For the first time, the guidelines for evaluating state false claims acts have been updated. The Office of the Inspector General for Health and Human Services (OIG) recently released an updated set of state False Claims Acts guidelines, providing details as to how the laws will now be evaluated by the agency.
While a small number of states already had their own state false claims acts in place, the rapid increase in states with new false claims act statutes is partially due to federal legislation that was passed in 2005. Known as the Deficit Reduction Act of 2005 (DRA), this law gave states financial incentives to establish their own state false claims act laws, so long as they enacted anti-fraud legislation that was modeled after the federal False Claims Act. Those states that the OIG found to have qualifying laws received a 10 percent increase in their share of any monetary recovery under such laws.
Since passing the DRA, a total of 28 states have enacted legislation that has been approved by the OIG. During the same period, however, the False Claims Act was amended by the Fraud Enforcement and Recovery Act of 2009 (FERA), the Affordable Care Act (ACA) and the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act). These three acts changed several key provisions of the federal False Claims Act, essentially requiring that all previously approved state laws be revised in order to retain their approved status.
As a result of the changes, the OIG was forced to begin analyzing each state’s compliance with the False Claims Act amendments. They also provided each state with a two-year grace period, during which OIG-approved state acts would continue operating under a “compliant status,” pending amendments for re-submission.
Understanding the New Guidelines
The OIG released the “Updated OIG Guidelines for Evaluating State False Claims Acts” on March 15, 2013. These updated guidelines replace the original version that was released in 2006. The 2013 Guidelines describe how the OIG will determine if a state’s false claims act law satisfies the requirements of the Social Security Act. Each state must meet these requirements in order to receive the 10 percent monetary increase of Medicaid-related false claims act recoveries.
Additionally, the 2013 Guidelines provide more specific information about the OIG’s review process for evaluating state false claims act laws. Unlike the 2006 Guidelines, the new 2013 Guidelines include all three amendments to the federal False Claims Act that have occurred since Section 1909 of the Act was passed. The three False Claims Act amendments contained in Section 1909 significantly modified:
- The bases for False Claims Act liability
- Expanded the rights of qui tam whistleblowers
- Added a requirement that civil monetary penalties must include adjustments under the Federal Civil Penalties Inflation Adjustment Act of 1990
Under the new 2013 Guidelines, the OIG must determine (along with the consultation with the U.S. Attorney General) whether a state’s False Claims Act statute:
- Establishes liability to the state for false or fraudulent claims that relate to Medicaid program expenditures and reimbursements
- Contains provisions that are, at the very least, just as effective in rewarding and assisting qui tam actions for false or fraudulent claims as those that are laid out in the federal False Claims Act
- Contains a requirement for filing a qui tam action under seal for 60 days with review by the State Attorney General
- Imposes civil penalties that are not less than the amount of the civil penalties authorized under the federal False Claims Act
Overall Effects for States, Medicaid Providers and Whistleblowers
It is clear that these updated guidelines expand provider liability under the False Claims Act, which will essentially make it easier for whistleblowers to bring cases against healthcare providers. In addition, medical providers may now be facing a system that is more regulated, as states begin putting forth increased efforts to prevent fraudulent activity within the Medicare industry.
This regulation, along with an attractive financial incentive, could encourage states to amend their false claims act statutes to comply with the updated guidelines. This is especially true for those states that are facing economic difficulties and budget cuts to government-sponsored programs like Medicaid. For example, the potential to share in high-dollar False Claims Act recoveries may help to bolster those states that have not yet enacted False Claims Act legislation to do so. Additionally, these new guidelines may help whistleblowers and states during a qui tam lawsuit. For example, if the federal government decides not to intervene in a qui tam suit, the potential of sharing an increased amount of damages may encourage states to independently join False Claims Act cases they may have previously declined.
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