Expected Impact of Enhanced Whistleblower Law

In the Press · July 13, 2009

New Federal Law Adds Punch to Whistleblower Statute: 
Health Care Groups May Feel the Impact

While allocating more than one trillion dollars to stabilize the economy, the United States Congress simultaneously passed the Fraud Enforcement and Recovery Act of 2009 (FERA) (Public Law No. 111-21).  This act protects those newly allocated funds against fraud and provides sweeping changes in the False Claims Act (FCA) ( 31 U.S.C. Sections 3729-3733), which now also includes highly unusual retroactive provisions.   

The act’s far-reaching changes and enhancements will be used to strengthen investigations and prosecutions into potential fraud committed against the United States government.  Health care groups may become a potential target, due to extensive reimbursements through Medicare and Medicaid.
 
In addition to the substantive changes in the law, FERA now provides substantial new funding and resources to the Justice Department, the FBI, the U.S. Postal Service, the U.S. Secret Service, and the Inspector General for the Department of Housing and Urban Development, for enforcement and prosecution activities.  Click here to read the full text of the amended FERA as passed by Congress and signed into law by President Obama.
 
The Lincoln Law
The FCA, sometimes called the "Lincoln Law" or "qui tam" statute, originally became law in 1863 and was targeted at halting dishonest providers to the Union military. Since that time, the law has resulted in the recovery of billions of dollars for the government. Under the FCA, a whistleblower who is an "original source" of information provided to the government, is entitled to obtain a percentage of the amount recovered.
 
Retroactive Effect
Congress is so intent on protecting the public’s fiscal heath, that it has made FERA effective retroactively to June 7, 2008.  This means that the new changes may affect cases under the FCA pending in court as of that date. This retroactivity provision is highly unusual for any law.
 
FCA Now Relates to Indirect Payment Claims
FERA also amends the FCA by removing the requirement that for liability to attach, a false claim must be presented to an officer or employee of the U.S. government. As amended, the FCA now defines claims more broadly to include any request or demand for money where government agencies rely on others to make payment decisions for them. For example, in health care reimbursements, government contracts are often administered by third parties. Now, a prosecution may ensue, even where third parties cut the initial checks for the government.
 
Reverse False Claims – Overpayments
In addition, Congress has strengthened the so-called "Reverse False Claims Act" provisions that address overpayments.  Failure to notify the government of an overpayment and to return it within a reasonable time frame can trigger criminal as well as civil liability. Under the new law, an overpayment of any obligation by the government is actionable even in the absence of a false statement or record.
 
No Need to Prove Intent
Violations of the FCA can occur when two parties conspire to violate the law, but Congress has removed the provision requiring proof of intent. This means that a violation of the law can now occur when someone acts recklessly or with deliberate indifference.
 
Tougher Retaliation Protections
Retaliation provisions of the FCA also have been extensively broadened. Now, sanctions against retaliation may apply when a whistleblower reports a violation to the company, even when the case has not been filed in court. In addition, the retaliation provisions of the FCA now apply to retaliation against a whistleblower’s family.
 
Broader Use of Civil Investigative Demands
Important changes have also been made in the manner in which the government may conduct investigations.  FERA now allows the United States Attorney General to delegate authority to issue "Civil Investigative Demands" (CIDs), which are requests for documents, interrogatory responses and/or testimony in order to facilitate investigations of FCA violations.  The freedom to use CIDs by individual U.S. Attorney’s Offices, combined with the increased funding for prosecution, is expected to result in more claims by the government to pursue fraudulently obtained government funds.
 
Now is the time for all health care organizations to carefully review existing processes and protocols to ensure that they are in compliance with all new and existing regulatory procedures.