Healthcare fraud is a massive business in the United States, with as much as three percent of annual healthcare spending lost to this rampant crime. To combat healthcare fraud, the False Claims Act has been used for more than 100 years as a tool to punish those involved and recoup taxpayer funds that were stolen or misused by criminals.
The False Claims Act was first passed during the Civil War in 1863. Its purpose was twofold: to punish dishonest defense contractors selling tainted food and supplies to the Union Army and financially incentivize whistleblowers to come forward with allegations of fraud against federal spending programs.
Today, healthcare fraud is still a major focus under the False Claims Act. The current U.S. Department of Justice (DOJ) has recovered nearly $44 billion through False Claims Act cases since January 2009—$28.8 billion in civil cases and $15.3 billion in criminal prosecutions.
Another new development is the use of qui tam lawsuits, which are whistleblower claims filed on behalf of the federal government under the qui tam provisions of the False Claims Act. While whistleblowers were used in the past, qui tam lawsuits are much more prevalent today because of changes made to the False Claims Act in 1986 that increased incentives for whistleblowers and their attorneys to come forward.
“The qui tam provisions work together to allow private parties—the original term for qui tam relators was ‘private attorney generals’—to bring a civil claim on behalf of the government,” explained Ileana Hernandez of Manatt, Phelps & Phillips Law Firm and a member of the firm’s healthcare litigation practice. “The False Claims Act provisions allow for a private party who has knowledge that the government is being claimed falsely to come forward and file suit.”
Other changes to the False Claims Act in 1986 made it easier to investigate allegations, Hernandez said.
“Before 1986, there were complaints that the government wasn’t moving quickly enough on qui tam suits, and sometimes taking too long so that judges would dismiss cases for lack of prosecution,” she explained. “Congress wanted to encourage more investigations throughout the country to find healthcare fraud, so it relaxed the rules on qui tam complaints. It made it easier for the government to investigate claims by developing evidence that was more relevant to the claim.”
Additionally, since 1986 changes have been enacted to make qui tam cases simpler and speed up pretrial discovery.
“Before 1986, there were complex jurisdictional issues to consider,” Hernandez said. “But in 1986, Congress made it clear that the only jurisdictional requirement was that the claim had to be false and material and that in most cases courts should defer back to the government in deciding what is material.”
Meanwhile, whistleblowers who file qui tam lawsuits can do so without fear of losing their job or being sued for libel or slander.
“The False Claims Act protects whistleblowers from being retaliated against by their employers with a retaliation claim,” Hernandez said. “In 2011, there was a big push to encourage more people to file qui tam cases because the number of qui tam suits that had been filed declined in previous years, and Congress wanted to increase the number of cases that were filed without affecting companies or their employees.”
Currently, healthcare is one of the biggest areas targeted by qui tam lawsuits. “A lot of qui tam cases are brought under the federal Anti-Kickback Statute—it is very broadly written and catches a wide range of conduct,” Hernandez said.
“Another area that is targeted involves medical supplies and pharmaceuticals,” she continued. “Another big area of healthcare fraud focuses on public health service employees who commit contract procurement fraud by promising to purchase certain goods and services, but then go for a different bid.”
Today, qui tam suits are filed in almost every state in the U.S., one of the reasons being that in 1986 Congress also opened up qui tam lawsuits to citizens of foreign countries. “It used to be only U.S. citizens could bring qui tam claims, but now it includes anyone who lives or works in the U.S., even if they are not a U.S. citizen, so long as their claim affects the United States,” Hernandez said.