A 'Hat Trick' Of Heightened False Claims Act Risks For Health Care Providers: The Failure To Report And Refund Overpayments, The Patient Protection And Affordable Care Act, And Corporate Integrity Agreements*

Introduction

At the risk of stating the obvious, fighting and prosecuting health care fraud are top priorities for the Federal Government, and the False Claims Act ("FCA") is its weapon of choice in the battle. In a speech in June, Stuart Delery, the Acting Assistant Attorney General for the Department of Justice ("DOJ") Civil Division, stated the DOJ has recovered over $11 billion under the FCA, including over $7.4 billion in health care fraud.1 The Federal Government has a willing and motivated ally: more than 630 qui tam matters were filed with the DOJ, over two-thirds of which allege false claims to government health care programs.2 These numbers represent the greatest number of lawsuits ever filed within a year in the 150-plus year history of the FCA. In only the latest example of the Department's aggressive pursuit of FCA claims, on July 2, 2012, GlaxoSmithKline LLC ("GSK") agreed to pay $3 billion to the Federal Government to settle FCA allegations.

Recent legal developments highlight increased FCA risks for health care providers who receive Medicare and Medicaid payments from the Federal and state governments. The Supreme Court's June 28, 2012, decision upholding the Patient Protection and Affordable Care Act (the "Affordable Care Act" or "ACA") gave the green light for authorities to enforce the ACA provision that makes the failure to timely return Medicare and Medicaid overpayments an FCA violation. Furthermore, for those providers and other entities subject to a Corporate Integrity Agreement ("CIA"), the additional self-auditing requirements and truncated time frames for reporting overpayments can materially compound the risks of FCA liability. For example, in February, the United States Court of Appeals for the Eleventh Circuit's decision in U.S. ex rel. Matheny v. Medco Health Solutions, Inc. again made clear that the failure to repay overpayments in the face of a CIA can give rise to FCA liability.

In light of this rigorous enforcement environment, especially DOJ's focus on the health care industry, providers must ensure that they adopt and implement effective compliance programs aimed at preventing FCA violations, including the timely self-disclosure of overpayments and, as a consequence, avoiding a CIA.

1. The FCA

   The FCA3 allows the government and private citizens to bring civil claims against individuals and entities who defraud the government.4 The FCA imposes per-claim penalties of between $5,500 and $11,000 plus treble damages on defendants found to have engaged in fraud.5

   The FCA makes it illegal for anyone to knowingly submit a false claim to the government, or cause another to submit a false claim to the government, or to knowingly submit a false record or statement, for the purposes of receiving a payment from the government.6 The FCA also includes a "Reverse False Claim" provision which imposes liability on any person or entity who "knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money to the government."7 In other words, "the defendant's action does not result in improper payment by the government to the defendant, but instead results in no payment to the government when a payment is obligated."8

   To establish a Reverse False Claim, the DOJ or a qui tam relator must prove the following elements:

   1. A false record or statement;

   2. The defendant's knowledge of the falsity;

   3. The defendant's purpose - to conceal, avoid, or decrease an obligation to pay money to the government - i.e., a duty to disclose created by statute, regulation, contract, judgment, or acknowledgment of debt to the government that defendant attempted to avoid;9 and

   4. The materiality of the misrepresentation.10

2. The "Report and Refund Mandate" Provision of The Affordable Care Act

   On June 28, 2012, the United States Supreme Court upheld much of...