Editor: Brad, please describe Odyssey HealthCare.
Bickham: Odyssey HealthCare is the nation's largest provider of hospice services to terminally ill patients and their families. We take care of over 12,000 patients and their families daily and have approximately 6,500 employees. We operate coast to coast with hospices in 29 states. Our geographic spread is immense. We have programs ranging from Boston in the Northeast to Florida and then into California and up into Oregon. We have approximately 95 Medicare certified programs counting by provider numbers, which translates into around 140 to 150 physical locations.
Editor: Gary, what is the current status of the recently enacted and pending False Claims Act legislation?
Eiland: On May 20, 2009, President Obama signed into law the Fraud Enforcement and Recovery Act of 2009 (FERA), that was passed overwhelmingly by the House and Senate. Even more extensive changes to the FCA are being proposed in Senate Bill 458 (The False Claims Clarification Act), which is still in the legislative process, and House Resolution 1788 (The False Claims Act Correction Act), which has gone through committee and has been recommended for consideration by the House.
FERA contained a number of significant FCA changes. It reversed a U.S. Supreme Court ruling that held that to be liable under the FCA, subcontractors of government contractors must intend to get a false claim paid and approved directly by the government. This makes subcontractors liable for knowingly committing fraud even if the fraud is committed indirectly through another contractor, removing the requirement that the claim be presented to an officer or employee of the federal government. As a result, healthcare providers can expect to see Medicare Advantage and Medicaid claims included among those subject to federal FCA allegations.
Among its other measures, FERA revised the language of the FCA, attaching liability whenever a person makes, uses, or causes to be made or used, a false statement "material to" a false claim. FERA broadly defined the term "material" as the natural tendency or capability to influence payment.
Editor: Brad, how will the combined effects of FERA, S. 458 and H.R. 1788 increase the costs of providing hospice care?
Bickham: Notwithstanding that reducing healthcare costs is a national priority, the three pieces of legislation Gary mentioned could significantly increase our litigation costs by (1) eliminating particularized pleading, (2) significantly increasing the available sources of information on which litigation may be based, (3) expanding the universe of those entitled to bring a qui tam suit by including government employees, (4) extending the statute of limitations, and (5) increasing monetary exposure.
False Claims Act cases are typically filed by qui tam relators bringing a law suit on behalf of the government. Relators don't usually add much legal support in processing the case, because their goal is to have the government take over the case. If the government decides to take over the case, the responsibility for running the case falls on the government.
When the government takes control of the case, the qui tam relator continues to be entitled to a percentage of the award. The percentage is negotiated between the government and the qui tam relator. Since particularity is not required by H.R.1788, relators are encouraged to file on the basis of a very limited amount of diligence in the hope that the government will take over the suit and do virtually all of the legal and discovery work - the relator can just sit back and await the outcome while collecting a percentage of any recovery.
Editor: Brad mentioned that he is concerned that litigation costs will be driven up by H.R. 1788's elimination of the current requirement that qui tam relators plead fraud with particularity.
Eiland: If the obligation for the qui tam relator to plead fraud with particularity is removed, exposure to "fishing expedition" discovery requests is greatly increased. If the FCA statute of limitations is also extended from six to ten years, plaintiffs will have up to ten years to gain information concerning the hospital's claim for services by searching for errors or other discrepancies and need not meet the particularity standards now required.
Bickham: Fishing expeditions should be discouraged, particularly those that burden the defendant with the cost of discovery. You are already dealing with a somewhat unequal playing field because these law suits are filed under seal and the broad subpoena powers that the government already has. Once the proceedings are unsealed, the government may choose not to intervene but to allow the plaintiffs to go forward with a lawsuit. In the past a decision by the government not to intervene often resulted in the case being abandoned by the plaintiffs. Eliminating the requirement that fraud must be pleaded with particularity in qui tam suits may result in more cases being pursued by plaintiffs after a decision by the government not to intervene with the hope that the discovery burden will force the defendant to settle even if the lawsuit lacks merit. Eliminating the requirement to plead fraud with particularity will make it more difficult to get rid of a meritless lawsuit in the early stages of litigation.
Editor: Brad is also concerned that more litigation would result from expanding the sources of information on which litigation might be based. Both H.R. 1788 and S. 458 would eliminate the defendant's ability to raise the public disclosure bar, thereby allowing any qui tam relator to use public information to bring a qui tam case.
Eiland: Currently, a qui tam action based on publicly available information cannot proceed if the relator is not an "original source" of the information supporting the FCA allegations. The proposed change would abolish a provider's ability to rely on the public disclosure bar to dismiss a qui tam action. Given their vulnerability to FCA actions, healthcare providers will be forced to defend numerous parasitic lawsuits. Hospitals and other providers file Medicare cost reports and multiple Medicare claims. That information is accumulated each year in a MEDPAR data file that can be purchased. As a result of "data mining," information uncovered by potential whistleblowers from those filings has already produced significant FCA settlements.
Bickham: It will be interesting to see how that plays out. It could lead to a significant increase in False Claims Act liability cases and associated litigation costs.
Editor: Another of Brad's concerns was that litigation cost would be driven up because the universe of those entitled to bring qui tam suits would be expanded by S. 458 to include government employees.
Eiland: Under the proposed amendment, auditors and government employees could file FCA cases based on information that might come to their attention during an audit or as part of their official capacity. When and if the amendment is adopted, such employees will face a conflict of interest in deciding whether to bring a potential false claim to the attention of their superiors and to The Center for Medicare and Medicaid Services (CMS), or to withhold that information and file a qui tam False Claims Act lawsuit.
Bickham: As a taxpayer, I question whether those being paid by the government to do a job should be allowed to bring a lawsuit to get a share of any potential recovery. It is an inherent conflict of interest because it puts the government employee in a position where he or she is faced with a decision between bringing a situation to a superior's attention or not sharing that knowledge and benefiting personally. It just doesn't smell right.
We strive to have a good working relationship with CMS and its various contractors, including the sharing of information and being proactive in obtaining answers to questions that we may have. The proposed amendments will create a concern that if we confide in a government employee or contractor in the future, we may be setting ourselves up for a False Claims Act type-liability case brought by that government employee or contractor.
I am also concerned that the precedent that is being set by encouraging government and provider employees not to bring a potential problem first to the attention of their superiors will also undermine corporate compliance efforts. The key to a successful corporate compliance effort is to have people who can spot a developing compliance problem and see that it is addressed before an actual compliance failure occurs. If in-house counsel, compliance officers, and staff see an opportunity to benefit personally if a compliance failure actually occurs, they may be tempted just to let it happen.
Most healthcare providers try hard to follow the rules, and we spend a lot of money and resources on internal compliance. We expect the individuals involved in that function to bring matters to our attention first so that we can address them rather than keeping them secret and seeking to aggrandize themselves personally.
Editor: Brad was concerned that litigation costs would also be increased by requiring the defendant to bear the plaintiff's litigation costs.
Eiland: Defendants' costs are further increased because the proposed amendments provide that they must bear successful plaintiffs' recognized litigation costs. Historically, the DOJ has argued that the FCA multiple damages provisions were not punitive since multiple damages were permitted, in part, to recompense the government for its costs of recovery. Costs of recovery would now be paid separately, which may make the multiple damages provisions subject to further challenge as excessive under the U.S. Constitution.
Bickham: You get the feeling of piling on with the proposed amendments. You already have the per claim penalties that usually dwarf the amount of the actual claim that you submitted. You could file a claim for a couple of hundred dollars and potentially be liable for damages with the penalties in excess of ten thousand dollars.
Editor: Finally, Brad is concerned about the cost implications of extending the proposed statute of repose to eight years as proposed in H.R.1788 or to ten years as in S. 458?
Eiland: In the healthcare industry, this is a significant issue because multiple individual claims would not be timely finalized and remain open somewhat indefinitely. Normally, Medicare cost reports and claims are subject to three- and four-year reopening periods, respectively. Extending the FCA statute of repose from six years to eight or ten years would extend the period during which the finality of healthcare claims is unresolved, further increasing FCA risks and exposure.
Bickham: The proposed amendments lengthening the statute of limitations will likely increase the cost of discovery. The longer statute of limitations period will result in providers revisiting their document retention policies, likely increasing storage costs. E-discovery logistics and costs are already extensive for a six-year period; they will exponentially increase at eight or ten years due to storage and retrieval costs and related issues.
Published August 7, 2009.
