Bylined Articles

Seven Tips to Protect Your Facility from a False Claims Act Lawsuit

By Amy E. McCracken
April 2013
INHAA's The Administrator's Advocate

Amy McCrackenThe False Claims Act is a federal law that imposes liability on persons and companies who make false claims for payment to the federal government. Many states have similar laws. The Act encourages whistleblowers to file suit on behalf of the government, and not just with a sense of civic duty; individuals who file such suits (called "relators") stand to receive a portion of the money recovered. It can and has amounted to millions.

Whistleblower, or qui tam, suits against long term care facilities are on the rise. Often, such cases are filed by disgruntled employees or former employees. Recent legislation, such as the Fraud Enforcement and Recovery Act of 2009 and the Patient Protection and Affordable Care Act, has broadened the scope of the False Claims Act. The Obama Administration has expanded the definition of a false claim, so now any false statement that is material to a claim can be actionable. In addition, liability has been expanded to knowingly failing to repay an overpayment.

In the long term care context, providers generally do not bill for each service provided. Accordingly, qui tam relators have focused on quality of care as the basis for liability. There are two primary theories of liability – worthless services and implied false certification. Under the worthless services theory, the relator alleges that the services provided by the facility were so deficient as to be worthless. As a result, any billing for the services is necessarily a false claim. For example, failing to turn a resident every two hours, if required by the resident's plan of care, missing a medication or failing to provide dietary supplements can lead to False Claims Act liability. The implied false certification theory relies upon the regulatory environment surrounding long term care, and tries to turn any violation of the Medicare or Medicaid regulations into a false claim for payment. Both of these theories have met with success in the courts.

The potential damages can easily rise into the millions, even for small overpayments. This is because the False Claims Act provides for three times the actual damages, plus a penalty of up to $11,000 per claim. Thus, an overpayment of $10 per resident for a 100-bed facility each month for a year could result in damages of $36,000, plus a penalty of $13,200,000. Clearly, the best practice is likely to avoid facing a False Claims Act lawsuit. The following seven tips can help you do that.

1. Have Appropriate Polices and Procedures

The best way to avoid a False Claims Act case is to provide quality care to all residents. Federal and state regulations define the care that must be provided to each resident, and that should be the template for care in every long term care facility. Policies and procedures for resident care should implement the applicable regulations. Compliance with these guidelines can significantly reduce your risk of becoming a target in a qui tam lawsuit.

Each facility should have written policies and procedures in place to detect and prevent fraud, waste and abuse. In addition, any facility that receives more than $5 million in Medicaid funds must also have policies and procedures to train all employees and contractors regarding the False Claims Act.

2. Conduct Effective Training and Education

Even the best policies and procedures are useless if your employees do not know what they are or how to use. Regular inservice training should be provided to all employees to ensure that they know and comply with regulatory requirements in rendering care to residents. For example, handwashing practices may be lax, which can have serious consequences for staff and residents due to the rise of superbugs such as MRSA and CRE.

3. Foster Open and Effective Communication

Most relators are driven by some degree of moral outrage. They believe that they observed improper conduct and that reporting it is the right thing to do. If they cannot report to management, they will report to the government. Accordingly, a key component in avoiding a qui tam lawsuit is to ensure a means for effective communication from staff to management. Management should demonstrate and communicate that it is committed to integrity and transparency in the operation of the facility. Employees must know the procedure to promptly report questionable conduct to management, in confidence and anonymously, if they wish.

4. Conduct Internal Monitoring

Administrators should systematically monitor compliance with regulations and billing requirements. They cannot act to correct problems if the problems are unknown to them. The monitoring should be designed to prevent fraud, waste and abuse, and to proactively address the root problem if issues are identified.

5. Consistently Enforce Standards

Administration should address identified problems in a consistent manner. This includes disciplining employees who fail to follow policies and procedures. Management should ensure that the disciplinary steps are known to all staff, and must apply them consistently to all employees – management and staff alike. Any favoritism will engender distrust among other employees, which can lead to a complaint to governmental authorities.

The False Claims Act protects whistleblowers, so it is vital to take complaints seriously and to ensure that no one "takes aim" against the reporting employee and retaliates. This is particularly important when an employee reports his or her direct supervisor.

6. Respond to Problems and Complaints

If an employee reports a problem, management must take it seriously. Employees will report to the government instead of management if they do not believe that management will fix the problem. Thus, management should investigate the allegation and should make changes as appropriate. There is no point in encouraging employees to report problems if management does not act on those reports.

More importantly, though, management should make sure that the reporting employee feels as though she or he made a valuable contribution, and should apprise the employee of any changes implemented as a result of the report. Employees who feel valued by the company, or feel as though they made a difference, are less likely to become whistleblowers.

7. Consider Self-Reporting

If you discover a serious problem in your billing practices which could give rise to False Claims Act liability, consider reporting the violation to the government immediately. Self-reporting within 30 days of discovery of the error may significantly reduce your damages and penalties under the Act. Before making a self-report, you should consult with your attorney.

Amy E. McCracken is a special counsel at Duane Morris LLP in its Chicago office. Ms. McCracken is a skilled trial attorney with a particular emphasis in healthcare, fraud and banking litigation. She represents long term care facilities throughout Illinois and has successfully defended long term care facilities in civil and administrative cases. Ms. McCracken represents banks in matters such as mortgage foreclosure, mechanics' liens, and creditors' rights enforcement. A former registered nurse, Ms. McCracken has significant experience in the medical device litigation, mass torts, Medicare fraud and other health care litigation matters.

Reprinted by permission.