Inside the False Claims Act: A General Counsel’s View From Both Sides of the Table

Certain words in health care will stop any general counsel (GC) in their tracks. Sentinel events such as a wrongful death, traumatic injury, life care plan and wrong-site surgery come to mind. However, without sounding crass, mistakes happen even with the best care. The damage can be managed, and usually, there is insurance. However, notice of a False Claims Act (FCA) suit strikes a different kind of fear: the federal government on the outside, a whistleblower on the inside, exponential damages and penalties, criminal charges and, if that’s not enough, exclusion from Medicare or Medicaid, which is the corporate death knell for a health care company.This writing delves into the lifecycle of FCA litigation from the GC’s perspective and whether it matters if the Department of Justice (DOJ) intervenes.

The False Claims Act: Yesterday’s Law, Today’s Challenge

For background, the FCA is a federal law that imposes liability on individuals and companies that knowingly defraud government programs. President Abraham Lincoln enacted the law in 1863 to combat fraud by contractors against the Union Army during the Civil War. Amended over the years to incentivize whistleblowers, the DOJ continues to employ the FCA, 31 U.S.C. §§ 3729-3733, and annually lists its trophies in the billions of dollars.

Suit may be brought by the federal government or a private citizen (a whistleblower, who is called a relator under the FCA) in a qui tam. The suit is filed under seal in federal court, which allows the government to investigate confidentially and decide if it wants to intervene and take over the suit.

When a GC learns of an FCA suit, the burning question is whether the government intervened or declined. In the past, declination would have been grounds for a sigh of relief, if not a whispered celebration. As discussed later, the stats are no longer so comforting.

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Corporate Counsel