What Medical Practices Need to Know about Whistle-blowing Lawsuits

In FY 2012, the federal government recovered $2.5 billion in fraudulent healthcare payments. Sums like that attract a lot of attention from potential whistle-blowers and potential defendants. Medical practices need to understand the whistle-blower process and how the government decides who to pursue.

At the recent HealthCare Symposium in Houston, Andrew Bobb, civil healthcare fraud coordinator for the Southern District of Texas, Houston Division, explained how whistle-blower lawsuits work, and how the government determines if action is feasible.

The HealthCare Symposium was a one-day conference co-sponsored with local chapters of the Healthcare Financial Management Association, Medical Group Management Association and American College of Healthcare Executives.

During his presentation, Bobb was careful to say that any opinions he expressed were his own, and not those of the U.S. Attorney's Office for the Southern District of Texas or the Department of Justice.

I make a similar disclosure: What follows is what I understood him to say.

Whistle-blower statute
Also known as the "Lincoln Law," the formal name of the statute is the False Claims Act. It was initially passed in 1863, and subsequently amended several times. It allows a private citizen to bring an action, on behalf of the United States, against an entity for fraud against the federal government and to participate in any recovered damages.

This type of statute has its roots in English common law and is known as a qui tam case. Qui tam refers to the Latin phrase qui tam pro domino rege quam pro se ipso in hac parte sequitur, which means that the suit is brought for the benefit of the king and the person bringing the suit.

If the government chooses to pursue the case, the whistle-blower is entitled to a negotiated percentage of the recovered damages, usually 15 percent to 25 percent. The whistle-blower also becomes a party to subsequent settlement negotiations. If the government and the whistle-blower cannot agree on the terms of a settlement, the whistle-blower is due a fairness hearing before a federal judge.

Assessment of the whistle-blower
A whistle-blower is almost always a disgruntled current or former employee. Given that, how credible is the whistle-blower's complaint and what is his motive? These are some of the questions the government considers when evaluating the credibility of a whistle-blower:

• Given the whistle-blower's position in the entity, how likely is it that she has actual knowledge of the fraud?

• What action did the whistle-blower take when he learned of the fraud? Did the whistle-blower try to correct the situation or did he participate?

• What is the whistle-blower's credit and criminal history?

• What is the quality of the evidence presented?

• Does the whistle-blower have a history of litigation?

The whistle-blower must be the first person to report the fraud. If the information is public knowledge or someone else has already initiated a qui tam case for the same issue, the government will not intervene, e.g., pursue, the case.

Assessment of the fraud and likelihood of recovery
Before pursuing a qui tam case, the government will consider:

1. Does the size of a potential financial recovery justify the required expenditure of governmental resources?

2. If so,
a. Does the potential defendant have the financial resources to pay the judgment or settlement amount?
b. Is this case the best use of finite resources? Another case, for instance, might yield a better return on investment.

If the answer to any of these questions is "no," the government will not intervene unless there are significant issues of quality of care.

Even if all of the answers are "yes," the assessment of the fraud will consider the complexity of the regulations at issue, the defendant's knowledge of the fraud, and the defendant's response to knowledge of the fraud as mitigating circumstances.

Identifying the whistle-blower
At least in the Southern District of Texas, the whistle-blower's identify will always be eventually disclosed.

The qui tam writ is filed under seal. If the government decides to intervene, it will extend the seal during the investigation. If not, the seal is lifted after 60 days and the writ becomes public record. Since the initial complaint is served on the U.S. Attorney General and the U.S. Attorney rather than the defendant, it is possible that the defendant may never become aware of the unsealed writ.

If the whistle-blower is still employed and the defendant guesses or becomes aware of his identity, he may be terminated. If terminated, the whistle-blower's attorney may identify the whistle-blower to the employers. Remedies include reinstatement, double back pay, and attorneys' fees.

The whistle-blower's identity will certainly be made known during a trial or the recording of a settlement.

Successful whistle-blower cases have returned millions of highly leveraged dollars to the federal government. In the Southern District of Texas, a team of four to five attorneys has recovered more than $103 million in three years.