The U.S. Department of Justice (DOJ) got a new arrow in its quiver, allowing it to exponentially increase its ability to prosecute certain types of healthcare fraud.
While the False Claims Act (FCA), with its qui tam provisions empowering whistleblowers to initiate lawsuits, will remain DOJ’s primary tool to prosecute fraud perpetrated against federally funded health insurance programs like Medicare, Medicaid, Tricare, and the Indian Health Service, a new whistleblower program – the DOJ Corporate Whistleblower Awards Pilot Program – seeks to pay whistleblowers for information about federal healthcare offenses and related crimes involving fraud against private health insurers, patients, investors, and other non-governmental entities.
According to Deputy Attorney General Lisa Monaco, one of the main purposes of the Pilot Program is to close gaps left in the existing group of whistleblower reward programs, noting that while these programs (like those falling under the umbrella of the FCA) have proven indispensable, “they resemble a patchwork quilt that doesn’t cover the whole bed.” In enumerating the subject areas where DOJ is soliciting whistleblower information under the new program, DOJ identifies categories of misconduct related to healthcare: federal offenses and related crimes involving private healthcare benefit programs, fraud against patients and investors in the healthcare industry, and a catch-all provision, seeking information about other federal violations related to healthcare not covered by the FCA. As regular RACmonitor readers and Monitor Mondays listeners know, the False Claims Act only applies when the federal government is the defrauded party. However, if an unscrupulous hospital is overbilling a commercial insurer, or a greedy dentist is overcharging their patients, the law does not apply. That’s where the new program seeks to fill gaps.
To minimize potential overlap between qui tam cases under the FCA and criminal whistleblowing under the new program, DOJ notes in its guidance that its focus is on healthcare matters where the overwhelming majority of claims and fraud loss involved non-governmental payors and other victims.
To be eligible for an award, the whistleblower’s information must lead to successful forfeiture exceeding $1 million in net profits, in connection with a prosecution, corporate criminal resolution, or civil forfeiture action related to the corporate misconduct. Without a successful forfeiture, a whistleblower will not be able to receive an award. Under the Pilot Program, a whistleblower may receive up to 30 percent of the first $100 million in net forfeitures, plus up to 5 percent of net forfeitures between $100 and $500 million.
In creating this program, DOJ appears to have been inspired in part by the existing whistleblower reward programs within the departments of insurance for the states of California and Illinois. These programs reward whistleblowers for filing cases where commercial health insurance fraud is at issue. California and Illinois have recovered tens of millions of dollars as a result of these programs, and DOJ seeks to do the same. By focusing on fraud against private insurance programs, DOJ is significantly expanding its healthcare enforcement efforts, and in so doing, raising the stakes for companies that fail to heed whistleblowers’ internal warnings about fraud against private insurers, patients, and other non-governmental victims.
In another noteworthy development in the whistleblower world, thanks to Dr. Ronald Hirsch, I also want to discuss a FCA case launched by a whistleblower in federal district court in New Jersey against Homecare Homebase, LLC, the developer of software for home-based care, which joins a number of recent cases finding that software providers can be liable for submitting false claims based on their software design. In a recent court decision in the case United States ex rel. Schieber v. Holy Redeemer Healthcare System, Inc., a New Jersey district court judge declined to dismiss the whistleblower’s qui tam case, holding that software billing company Homecare Homebase could be liable for causing the submission of false claims to the Centers for Medicare & Medicaid Services (CMS) by allegedly intentionally designing software that prompted its home health provider users to upcode the number of necessary therapy treatments, thereby increasing their Medicare reimbursements.
According to whistleblower Mark Scheiber, a physical therapist and former employee of Holy Redeemer Healthcare System, a user of Homecare Homebase’s software, Homecare Homebase caused home health providers like himself to upcode service claims because it automatically and repeatedly prompted the provider to select a higher number of necessary visits, even after they already had input the number of necessary visits into the software. The court found that the complaint properly alleged that a software company can be liable if its conduct was a substantial factor in the submission of false claims, and that allegedly intentionally designing an application to encourage upcoding was sufficient to satisfy the “substantial factor” causation standard.
For healthcare tech companies, the message is becoming increasingly clear: be aware that features built into your software code can readily cross the line from education into fraud.
Federal officials announced this week that one of the nation’s largest health insurers has agreed to pay $117.7 million to resolve fraud allegations. The False
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