Shannon S. Smith Assistant United States Attorney Eastern District of Arkansas (501) 340-2628 Shannon.Smith@usdoj.gov The views expressed in this presentation are solely those of the author and should not be represented as the policy or opinion of either the United States Department of Justice or the United States Attorney for the Eastern District of Arkansas. 2 1
Overview of the False Claims Act 31 U.S.C. Section 3729-33 Provides for recovery of treble damages Do not need to prove specific intent to defraud Only need to show reckless disregard or deliberate indifference Lower standard of proof than criminal cases Reaches individuals, corporations and partnerships Corporations can be liable for acts of employees even if they did not know about the conduct if the conduct benefits the corporation Liability is joint and several Statute of limitations is 6 years from date of fraud or three years from date of discovery (not to exceed ten years) Targets the incentive for fraud: Money 2
FALSE CLAIMS ACT AND FERA On May 20, 2009, the Fraud Enforcement and Recovery Act of 2009 (FERA), P.L. 111-21, became law. Section 4 of FERA revised certain provisions of the False Claims ACT (FCA), 31 U.S.C. 3729-33. First significant revisions since 1986. Revisions focused on only a few sections of the statute. 5 Congress labeled the FCA amendments Clarifications to the False Claims Act to Reflect the Original Intent of the Law. The effectiveness of the FCA has recently been undermined by court decisions limiting the scope of the law and allowing subcontractors and nongovernmental entities to escape responsibility for proven frauds. In order to respond to theses decisions, certain provisions of the FCA must be corrected and clarified. S. Rep. No. 111-10, 111 th Cong., 6 1 st Sess. 10 (March 23, 2009). 3
Provisions of the False Claims Act 31 U.S.C Sections 3729-33 3729(a)(1) Any person who (A) knowingly presents or causes to be presented, a false claim or fraudulent claim for payment or approval. 3729(a)(1)(B) 3729(a)(1) Any person who (B) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim. 8 4
Pertinent Dates Although the changes made by FERA generally apply only to conduct that occurs on or after May 20, 2009, the date FERA was enacted, FERA expressly states that the changes to the former paragraph 3729(a)(2) apply to claims pending on or after June 7, 2008 (two days before the Supreme Court s decision in Allison Engine). 9 Conspiracy 3729 (a)(1)(c) 3729(a)(1) Any person who (C) conspires to commit a violation of subparagraph (A), (B), (D), (E), (F), or (G). 10 5
More effects of changes A violation of the new conspiracy provision will occur when a person conspires to violate any of the FCA s other liability provisions. Proof of a specific intent to defraud should not be required. It should be sufficient to show that the defendants agreed to violate one of the FCA s substantive liability provisions, which can include an agreement to act recklessly or with deliberate ignorance. 11 Failure to Deliver Property 3729(a)(1)(D) 3729(a)(1) Any person who (D) has possession, custody, or control of property or money used, or to be used, by the Government and, knowingly delivers, or causes to be delivered, less than all of that money or property. 12 6
Broad effect Intended to cover failure to deliver property. Little use in past. Eliminated wording about intent to defraud, willfully concealing, and requirement for receipts or certificates. May be used more since archaic language and willfully removed. 13 Reverse False Claims 3729(a)(1)(G) 3729(a)(1) Any person who (G) knowingly makes, uses, or causes to be made or used, a false record or statement material to obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government. 14 7
Changes to Reverse False Claims Eliminated to conceal, avoid, or decrease from existing statute. Eliminated intent language. Result is that a person violates the reverse false claims provision where he knows that he has received federal money to which he is not entitled including money that he initially was entitled to receive, but is no longer entitled to retain and does not return it. 15 FCA, FERA and PPACA What the large print giveth, the small print taketh away FCA with FERA change to 3729(a)(1)(G)- the reverse false claim PPACA Section 6402(d) receipt of overpayment must be reported within allotted time period see Kane case Can be a felony up to 5 years in prison, plus serious fines (up to $250,000 per individual or $500,000 per corporation) 16 8
Odds and Ends 3733(a)(1) Attorney General may delegate authority to permit FCA civil investigative demands (subpoenas). Information may be shared with Relator. 3732 Complaint, while under seal, may be served on coplaintiff, State or local government. 3731 Government s Complaint relates back to relator s filing date. 17 QUI TAM ACTIONS If a private party files the action, the complaint is filed under seal for at least 60 days while the United States investigates the complaint. The seal period can be extended for "good cause" 9
If the United States provides any portion of the money or property which is requested or demanded, or if the United States will reimburse anyone for any portion of the money or property which is requested or demanded the False Claims Act applies Any false invoice Claims to Medicare Cost reports Fraudulent attempts to redeem food stamps Federal insurance claims Fraudulent negotiations of Treasury checks 10
Federal Health Care Programs Medicare 55 million beneficiaries, $597 billion in expenditures for 2014 Medicaid 70 million beneficiaries, over $400 billion in expenditures TRICARE - DOD VA FEHBP Public Health Service Entities 21 General HCF schemes Overbilling for services rendered Billing for services not rendered Providing and/or billing for medically unnecessary services Failing to provide adequate care or services Billing for defective goods Program integrity concerns (Antikickback/Stark) 22 11
ANTI-KICKBACK ACT 41 U.S.C 51-58 Prohibits payment of any kind to or by a contractor for the purpose of receiving favorable treatment Double damages plus a civil penalty Part A Fraud Schemes Year-End Cost Reports Billing for costs unrelated to patient care (e.g. lavish entertainment, furs, jewelry) Disguising non-reimbursable costs as reimbursable costs (e.g. including Labor and Delivery in OR costs) Shifting non-medicare patients to cost report (e.g. nursery) Falsifying wage index (hours and salary date) to increase DRG payments 24 12
Continued. Shifting costs related to private-pay patients to Medicare (e.g. nursing salaries) Cost shifting to cost-based services Related parties billing at rates including exorbitant profits on supplies or services Overstating costs (e.g. fail to report rebates on supplies and equipment) Physician kickbacks included in cost report 25 Still going Double billing Billing both Part A and Part B for same item/service Billing Medicare when provider has been paid by another payor Billing the same cost twice on a single cost report (e.g. billing for management fees and then including same fees as A & G costs) 26 13
Last one! Making false statement to the carrier, fiscal intermediary or the OIG in furtherance of the scheme. 27 COMMON LAW REMEDIES Breach of Contract Unjust enrichment Mistake of Fact Conversion Breach of Fiduciary Duty Restitution Single damages 14
29 Questions??? 30 15