Federal False Claims Act

“One of the Department’s most important tools in protecting the integrity of Medicare and other taxpayer-funded health care programs is the civil False Claims Act” – Deputy Attorney General, June 3, 1998

The False Claims Act allows individuals to sue on behalf of the government if they have personal or confidential information that relates to a false or fraudulent claim submitted to the government, its agencies, or its contractors. Under the False Claims Act, an ordinary citizen can file a lawsuit on behalf of the government as a “private attorney general” in order to recover money owed to the government. These cases are called “qui tam” actions. The person bringing the lawsuit is called a “relator.” In a successful False Claims Act case brought by a private citizen, the relator is generally entitled to 15-30% of what the government collects as damages.

The False Claims Act is a powerful tool for weeding out government fraud and protecting taxpayer money. Since 1986, the federal government has recovered more than $30 billion in settlements and judgments through lawsuits brought under the False Claims Act, $14.2 billion since 2009. In 2012 alone, the Justice Department recovered more than $5 billion. Part of the reason the False Claims Act is so effective is because it allows for recovery of treble damages, as well as costs, attorneys’ fees and various monetary penalties.

What exactly is a False Claim?

False claims can relate to Medicare, Medicaid, and other healthcare fraud, military and other government contracts, failure to pay government fees, royalties or other money due to the government (referred to as “reverse false claims”), federal grants, billing for needless medical services (e.g. “upcoding”), and improper promotion of off-label use of pharmaceutical drugs.

The term “claim” is defined very broadly under the False Claims Act. Under the Act, a claim means any request or demand for money or property that: (i) is presented to an officer, employee, or agent of the United States; or (ii) is made to a contractor, grantee, or other recipient, if the money or property is to be spent or used on the Government’s behalf or to advance a Government program or interest, and if the United States Government:

  • provides or has provided any portion of the money or property requested or demanded; or
  • will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is requested or demanded; and

Here are some examples of successful actions brought under the False Claims Act:

GlaxoSmithKline Agrees to Pay $1.04 Billion for False Claims
In various lawsuits, the government alleged that GSK promoted its drug Avandia to physicians and health care providers by submitting false and misleading information about Avandia’s safety profile, which in turn caused false claims to be made to federal health care programs. The lawsuit also claimed that GSK paid kickbacks to physicians for prescribing its drugs and avoided paying Medicaid drug rebates between 1994 and 2003 by reporting false drug prices to the government… Read More

Intermountain Health Care Inc. Pays U.S. $25.5 Million to Settle False Claims Act Allegations
Intermountain Health Care Inc., which operated the largest health system in Utah, agreed to pay $25.5 million to settle claims that it violated the Stark Statute and the False Claims Act by engaging in improper financial relationships with referring physicians… Read More

LifeWatch Services Agrees to Pay $18.5 Million to Settle False Claims Act Allegations
The settlement resolved two qui tam actions alleging that LifeWatch Services violated the False Claims Act by improperly billing Medicare for ambulatory cardiac telemetry (ACT) services, knowing that these services were not eligible for Medicare reimbursement for certain patients. One lawsuit claimed LifeWatch used false diagnostic codes in order to have their false claims paid by the government… Read More

Florida’s Tenet Hospital Pays $29 Million in False Claims Action
The settlement followed government allegations that Tenant submitted improper Medicare claims between 1994 to 1997, including false, fraudulent and misleading statements and omissions regarding patient medical conditions, Medicare eligibility, and services that were not eligible for Medicare reimbursement… Read More

How Does the False Claims Act Work?

Lawsuits filed under the False Claims Act are filed in federal court under seal (or in secret). If the lawsuit is filed by a relator (i.e. private citizen), the relator must also serve the U.S. Attorney for the district where the action is filed with a copy of the complaint and a written disclosure of substantially all material evidence and information available to the relator. Once a claim is filed, it remains under seal for 60 days while the government investigates the claim and decides whether it will intervene in the lawsuit. If it does, the government will take over the primary responsibility for prosecuting the action. If it does not, the relator must decide whether to proceed with the lawsuit. The 60-day period can be, and often is, extended by the government. Further, even if the government initially declines to intervene, the Court can permit the government to intervene at a later date upon a showing of good cause.

If the government intervenes or the case otherwise proceeds, the lawsuit will be unsealed and the defendant notified. This is generally the first time a defendant becomes aware that a False Claims Act case has been filed.

What is the Relator’s Share of Recovery?

If the government elects to intervene in a False Claims Act case brought by a relator, the relator will be entitled to anywhere from 15-25% of the government’s recovery. If the government does not intervene – and thereby leaves the prosecution of the case to the relator and his or her attorneys – the relator’s portion will increase to 25-30%. The relator’s share is paid to the relator out of what the government collects from the defendant.

What About Employer Retaliation?

The False Claims Act provides safeguards against retaliation for employees who initiate lawsuits under the False Claims Act. Specifically, the False Claims Act states: “Any employee, contractor, or agent shall be entitled to all relief necessary to make that employee, contractor, or agent whole, if that employee, contractor, or agent is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts done by the employee, contractor, agent or associated others in furtherance of an action under this section or other efforts to stop 1 or more violations of this subchapter.” Thus, the Act protects employees even if a lawsuit is not filed.

Relief which may be provided to employees includes: “reinstatement with the same seniority status that employee, contractor, or agent would have had but for the discrimination, 2 times the amount of back pay, interest on the back pay, and compensation for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorneys’ fees.”

Public Disclosure Bar

A Court will dismiss a lawsuit brought under the False Claims Act by a private individual if the lawsuit alleges allegations which were already publicly disclosed: (i) in a Federal criminal, civil, or administrative hearing in which the Government or its agent is a party; (ii) in a congressional, Government Accountability Office, or other Federal report, hearing, audit, or investigation; or (iii) from the news media. There is an exception to this “public disclosure bar” if the relator was the original source of the information.

If you believe you have information which might allow you to file an action under the False Claims Act, contact Viñas & DeLuca for a free and confidential consultation by calling (305) 372-3650. Or, you can complete our Free Case Evaluation Form and we will contact you.