9/12/2014

Qui Tam Gains Momentum in the Battle Against Medical Provider Fraud

An attractive option in the pursuit of fraudsters, qui tam requires caution to avoid getting stung in the end.

By Richard J. Mennies

Though “qui tam” sounds like a menu option, it actually offers something more appetizing to insurers victimized by medical provider billing fraud: justice. Additionally, the False Claims Act (FCA), 31 U.S.C. §§ 3729-3733 offers private insurers, Medicare, and Medicaid redress against unscrupulous doctors and medical equipment providers whose machinations defraud them.

The Latin term “qui tam” is short for “qui tam pro domino rege quam pro se ipso in hac parte sequitur,” which means “who brings the action for the king as well as for himself.” In today’s qui tam suits, the “king” is the federal government, and the suing party is called the “relator.” The FCA provides a powerful remedy, namely the potential for treble damages of $5,000 to $10,000 for each false claim, attorney’s fees, and costs, with relators standing to reap 15-20 percent of the government’s recovery. In 2013 alone, the federal government recovered about $3.8 billion through qui tams, with relators receiving about $388 million of that recovery.

Requirements and How It Works

If you were filing a qui tam action arising from fraudulent medical provider billing practices, you would have to prove, for example, that the provider (1) knowingly presented or caused to be presented a false claim for payment; (2) knowingly made, used, or caused to be made a false record or statement material to a false or fraudulent claim; or (3) conspired to commit either one or two.

A relator, or whistleblower, is someone who has direct and independent knowledge of the fraud and has voluntarily provided the information to the government before filing suit. After notifying the government of the fraud, the relator files a lawsuit in the U.S. government’s name, under seal, in a federal district court.

Initially, the complaint is delivered only to the government with a confidential memorandum detailing the fraudulent scheme and supporting evidence. The Department of Justice (DOJ) investigates and determines whether the government will intervene. DOJ investigations can take one to two years, during which the complaint and case remain sealed.

If the government decides to intervene, it takes over the litigation, significantly reducing the relator’s legal fees. The relator cooperates as needed, and if the case resolves through settlement or favorable judgment, they may receive 15 percent to 25 percent of the government’s recovery.

If the government declines intervention, the relator may continue the suit at his own personal expense but keeps 25 percent to 30 percent of any recovery. However, suits that the government declines have a lower rate of success. Additionally, if the defendant prevails, the court may award attorney’s fees and costs against the plaintiff.

Statutes of Limitations and Caveats

There are two applicable statutes of limitations: six years from the date the fraud is committed or three years from the date the relator should have reasonably discovered the violation, whichever is later. This means that claims may extend well past six years of when the fraud occurred if it is complex enough to have reasonably escaped detection up until three years before the relator filed suit.

But don’t run to the courthouse yet. First of all, the government only intervenes in a small number of cases. Also, there are two main obstacles to overcome: the so-called “first-to-file” and the “original source” requirements. Hurdle one is the FCA’s requirement that there are no pending similar claims against the same defendant. The courts, however, disagree on whether “pending” means currently in suit or encompasses all prior similar suits, even resolved suits. In order to sustain your claim when a similar case is (or was) pending, you must assert facts that distinguish and differentiate your case from the earlier-filed action.

Hurdle two involves the information source. The action cannot be based purely on information available to the public, such as discovery during civil proceedings, Freedom of Information Act responses, and media coverage. At least part of your evidence must be from an original source, i.e., insider information. Consequently, careful pre-complaint research and frank assessment of your evidence are vital to your qui tam success.

Here are three examples of qui tam recoveries in 2013:

  • A North Carolina whistleblower received $1 million of a $6 million settlement paid by TranS1 Inc., which allegedly sold medical devices used for minimally invasive spinal fusion surgeries but counseled medical providers to bill for more invasive spinal surgeries.
  • A Washington relator received $2.7 million of a $14.5 million settlement paid by Sound Inpatient Physicians Inc., which allegedly billed for higher and pricier levels of service than it actually provided.
  • A Georgia whistleblower received $2 million of an $8 million settlement paid by Dubuis Health System, which allegedly kept Medicare patients in hospitals longer than medically necessary.

Alternatives to Qui Tam

The FCA may not be the best risk-reward option, particularly if there are prior similar actions or you are relying heavily on publicly available information. First, look to whether your state has its own FCA where a state rather than a federal program was defrauded.

Alternatively, your state may provide a different remedy that offers a more complete recovery. For example, in Pennsylvania, the Insurance Fraud Prevention Act provides for treble damages without sharing with either the state or federal government. Remember that under the FCA, the relator’s recovery depends on how much the government—not the relator—was defrauded. However, the applicable state remedy’s statute of limitations may be much shorter than the six-year FCA statute of limitations.

Know Your Limitations

If you decide to pursue an unscrupulous medical provider, carefully assess the evidence and available legal remedies. Qui tam is an attractive option where (1) the provider has never been sued under the FCA; (2) your evidence originates from insider information; and (3) the fraudulent Medicare or Medicaid submissions amount to a claim that the government would want to prosecute. Otherwise, you may be stuck with an unrecoverable legal bill while the statute of limitations on a viable state law claim expires.   



Richard J. Mennies, Esq. is an attorney with Mayers, Mennies & Sherr LLP. He has been a CLM Member since 2013 and serves on the CLM Insurance Fraud Committee. He can be reached at (610) 825-0300, rmennies@mmsllp.com, www.mmsllp.com.

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