitoring what the Supreme Court says and what other courts say," he says, "but perhaps the best advice for most healthcare providers is to take this as kind of an early warning sign and do everything possible to proactively get ahead of the curve."

On the one hand, that means systematically reviewing your organization's claims to make sure your people are staying within bounds, Mehta says.

On the other hand, it also means developing strong internal reporting structures that whistleblowers can trust—such as hotlines to report suspected FCA violations—so they don't feel the need to become external whistleblowers seeking government intervention, he adds.

If you earn whistleblowers' trust, then you can respond directly to their complaints, problem-solve internally, and self-report violations to the government if needed.

What You Can Do Reactively
 

Having the ability to self-report FCA violations could enable providers to persuade the DOJ to go easier on them. Under new guidance issued this month, FCA litigators in the DOJ's Civil Division are directed to give credit to defendants that cooperate with investigators.

That meaningful assistance may include voluntary disclosure of FCA violations that the DOJ didn't know about already, which is "the most valuable form of cooperation," said Assistant Attorney General Jody Hunt in a statement. But it could also include cooperating in an ongoing DOJ investigation or taking remedial steps in response to a violation, Hunt said.

Even if the DOJ is already investigating your organization, you may be able to secure credit for voluntarily disclosing additional misconduct beyond the existing investigation; for preserving relevant information and documents beyond what is typically required; for identifying people who are aware of the relevant information or conduct; or for facilitating the government's review of information embedded within specialized or proprietary technologies, the DOJ said.

Furthermore, the DOJ will consider corrective actions your company has taken. That could include a thorough analysis of what led to the violation, disciplining or replacing the responsible individuals, or accepting responsibility as an organization and enacting or enhancing internal compliance measures, the DOJ said.

The benefits of cooperating with FCA investigators will most frequently come in the form of a reduction in civil penalties and the damages multiplier, the DOJ said. But the DOJ may also publicly acknowledge the organization's help and notify another agency of that assistance to inform the agency's administrative enforcement approach.

The details are outlined in the DOJ's guidance. But be sure to consult with competent legal counsel before deciding whether to voluntarily disclose information to the government and what information to disclose, says Mehta, a former federal prosecutor.

"The way that the government can use information is often opaque to outsiders and experienced lawyers can help clients navigate these perilous waters," he says.

More Cases, More Dismissals?
 

While it seems that Intermountain's effort to deflate the power of FCA whistleblowers is headed for a settlement, rather than a Supreme Court decision, there's another FCA-related case that could give whistleblowers greater leeway moving forward.

The FCA says relators have six years after an alleged violation to file their claims or a maximum of three years after a U.S. official responsible knew or reasonably should have known of the alleged violation. There was a dispute on how to properly interpret that passage of the law, but the Supreme Court decided Monday that the FCA gives whistleblowers up to a decade to file in some circumstances.

Some defense attorneys who expected the court to rule in favor of the longer time frame said the decision could potentially lead to an increase in the number of FCA cases, higher settlement costs for those accused, and encouragement for the government to move for dismissal more often, as Lydia Wheeler reported for Bloomberg Law.

The decision comes after Michael Granston, director of the DOJ's Civil Fraud Section, issued a memo last year outlining factors the DOJ should consider in deciding whether to ask courts to dismiss an FCA case in which the government has declined to intervene. That memo, as Dykema attorneys wrote last year for the American Bar Association, may offer a blueprint on how defendants can buddy up with the DOJ and seek dismissal of FCA whistleblower claims.

“For most healthcare providers, it's a question of when, not if, they're going to have to deal with one of these whistleblower lawsuits.”

—Steven Porter is an associate content manager and online news editor for HealthLeaders, a Simplify Compliance brand.


KEY TAKEAWAYS

Intermountain told the Supreme Court that it expects to finalize a settlement in this case, rather than seeing it through.

The nonprofit health system has sought to use the case as a vehicle to rein in whistleblower litigation.

There are things healthcare executives should do proactively and reactively to minimize the risks of protracted and costly FCA litigation.


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