Compliance. TODAY August An Outlaw in Compliance. an interview with John Outlaw. See page 16

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1 Compliance TODAY August 2015 a publication of the health care compliance association An Outlaw in Compliance an interview with John Outlaw Compliance Officer Hospital Affiliated Physicians McKesson Business Performance Services See page Physician arrangements: The missing link Gail Peace 31 How to be a compliance officer: Tips for new members of our profession Kim E. Greene 37 The law firm business associate: New liabilities create conflicts of interest Barry S. Herrin 43 Validity versus representativeness Chun Liu This article, published in Compliance Today, appears here with permission from the Health Care Compliance Association. Call HCCA at with reprint requests.

2 by David Nasca, Esq. Qui tam litigation: Improving recovery through alternative dispute resolution Since 1986, 84% of suits affirmatively declined by the Department of Justice were dismissed qui tam interventions recovered $2.4 billion more than cases without government support. Mandatory alternative dispute resolution (ADR) would create a hurdle to frivolous suits reaching court. ADR s lack of publicity is beneficial to both the whistleblower and the employer. The non-adversarial nature of ADR is beneficial to highly charged whistleblower cases. David Nasca (nascadj@upmc.edu) is a Contract Administrator with the University of Pittsburgh Medical Center (UPMC) in Pittsburgh. Nasca Alternative dispute resolution (ADR) is an effective tool that can be used in place of litigation for an extremely wide array of different types of legal action, including healthcare disputes. It includes various techniques, such as arbitration and mediation, which allow legal issues to be settled without having to litigate and go to court. One area ripe for increased use of ADR involves the False Claims Act (FCA), specifically qui tam cases in which whistleblowers act on behalf of the government in bringing fraud claims against various institutions, such as different types of healthcare entities. Cases involving the FCA continue to increase in frequency every year, meaning that this topic will only grow more important each passing year, and as such, we need to figure out ways in which we can improve the process and make it as efficient and effective as possible. One of the ways that this can be done is to increase use of ADR in the prosecution of claims under the FCA. False Claims Act history The FCA has existed since the 1800s, but it is only in the past few decades that it has become a tool frequently used to combat fraud. The qui tam provision of the FCA, also known as the whistleblower provision, can be found at 31 U.S.C.A. 3730(b), and it is important because it allows private persons to file suit on behalf of the US government for violations of provisions of the FCA. The FCA provides for the government to intervene and take up the qui tam case if it so chooses, but it also provides the option for the private party who brought the qui tam matter to pursue the case themselves on behalf of the government as a relator. Qui tam litigation is one of the main ways in which the FCA is enforced, and even though these qui tam provisions existed when the FCA was first created, it was uncommon to have private plaintiffs until Congress amended the FCA in The amendments made to the FCA in 1986 came at a time when the national deficit had grown dramatically and the government saw the FCA as a method of attacking the fraud against the American government that was seen as posing a severe threat to national interests, and the amendments made the FCA

3 a much more formidable vehicle for fighting fraud by lowering the standard of intent for certain FCA violations, lengthening the statute of limitations, increasing damage and penalty provisions, and increasing the amount qui tam litigants would receive for successful recoveries. 1 These changes encouraged private parties to engage in qui tam litigation. The most recent amendment to the FCA in 2009 once again came at a time of very high government spending, similar circumstances to the previous legislation discussed. President Obama signed the Fraud Enforcement and Recovery Act (FERA) of 2009 into law in May of that year, and this resulted in even greater expansion of the FCA. Before FERA, there was no liability under 31 U.S.C.A. 3729(a)(1) unless a defendant presented a false claim for approval or payment to a US government employee or a member of the US Armed Forces. The other major change that came with the FERA amendment involved employer retaliatory actions. Before FERA, the FCA only provided a cause of action when an employer discriminated against a whistleblower employee, but FERA removed this language and expanded what kind of employee mistreatment would give rise to action under the FCA. These amendments have all made the FCA the leading weapon used to combat fraud against the government and, since the 2009 amendments, we have seen qui tam litigation skyrocket throughout the country. The FCA is used to combat fraud against a variety of different parts of the government, with the two main departments being the Department of Health and Human Services (HHS) and the Department of Defense (DoD), with the Department of Health and Human Services having by far the largest number of qui tam cases. Healthcare industry The healthcare industry is ripe with opportunities for qui tam litigation because of all the government money involved, particularly Medicare reimbursement. According to the Department of Justice (DOJ), since 1987 the government has recovered $29,186,901,708 in qui tam cases in which they have intervened and $1,041,053,265 in cases in which they have declined to help the individual bringing the qui tam matter. 2 During 2014 alone, there were 469 new qui tam matters relating to fraud against the Department of Health and Human Services, more than double the amount of new qui tam matters before the passage of the FERA amendments (231 in 2008). In 2014, qui tam settlements and judgments involving HHS resulted in recovery amounts of $2,186,948,220 for qui tam cases with government intervention and $37,618,463 when the government declined to act. Although both of these are large sums of money, these figures illustrate how much less successful qui tam cases are when the government is not involved. This is bolstered by the fact that data from shows that out of 4,628 qui tam cases in which the government these figures illustrate declined to intervene, how much less successful 85% (3,962) were dismissed and only 5% qui tam cases are when the (253) ended with a settlement or judgment. government is not involved. This suggests that either the government chooses to intervene in cases they think will likely yield a large recovery, or qui tam relators just don t fare well without the government s help. Since 1986, 84% of all qui tam lawsuits that the DOJ) affirmatively declined to prosecute eventually ended up being dismissed in some form during litigation. 3 Although it might appear that relators are not very good at pursuing qui tam litigation without government help, it also suggests that

4 some of these qui tam cases are not very strong and should not be brought in the first place. The influx of frivolous cases, combined with the rapid increase in qui tam litigation generally, is creating costs that are eventually being passed on to the public. An example of this is from a 2003 report that found the Department of Energy spent $330.5 million reimbursing its contractors for litigation costs that were associated with having to defend themselves from trivial lawsuits from October 1998 through March It is likely that this amount is much larger for the HHS, as they receive far more qui tam matters than the Department of Energy does. Another example of why qui tam cases will likely continue to increase is the proposal by the Centers for Medicare & Medicaid Services (CMS) that was made in April of This proposal is to increase the potential reward amount for information that leads to a recovery of Medicare funds from 10 percent to 15 percent of the final amount collected, as well as proposing to increase the portion of the recovery on which CMS will pay a reward up to the first $66 million recovered this means an individual could receive a reward of $9.9 million if CMS recovers $66 million or more. 5 All of this suggests that there needs to be more effective ways to handle qui tam matters when the government declines to intervene, so that weak qui tam matters do not make it into the courts to waste time and resources, and meritorious qui tam cases that are not backed by the government can have an avenue for producing a better outcome than a simple dismissal. Benefits of alternative dispute resolution One way in which the government could mitigate the time and cost of litigation, while also getting rid of frivolous qui tam cases, is to increase the use of forms of ADR such as arbitration or mediation. There are a number of positive benefits to using some form of ADR in qui tam cases. One benefit of alternative forms of dispute resolution is to resolve parts of a particular case so that fewer issues are being litigated. 6 This will save time and money, hopefully leading to a shorter, more concise trial. Another benefit is the fact that most forms of ADR are non-adversarial, which is important because many qui tam cases are highly charged and emotional, with each side being very hostile at the beginning of the process. The whistleblower often feels they have been wronged or betrayed and the entity that they are bringing the claim against is angry that they have to be involved in this matter. ADR forms such as mediation provide a neutral third party to set the tone with the hopes that this friendlier and more cordial tone will be conducive to reaching a settlement more quickly. Another very positive aspect of ADR involves publicity, or lack thereof. Employers in government-regulated industries tend to be highly sensitive to anything that will tarnish their public image, like the filing of complaints or lawsuits against them, disliking negative press coverage and worrying that the coverage will decrease productivity and affect employee morale and turnover. 7 By using ADR tactics instead of litigating, the employers don t have a public trial to deal with, and the settlement terms that they want to negotiate can include confidentiality agreements to keep the whistleblower from going to the press after a settlement is reached. One would think that publicity could be used as leverage by the whistleblower who brings the qui tam matter, but it can also have a very negative effect on the whistleblower. Once a whistleblower brings a qui tam case, there will forever be a record of that person as being a relator, making it very difficult for them to find work later on. For example, take a well-qualified doctor with an extensive litigation history, including a whistleblower claim, who is in the process of being reviewed for a possible hire. Employers are extremely hesitant to hire these people, because

5 they are worried that they could be dragged into a long and drawn-out lawsuit that would waste precious time and resources. So even if the person is an extremely qualified candidate, employers often just do not want to take the risk. Using ADR can keep this from happening, because there is no public trial or docket history to worry about, and the settlement can include two-way confidentiality so that neither party discusses the whistleblower matters brought up during the course of dispute resolution. One suggestion for increasing the use of different ADR forms in qui tam cases is to mandate some form of ADR, such as arbitration or mediation, either generally or before the government decides to decline intervening in a relator s lawsuit. Currently, under 31 U.S.C.A. 3730(c)(5), the government can pursue qui tam claims through any alternate remedy available to the Government, including any administrative proceeding to determine a civil money penalty, but there is unfortunately no provision that exists which requires parties to FCA claims to go through initial arbitration or mediation before litigation. An ADR requirement would act as a de minimis hurdle for cases that should not be in the formal judicial process, and this buffer will become even more important as qui tam suits continue to increase in frequency. 8 The False Claims Act operates like an anomaly because it encourages litigation as the primary remedy, despite long-standing government policies promoting ADR for civil disputes in a more cost-efficient and expeditious manner. 9 This mandate would help to keep unnecessary qui tam cases out of court, and also (hopefully) get the government involved in more qui tam cases through administrative means, making it more likely a settlement will be reached. This would increase the amount of recovery for both the government and the relator. Conclusion Qui tam litigation under the FCA has become a tremendous resource for fighting fraud and recovering government money, but with its increasing frequency, it is One way in which ADR use could be compelled is through a legislative change that would mandate that ADR be used in the qui tam process. becoming more costly and time consuming to the courts, the government, and in turn, the citizens. ADR is one way in which these qui tam cases can be pursued in a more effective and efficient manner. One way in which ADR use could be compelled is through a legislative change that would mandate that ADR be used in the qui tam process. This would result in fewer frivolous lawsuits and likely higher recovery rates for qui tam cases, while freeing up the courts from wasteful litigation. All of this will only become more important, because it appears qui tam matters are only going to grow and continue to be a vital source of financial recovery for the government. 1. David Baker: A Whole New World of False-Claims-Act Liability: The 2009 Amendments and Learning Where to Draw the Line. Catholic University Law Review, Vol. 61, Issue 1, Fall Available at 2. Department of Justice, Civil Division: Fraud Statistics Overview, November 20, Available at Lt Col Charles T. Kirchmaier, Note: Treating the Symptoms But Not the Disease: A Call to Reform False Claims Act Enforcement, Military Law Review, Vol 209, Fall 2011, pp , citing pages 186, 228. Available at 4. Idem at pp Centers for Medicare & Medicaid Services: Fact Sheet: CMS Proposes New Safeguards and Incentives to Reduce Medicare Fraud. April 24, Available at 6. Peter B. Hutt II et al: Techniques for Resolving False Claims Act Cases Through Mediation, 37-SPG Procurement Law. 1, 17 (2002). 7. Richard D. Fincher, Mediating Whistleblower Disputes: Integrating the Emotional and Legal Challenges, Dispute Resolution Journal, Feb-Apr 2009; Vol. 64, Issue 1, p 62. Available at 8. Idem at Ibid, ref #1 at