New Justice Dept. policies, new AG may mute False Claims Act whistleblowers
HEALTHCARE INDUSTRY GROUPS have always hated False Claims Act whistleblower lawsuits.
These cases involve private individuals—usually knowledgeable insiders— accusing companies and individuals of defrauding federal programs in the hope of righting a wrong and collecting a share of the bounty for their work.
False Claims Act lawsuits can hit companies and individuals with damages up to three times the demonstrated losses to the government. Whistleblowers can pocket 15% to 30% of that recovery. The number of healthcare cases grew to 506 in 2018 from 291 in 2008.
But now, as William Barr takes the helm of the U.S. Justice Department as attorney general, industry groups and the defense bar have fresh hope that these cases will dwindle.
In 2001, Barr called the whistleblower law an unconstitutional “abomination.” As head of the Justice Department’s Office of Legal Counsel in 1989, he unsuccessfully pushed the department to file a constitutional challenge against the law.
The Justice Department last year issued two new policy memos with the goal of dismissing more whistleblower cases and narrowing the types of federal policy documents whistleblowers can cite to support their claims.
Since 2017, it has moved to dismiss about two dozen cases. Such motions previously were rare.
Those moves have made anti-fraud advocates nervous about the Justice Department’s stance on whistleblower cases going forward.
Barr’s “previous statements about the whistleblower provisions suggest he won’t be entirely unsympathetic to other types of constitutional challenges,” said Jaime Jones, global co-leader of the healthcare practice at Sidley Austin.
The U.S. Supreme Court recently accepted a case that could shorten and standardize the statute of limitations for whistleblowers to bring cases. That could shrink potential recoveries.
HHS’ Office of Inspector General has asked for comments on giving providers more leeway to pursue value-based and care-coordination initiatives without the risk of false claims actions. In response, the American Hospital Association requested two new safe harbors for such efforts.
“There’s definitely a potential confluence of factors that may filter out some of the less meritorious False Claims Act cases,” said Jonathan Feld, a former Justice Department attorney who now defends healthcare clients in FCA cases.
But attorneys for whistleblowers warn that these developments could hamstring whistleblower actions and open the door to increased fraud.
“There is concern about Barr,” said Peter Chatfield, a Washington, D.C., attorney with Phillips & Cohen who represents healthcare whistleblowers. His broader worry is that “the trend with the current administration is to be more hands-off, allowing bad-faith actors more leeway than they deserve.”
In another threat to the law, Intermountain Healthcare last month asked the Supreme Court to decide whether allowing whistleblowers to go ahead with FCA cases on their own violates the constitutional provision requiring the president, the attorney general or the courts to appoint officers who prosecute cases for the government. Observers consider the appeal a long shot, though its arguments may be attractive to Barr and the conservative justices.
Still, Justice Department officials praise the whistleblower law as a key deterrent to rip-offs of federal healthcare programs, in-
cluding kickbacks to increase hospital referrals, upcoding and misrepresenting electronic health record system’s capabilities.
In fiscal 2018, healthcare companies and physicians paid out $2.5 billion in FCA settlements and judgments, up from $2.4 billion the previous year. Of that total, $2.1 billion resulted from cases filed by whistleblowers, who received $301 million from the settlements.
Healthcare industry groups are particularly concerned about the growth of cases that the government declines to join. Those accounted for 77% of 264 unsealed cases last year, according to an analysis by the Mintz law firm, a percentage that has been consistent since at least 2012.
Attorneys representing whistleblowers say there are many meritorious FCA cases the government simply lacks resources to pursue. They note that government-declined cases have resulted in more than $2.4 billion in recoveries from 1986 through 2018.
Government-filed FCA cases have remained mostly flat, with a modest uptick in the last three years.
“The act encourages people to bring meritless claims, with the hope they can squeeze some money out of providers,” said M. Miller Baker, a McDermott Will & Emery partner representing Intermountain in its Supreme Court petition. “The result is that hospitals, which have very low margins, have to spend a lot of money defending these claims.”
That echoes what Barr said in his 1989 memo denouncing the whistleblower law: A whistleblower “is interested only in money, not in the faithful execution of the laws.”
Justice Department officials, however, have reaffirmed their support for the FCA, citing more than $59 billion in recoveries since 1986.
Last month, under close questioning during his confirmation, Barr said he would take no actions to undermine the whistleblower law.
In 2000, the Supreme Court upheld that whistleblowers have legal standing to bring FCA lawsuits. But the opinion left open the question of whether lawsuits violate the Constitution’s clause barring non-appointed individuals from prosecuting cases on behalf of the U.S.
Intermountain has focused on that point in its appeal. “The question is whether or not Congress can outsource the law enforcement authority of the United States,” Baker said. “That was previously articulated by William Barr during the first Bush administration.”
But other legal experts doubt Barr would try to upend what has been a lu- crative fraud recovery program for the government.
“It’s been a spectacular success, and I expect Barr now will understand that the actual legal experience with the law is very different than what he predicted in 1989,” said John Phillips, a Washington attorney who helped craft the whistleblower law.