What Is The False Claims Act in Healthcare

The False Claims Act (FCA) is the most successful anti-fraud law in the United States. This federal statute was enacted to protect the public fisc by encouraging private citizens to expose fraud involving federally funded contracts or programs, such as Medicare and Medicaid. 

The FCA also supplements the limited prosecutorial and investigative resources of the federal government. Congress specifically crafted and later amended the FCA so that private citizens and the Government have an effective weapon for fighting dishonest corporations that pilfer government funds. The healthcare and defense industries have traditionally been the top two areas under the FCA. 

The  FCA has historically also been referred to as the  “Lincoln Law,” “Informer’s Act,” or the “Qui Tam Statute.” Each of the terms describes an aspect of the False Claims Act definition. False Claims Act cases have returned over $70 billion to the federal government since Congress strengthened the FCA in 1986. 

READ THE FULL FCA STATUTE: The False Claims Act Text

The Federal False Claims Act was originally enacted by the United States Congress in 1863 under the administration of President Abraham Lincoln, as a response to widespread abuses by government contractors against the Union Army during the Civil War. The Act was modified in 1943 by setting up certain restrictions on relators. Such restrictions in the 1943 amendments, and subsequent unfavorable case law, led to the decreased use of the qui tam whistleblower provisions because the incentives for honest citizens and their attorneys to step forward and provide resources were lacking.

However, as more and more fraud went undetected and unaddressed (especially in the defense industry), the public and Congress became outraged. Stories of outrageous fleecing of our Government, like hammers that cost the military $5,000 each, were becoming more common. In 1986, the law was amended to strengthen the incentives for citizens to expose fraud as qui tam relators. The amendment worked – since the revitalization in 1986, the number of qui tam lawsuits filed has greatly increased each year, and more and more attorneys and their law firms have become familiar with the law. 

The False Claims Act intent and its qui tam whistleblower provisions for whistleblower protection have been so successful that the defense, healthcare, and other industries have periodically been behind substantial efforts to legislatively weaken the False Claims Act and its qui tam provisions. 

LEARN MORE: History Of The False Claims Act

Over the years, the legal requirements involving knowledge and intent sufficient to attach FCA liability have evolved, but the basic trigger has remained the same – namely, companies knowingly defrauding the Government to obtain government funds. Most False Claims Act lawsuits call upon the Qui Tam Whistleblower Provisions of the FCA and involve Government Healthcare Programs and include False Claims Act Medicare and Medicaid lawsuits.

The Qui Tam provisions encourage private citizens and their counsel to file sealed lawsuits in federal court that seek recovery of government money obtained by fraud, or more specifically, false claims. This very powerful law not only affords rights to whistleblower litigants but provides essential checks and balances against government inaction. 

Employees of healthcare providers who have the moral fortitude and courage to file qui tam False Claims Act Healthcare lawsuits are generally eligible to receive a share of the recovery, known as a whistleblower reward.

LEARN MORE: Qui Tam Meaning

The False Claims Act was amended again in 2009. Prior to the Amendments, the FCA’s anti-retaliation provisions  were overly restrictive in its protection of healthcare company employees. Under the prior statutory language and case law, employees (and others) could only pursue anti-retaliation actions in the rare instances when their employer was on notice that they were intending to file a qui tam action. The 2009 amendments broadened the statutory language, allowing the right to relief not only on pursuit of a qui tam case, but on any conduct by or on behalf of the employee which would tend to stop FCA misconduct.

This broader protection was the focus of an Ohio district court case, which dissected the differences between the pre- and post-2009 FCA anti-retaliation provisions. In that case, the plaintiff was a former corporate compliance vice president who brought an FCA anti-retaliation action against her former employer, Holzer Health Systems.

According to the plaintiff, she was fired soon after commencing an investigation into allegations that employees were disproportionately using the services of an ambulance company, Life Ambulance, in exchange for gifts and luncheons paid for by Life Ambulance.

The defendant cited a Sixth Circuit decision, Yuhasz v. Brush Wellman, Inc., which concluded that performing ordinary and expected employment duties of informing an employer that certifications were illegal and might incur liability under the FCA, failed to provide the employer with notice of protected activity. The court rejected the defendant’s argument, noting that Yuhasz pre-dated the 2009 FCA amendments.

Under the amended FCA, the anti-retaliation protection now properly extends to healthcare employees who are fired for trying to stop FCA violations, regardless of employer knowledge.

The False Claims Act works, among other reasons, because whistleblowers bring important inside information to the government’s attention.  The FCA incentivizes whistleblowers to expose this valuable information. 

False Claims Act Law Firms work with the whistleblower client to present evidence of fraud to the government in a way that facilitates easy understandability and a successful prosecution. False Claims Act attorneys are particularly interested in False Claims Act Healthcare Cases dealing with violations of the FCA and involving additional factors, such as patient harm or lack of efficacy.

Typical cases brought under the qui tam provisions of the  False Claims Act include at least one company with relatively deep pockets. Smaller companies that may be defrauding the government often dissolve with little to no assets or declare bankruptcy. The estimated amount of damages from the false claims, whether there was patient harm, and whether there were kickbacks involved are just some considerations when whistleblower firms evaluate potential representation of a healthcare whistleblower.

The most common violations under the FCA, in legalese, are as follows::

The False Claims Act is intended to reach all fraudulent activity resulting in government monetary damages. A false claim may take many forms, the most common being a claim for goods or services not provided or knowingly provided in violation of contract terms, specification, statute, or regulation. Each and every claim submitted under a contract or other agreement which was originally obtained by means of false statements, falsities, or in knowing material violation of any statute or applicable regulation, constitutes a false claim.

LEARN MORE: What Is a False Claim?

Whistleblowers and counsel bring Qui Tam cases against parties engaging in Healthcare Fraud against the Government. The defendants in Qui Tam cases are often in the  healthcare industry companies, including:

LEARN MORE: Defendants in False Claim Act Lawsuits

False Claims Act healthcare cases have returned over $48 billion to the federal government since 1988. The vast majority of the recoveries were the result of courageous whistleblowers who stood up against their dishonest employers and filed healthcare fraud qui tam lawsuits.

Throughout the legislation’s history, lobbyists for industries subject to False Claims Act prosecution, and in particular, the healthcare industries and defense industries, have aggressively pushed to derail aspects of the FCA qui tam mechanism. Fortunately, Congress has refused to ignore the overwhelming effectiveness of this important fraud-fighting weapon. 

Taxpayers Against Fraud reminded Congress and the public about the real-world success of the Act when it released its report, The Importance of Whistleblowers to Reducing Fraud Against the Federal Government and Recovering Funds for Taxpayers.(1) Authored by economist Jack Meyer of Health Management Associates, the report was a response to a paper published by the defense-oriented U.S. Chamber of Commerce.

The United States Department of Justice announced that False Claims Act recoveries through settlements and judgments exceeded $5.6 billion in fiscal year 2021, marking the second-largest amount recorded since 2014.(2) Of the $5.6 billion recovered in FY2021, over $5 billion came from defendants in the healthcare industry resulting from allegations involving unnecessary or inadequate care, paying kickbacks to health care providers to induce the use of certain goods and services, or overcharging for goods and services paid for by Medicare, Medicaid, and other federal health care programs.

Of particular note, Whistleblowers filed 598 qui tam lawsuits for fiscal year 2021, with the Justice Department reporting settlements and judgments exceeding $1.6 billion in these and earlier-filed suits — a testament that whistleblowers have brought the lion’s share of the recoveries. 

The False Claims Act is particularly effective at recovering stolen health care dollars due to Medicare fraud. Over $5 billion, or approximately 89%, of the recoveries for FY2021 were from actions alleging healthcare fraud against federal healthcare programs. The most egregious violators were hospital systems, dialysis chains, and pharmaceutical manufacturer fraud, accounting for the bulk of the billions of all healthcare dollars returned to the federal government. 

As these numbers indicate a steady increase over previous years, it follows that qui tam recoveries in the past five years account for half the settlement dollars recovered under the modern False Claims Act since its inception in 1986.

For False Claims Act Medicare violations and other healthcare fraud, reporting directly to the Centers for Medicare & Medicaid Services (CMS) has failed thus far to result in significant rewards for whistleblowers. Although CMS has a Medicare Incentive Reward Program (3), it will only reward whistleblowers up to 10% of the amount recovered, or a maximum amount of $1000, whichever is less. 

No such cap exists in the False Claims Act, which provides that successful whistleblowers are entitled to 15-30% of the total recovery from the Defendant, whether through a favorable verdict or settlement. Tens, if not hundreds of millions, are at stake in most False Claims Act cases brought by us and by most of our colleague qui tam plaintiff law firms. 

Notably, from 1986 through September 2021, the total amount of whistleblower rewards paid to relators, pursuant to the False Claims Act, was approximately $8.1 billion. Most of that amount was paid specifically to healthcare fraud whistleblowers. Whistleblowers continue to make crucial contributions to the fight against fraud and, as such, should be rewarded in False Claims Act Healthcare Cases.