THE FALSE CLAIMS ACT AND QUI TAM ACTIONS

by Madeleine P Cosman, PhD, Esq

Qui tam legal actions are federal whistle-blower law suits for False Claims against the government prosecuted under the venerable Civil War False Claims Act. That Act was created in 1863 to catch fraudulent armament suppliers. Medicare actively encourages these lawsuits. Qui tam actions are a major method for stimulating government investigation of physicians. Four groups have excellent incentive to maliciously report an innocent doctor: q a disgruntled fired employee q an envious medical competitor q a divorcing spouse q an unhappy or mischievous patient

A qui tam brought by an employee or competitor snitch can be swift, sweet revenge. A spouse's qui tam action usually is faster, more devastating, and more lucrative than contested divorce litigation. A patient's suit for the physician's alleged billing abuse is easier and cheaper than a malpractice suit that requires proof of negligence or demonstration of damage

In a False Claims Act qui tam no patient is hurt. The victim of the crime is the Medicare program. So standards of proof are comparatively easy to meet. If the doctor performs the medical or surgical act and bills for it, the doctor is liable for prosecution. Any billed service absolutely legitimate and proper can be turned to potential malevolent use in a qui tam.

Medicare has special telephone lines to enable patients to report their doctors they believe overcharging or otherwise fraudulently billing the government. AARP gave its elders Medicare Fraud Fighters Kits. Each AARP participant received a Sherlock Holmes-style magnifying glass, highlighter, pen, pad, and refrigerator-magnet with the special Fraud-Fighter's 800 number. Each senior was enticed by a token $1,000 bounty as preliminary informant.

A False Claims Act qui tam is a superb envy engine for generating profit. A qui tam whistle-blower can collect up to 30% of any penalty. An innocent doctor will prefer to admit to a civil infraction and pay a penalty rather than risk the time, expense, and public dishonor of a criminal court case. Money almost always rewards the qui tam reporter Any act involving payment of Federal funds, directly or indirectly, yields liability even without intent to defraud. Each act generates $10,000 in penalty plus triple damages, the "damage" being the amount the government paid the physician for medical service.

That may not sound like much until you do the math. In a current case, a busy orthopedist specializing in hand, elbow, and shoulder injuries performed during three years a minor arthroscopy procedure on 300 patients' elbows for which he charged $250 each. His income from these patients was $75,000 for services they requested, he provided, and each and every elbow but three benefited from the therapy. Falsely accused by a fired office manager who intentionally used a wrong CPT billing code, the orthopedist is trapped. The realtor is the title for the whistleblower who rats out the target doctor. This realtor stands to make good money, expecting a quarter to a third of the government's take. It's easy arithmetic. Each patient's elbow worth $10,750 ($10,000 penalty plus triple $250) multiplied by 300 patients or "incidents" yields a "fraud" of $3,225,000. For a small effort the realtor's likely large reward is one million dollars. In larger cases, the take is more stunning.

In 1989, three years after the old False Claims Act was rejuvenated, a New York practitioner named Irwin Halper was subjected to the arguable double jeopardy of separate criminal and civil prosecutions for 65 filed claims for $12 each for payments for medical tests. The Government insisted he should have charged $3 per patient. The total amount in controversy was $585. Halper was convicted, fined $130,000, and sentenced to two years in prison. That seemed outrageously disproportional in 1989. Nowadays it seems paltry punishment compared to meteoric fines and harsh prison sentences, such as psychiatrist Dr. George Krizek's White Coat Crime agony in which his alleged overpayments of $245,392 generated a possible penalty of $81,000,000. That case took 12 years to litigate and nearly went to the Supreme Court.

Qui tam is the short form for the Latin phrase popular in 13th century England: Qui tam pro domino rege quam pro se ipso in hac parte sequitur, meaning he sues for the state, for the king, as well as for himself. President Lincoln signed the Civil War False Claims Statute of 1863 to enable private citizen qui tam law enforcement for the government. People described the law as "setting a rogue to catch a rogue." The Justice Department did not yet exist that could prevent unscrupulous armaments manufacturers from overcharging and defrauding the public fisc.

Any person or any corporation receiving government funds, directly or indirectly, is liable for five accusations, the first being the most popular: q mischarge q false negotiation q false certification of entitlement q substandard product or service q reverse False Claim

Essentially a quaint and quiet old law until 1986, the False Claims Act was reinvigorated with amendments making it easy and lucrative to use. In 1987 there were 32 qui tam cases. In 1998 cases escalated to over 800 yielding about $800 million dollars. Between 1986 and 1997 a total over 2000 qui tam cases had been filed. Medical cases litigated in 1998 numbered 287 and represented 61% of the total annual qui tams. In 2002 there were approximately 400 cases and hefty medical awards totaled well over a billion dollars.

Doctors are the most common professionals attacked under False Claims Act qui tams. But the law itself inflicts excessive fines on anyone it catches. Mr. Bajakajian was on trial for False Claims because he failed to file a customs report on the $357,144 of his own money he took out of the country to repay a valid debt. His penalty was the total amount he failed to report: $357,144. (Bajakajian, Supreme Court, 1998) An angry apartment renter with subsidized low rent reported his landlord for criminally overcharging by $31.96 per month. Since the landlord endorsed 51 rent checks with the alleged annual overcharge of $1,630, he was stuck with a penalty of $290,000 and peril to his right of Due Process. (Gilbert Realty, Michigan, 1993). Dangerous literality in False Claims litigation prompted the court in U.S. v. Data Translation, Inc. (First Circuit, 1992) to amusing analogy characterizing strict, unintelligible governmental discount requirements, easy to violate and impossible to obey under the False Claims Act. Government discount law resembles an inflexible rule for a federal park forbidding animals in the park. A False Claims Act qui tam interpreting the rule literally could convict a parent with a toddler carrying a teddy bear, swatting a fly, and munching a chicken sandwich.

A dependable, comprehensive book on FCA is John T. Boese, Civil False Claims and Qui Tam Actions (New York, Aspen Law, 2000).