The following is the second of a regular series of contributions to Park Place Live by Mark E. Reagan, the managing shareholder of Hooper, Lundy & Bookman. 

Healthcare providers, including post-acute and long-term care operators, continue to face the threat and the reality of legal actions brought against them under the False Claims Act (FCA), including cases initiated by “whistleblowers” known as “qui tam” relators. Although originally founded in longstanding English and American precedent, these doctrines have continued to evolve in the modern era. This evolution has expanded the scope of exposure for FCA claims.

However, there is an increasing possibility that the U.S. Supreme Court may be looking to review the constitutionality of the FCA regime, particularly as to the ability of “qui tam” relators to continue to prosecute FCA claims in the name of the government. This article will explore all of these elements.

Historical Origins

The origins of the “qui tam” doctrine can be traced to an enactment of the English Parliament in 1400. Under this law, private parties could initiate a suit to recover penalties, with the proceeds shared between those prosecutors and the Crown. In practice, the use of this process was minimal.

Contrary to its British counterparts, a number of American states in the early 19th Century proceeded to adopt and extensively utilize the English “qui tam” doctrine in state constitutions. The ability of private individuals to bring such actions was recognized by the Supreme Court in 1805. Unlike the English experience, the use of these “qui tam” provisions were exceedingly common in early American courts.

The advent of the Civil War ushered in the establishment of the FCA. Known colloquially as “Lincoln’s Law,” the FCA was first enacted in 1863 as a mechanism to combat defense contracting fraud. However, the scope of the FCA went beyond war profiteering, reaching all forms of governmental payments for goods and services, including those supplied by healthcare providers.

With the establishment of the FCA (along with the ability of “qui tam” relators to assert such claims), the regime had been put in place for the foreseeable future. However, Congress became increasingly concerned about the risks of “collusive and vexatious” relators, an issue that has continued through today.

Recent History

In the 20th Century, the use of the FCA by “qui tam” relators went through a series of different visions of its importance by Congress. For example, while the Roosevelt Administration in 1943 effectively abolished the use of “qui tam” in FCA, the Reagan Administration revived it in 1986, asserting that “the magnitude of the fraud problem is such that a solid partnership needs to be forged between governmental prosecutors and private whistleblowers.”

Since 2000, the volume of FCA cases (whether brought by the government or a “qui tam” relators) against healthcare providers has expanded exponentially. While the FCA claims of the past against healthcare providers largely focused on Medicare or Medicaid billings for items and services that were never actually provided, the FCA cases of the modern era focus far more on alleged violations of complicated reimbursement and certification requirements and the quality of the services provided to program beneficiaries. This represents a wholesale transformation of these types of issues, which are now being largely addressed through the collection of overpayments or the imposition of civil money penalties or other administrative enforcement.

Operator Experience

In the post-acute and long-term care sectors, this transformation has produced countless FCA cases based on the Medicare Part A reimbursement system, first under the pre-PPS “cost-based” system and then moving to the RUGS-IV and now PDPM systems. These types of cases are just as likely brought by “qui tam” relators as those brought by the Dept. of Justice. Many of these relators are not even individual “whistleblowers” with personal knowledge of the alleged fraud but, rather, data management companies attempting to take advantage of the Byzantine nature of federal reimbursement methodologies. It has gotten out of control.

As to quality of care, there has also been a dramatic expansion of purported “failure of care” cases, alleging that the care was so poor that it essentially was “worthless” in nature. Largely focusing on assertions of insufficient staffing, the notion that this constitutes FCA liability is equally outrageous.

Possibilities for Reform

With FCA cases (and particularly those brought by “qui tam” relators) becoming so prevalent and creating such burdens on the judicial system, a number of federal court judges (either “concurring” or “dissenting”) have revived concerns regarding the constitutional problems associated with the “qui tam” statute, particularly as to whether “qui tam” relators can effectively “represent” the federal government. The Supreme Court has also started to engage in this analysis.

In recent decades, the Supreme Court reviewed some, but not all, of the elements of “qui tam” cases brought under the FCA. For example, although the Court held in 2000 that relators have standing to bring “qui tam” claims, it expressed “no view” as to other constitutional concerns. However, at least two Supreme Court justices have indicated their concerns on the constitutionality of the “qui tam” relator in the past two years, indicating that the Court may be interested in hearing additional challenges to the doctrine.

Regardless of what action that the Supreme Court may ultimately take on this area, there is little doubt that “whistleblowers” will be able to continue to bring to the attention of government allegations of wrongdoing and perhaps even share in the proceeds of any recovery. However, it may well be the case that it will be ultimately determined by the Supreme Court that only the Dept. of Justice can prosecute these cases.

Given the current misuse of the FCA, even this form of relief would be welcomed by operators and those who represent them. Stay tuned!

Note: The author would like to credit the contributions of his colleague, Sheryl Xavier, in making this article possible.

Disclaimer: This article is solely for general educational purposes and does not constitute any form of legal advice. Although the information contained in the article concerns potential legal issues, it is not a substitute for specific legal advice from qualified counsel. The publication of this article does not create any attorney-client relationship between the reader and Hooper, Lundy & Bookman, P.C. You should not act upon this information without seeking your own independent professional advice.