By David L. Haron
While fraud may be hard to define, most know it when they see it. Certainly that’s true of the Department of Justice (DOJ).

Since 1993, DOJ has made combating health care fraud its top white-collar-crime priority. DOJ describes fraud as “any scheme designed to obtain money or something of value under false pretenses”, and it’s especially interested in fraud that targets the elderly and other vulnerable populations as well as taxpayer-funded health care programs.

Fraud is not only illegal, but it also increases the cost of health care, reduces the quality of services — and, when the defrauded party is the government, raises taxes. According to government auditors, at least 10 percent of the nation’s annual health care budget is lost to fraud and abuse.

Partnering to combat fraud

DOJ relies on private citizens to help combat fraud. People who are aware of fraud can file suit under the whistleblower or qui tam provisions of the False Claims Act. Qui tam is short for a Latin phrase that means, “He who sues on behalf of the king, as well as for himself.”

The provisions — part of a law enacted in the Civil War era, and which Congress amended in 1986 — allow private citizens to help federal investigators by representing the United States in lawsuits against fraud perpetrators. As a result of their tips, these “relators” are entitled to between 15 percent and 30 percent of the funds recovered for the government.

Many whistleblowers repeatedly try to get their employers to recognize that illegal activity is occurring. Typically, they are ignored or patronized. After several attempts, they feel frustrated because their complaints go unheard. Often, they voluntarily resign from their jobs, or are labeled as “troublemakers” and fired. Usually, it is only then that they finally call a lawyer.

Profile of a whistleblower

Whistleblowers tend to have certain characteristics in common. Generally, they are dedicated, long-term professionals. They are experienced and knowledgeable about their jobs — and about the rules and regulations that apply.

Bright and inquisitive, they know the difference between right and wrong, and aren’t afraid to say so. They have a high level of integrity, and are genuinely concerned about the well being of others. Seeking the advice of a lawyer is uncomfortable for them; usually, it’s a last resort.

These employees generally have firsthand knowledge that fraudulent activity is occurring. For example, a nurse, who sees the doctor filling out 50 charts at a time, may look at the charts and say, “These procedures were never performed.”

Perhaps the physician is billing for services that were not provided, or providing services that are unnecessary. The nurse then complains, often repeatedly, maybe even calling the hospital to report it. Yet, nothing changes. Frustrated, she comes to a lawyer and asks, “What should I do?”

Many clients keep a diary that includes a chronology of suspect activities and names of witnesses, which helps to build the case.

The role of DOJ

Once a suit is filed, it remains under seal, meaning that neither the defendant nor the general public know about it. While under seal, DOJ reviews the information and decides whether to investigate the case. The investigative process can take months or years.

During this time, DOJ assesses the credibility of the complaint and the relator. Although the defendant still doesn’t know a qui tam complaint has been filed, DOJ has various methods of obtaining more information from the defendant.

DOJ may use a subpoena, issue a civil investigative demand, or obtain a search warrant. Any of these may raise a defendant’s suspicions, and he may begin to suspect a whistleblower lawsuit. This is a good time for the defendant to consult a lawyer and to consider cooperation. If DOJ decides to pursue a case, it moves forward with DOJ leading the way, while the relator and her lawyer play a supportive role.

At this point, the defendant is told of the complaint. He has the option of settling the case while it remains under seal. Or, if he refuses to settle, the complaint is unsealed and becomes part of the public record as a regular federal court case.

Qui tam settlements and rewards

The False Claims Act provides that any person who defrauds the federal government is liable to the government for triple damages (three times the amount of damage caused by the fraud), as well as for civil fines and criminal penalties such as imprisonment. In addition, the person can be excluded from participation in government programs.

The penalties are designed to serve as a deterrent. DOJ makes a point of publicizing qui tam settlement and judgments to discourage others from engaging in fraud.

Relators in qui tam cases receive anywhere from 15 percent to 30 percent of the government’s total recovery, depending on how much they assist DOJ in the case. DOJ would not be able to pursue the suits without help from whistleblowers.

Employee solutions

At first, many relators fear the consequences of reporting fraud. Yet, the failure to report perpetuates crime. So it’s important to take action.

As an employee, if one suspects fraudulent activity, she should first talk with an attorney — ideally one who specializes in litigation under the False Claims Act. He or she will advise the client to try to work with her employer and to either report the fraud directly to the proper authorities or to file a lawsuit.

If the conduct appears to be an isolated incident, it can probably be reported and left at that. Many employees, health care and insurance companies, as well as government agencies, have hotlines for this purpose. Contacting one of them may be sufficient.

However, for a far-reaching scheme, the client may want to consider filing a qui tam suit.

Employer solutions

As an employer, and a government contractor, such as a Medicare or Medicaid provider, the government requires one to be in compliance with government rules and regulations. The danger of not implementing a compliance program became considerably more grave in 1991 when the revised Federal Sentencing Guidelines for Organizations took effect.

These guidelines significantly increased the average fine imposed on organizations found guilty of violating criminal law. So, the risks are too great to ignore, and ignorance is not a defense that DOJ or the Act will tolerate.

To ensure that one stays on the right side of the law, one obvious step is to hire competent people to lead the compliance efforts, then make sure they receive continual education.

Second, every employee should receive training on how to comply with laws and regulations, as well as how to properly report non-compliance. Employees may feel more comfortable about reporting questionable circumstances if the organization has a mechanism, such as an internal hotline, that guarantees anonymity. However, it is crucial that the report results in serious investigation and corrective action.

Third, the compliance program must remain effective through random self-auditing of government billings. This will help identify a provider’s strengths and weaknesses. If there is a problem, it should not be ignored. The government won’t look favorably upon an organization that has implemented a compliance program, but doesn’t follow it.

The cost of a qui tam settlement can total millions of dollars — far greater than the cost of running a good compliance program.

David L. Haron is a principal at Frank, Haron, Weiner and Navarro, PLC. His practice includes all aspects of health care law, complex litigation, business transactions and real estate planning and development. As a qui tam lawyer, he has recovered more than $100 million from corporations and individuals who fraudulently received funding from the taxpayers.