In a series of program announcements and proposed rulemakings, the Department of Health and Human Services Office of Inspector General (OIG) and Centers for Medicare and Medicaid Services (CMS) rolled out several important updates and refinements to the anti-fraud tools at the disposal of whistleblowers and government investigators. These new guidelines provide a variety of financial incentives for state governments, private whistleblowers, and even Medicare beneficiaries to report and investigate allegations of fraud and program abuse. When taken in combination with the almost daily release of new qui tam complaints against both providers and manufacturers, these announcements suggest that the industry should be prepared for yet another year of aggressive enforcement activity.
Most notably, the OIG recently implemented new standards for determining whether a State’s false claim act is “at least as effective” as the Federal False Claims Act (FCA) in combating false or fraudulent Medicaid claims. Since the passage of the Deficient Reduction Act (DRA) in 2005, any state that has enacted a false claims statute that meets this standard after review by the OIG (in consultation with the Department of Justice) is eligible to collect an additional 10% of any Medicaid funds recovered in an action brought under the statute. These enhanced financial recoveries were intended to expand the pool of private attorneys general by giving states and relators an incentive to investigate and pursue allegations of fraud involving smaller potential recoveries (such as nursing home quality of care claims).
To date, twenty-eight states have submitted their false claims acts for OIG review. Although the OIG’s standards for reviewing state false claims acts were fairly well-established, recent revisions to the FCA under the Fraud Enforcement and Recovery Act of 2009, the Patient Protection and Affordable Care Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act raised questions about whether state statutes that were previously approved by the OIG will continue to qualify.
In order to answer these concerns, the OIG released a new set of guidelines that it will use when evaluating state statutes. These guidelines include several important changes from the OIG’s previous discussions that both providers and manufacturers will need to consider. For example, state false claims acts must now mirror the federal FCA’s expanded definition of a “claim” and include the retention of an overpayment in the conduct that could lead to reverse false claims liability. State statutes must also include enhanced whistleblower protections and a broader “original source” exception to any public disclosure bar.
The OIG’s new guidelines, if fully embraced by state legislatures, are likely to usher in a new round of whistleblower complaints. Other recent changes to the government’s fraud reporting programs will further accelerate this trend. Under a proposed rule published on April 29, Medicare beneficiaries or other individuals who provide tips about suspected fraud that lead to the successful recovery of funds may be entitled a reward of up to $9.9 million, depending on the size of the government’s recovery. This rule would represent a dramatic change to CMS’s Incentive Rewards Program, which currently offers a maximum award of just $1,000 for actionable information.
This change follows on the heels of a new funding opportunity to support the expansion of Senior Medicare Patrol (SMP) activities. This opportunity will make up to $7.3 million available to this national, volunteer-based program that empowers Medicare beneficiaries to prevent and report fraud, waste, and abuse. This program has trained over 3.5 million beneficiaries since 1997 and has generated more than 7,000 referrals to CMS and the OIG since that time.
Taken together, we expect these new developments to significantly increase the number of tips, reports, and whistleblower claims fielded by federal, state and private attorneys. However, the increased workload that these financial incentives will create raises serious questions about how reports of suspected fraud will be prioritized and investigated. While these reports may ultimately help CMS and the OIG detect and correct some of the more obvious instances of fraud and abuse across the industry, these programs are also likely to result in any number of unfounded allegations that providers and manufacturers will have to spend valuable time and resources to address.