On May 20, 2009, the President signed into law the Fraud Enforcement and Recovery Act of 2009 (“FERA”), which will implement significant changes to the federal False Claims Act (“FCA”). The amendments to the FCA will significantly expand the scope of FCA liability, provide for new investigative tools, and make it easier for qui tam relators to bring and maintain FCA suits on behalf of the government.
The House and Senate both passed the bill with overwhelming majorities before the President signed FERA into law. While the new law is primarily targeted at potential fraud involving recipients of economic stimulus funds in the financial services industry, it also includes some very significant changes to the liability provisions of the federal False Claims Act affecting members of the health care industry.
Members of the health care industry should be concerned about the new definition of “obligation,” which applies to retained overpayments. While the new law only imposes liability for a knowing and improper “retention” of an overpayment, it is unclear exactly when FCA liability would attach for retention of such an overpayment. Currently, Medicare providers such as hospitals and skilled nursing facilities reconcile their accounting at the end of the fiscal year to determine whether Medicare overpaid them for services, and then return the overpayment (certain providers continue to cost report - even under prospective payment systems). The Senate Judiciary Committee report suggests that the Senate bill’s revision was not intended to interfere with this process and does not “create liability for a simple retention of an overpayment that is permitted by a statutory or regulatory process for reconciliation.” While this legislative history provides some guidance in interpreting intent of the statute, courts are not necessarily bound by the legislative history and there is not necessarily a guarantee that courts interpreting the definition of “obligation” will agree that the retention of an overpayment permitted by statute will prevent FCA liability.
In addition, while courts have generally held that potential FCA liability extends to Medicaid claims (or at least the federal share), commentary and arguments in several decisions have raised the possibility that claims to Medicaid may not satisfy the requirements of an action under the federal FCA. However, the new revisions were intended, at least in part, to dispel the notion that court decisions can be read to restrict FCA liability from attaching to Medicaid claims. The Committee report makes it clear that the revisions in § 3729(a)(2) were intended to clarify that FCA liability extends to “all false claims submitted to State administered Medicaid programs.”