Exposing Healthcare Fraud: Whistleblowing 101
By Andray K. Napolez
Andray K. Napolez is an assistant attorney general in the special litigation bureau of the Illinois Attorney General’s Office. He can be reached at anapolez@atg.state.il.us.
The Federal False Claims Act, 31 U.S.C. § 3729 et seq., and certain state false claims acts closely modeled after the federal Act (CA, DE, DC, FL, HI, IL, IN, LA, MA, MI, MO, NH, NM, NV, TN, TX, and VA) (collectively, the acts) are gaining momentum as a mighty weapon to wield against fraud in the healthcare arena. Under the acts, also referred to as whistleblower and qui tam acts, a private citizen may bring an action on behalf of the government to recoup funds illegally obtained by a defendant as a result of a false claim (or damages related to a defendant’s failure to pay an obligation to the government—a reverse false claim). In fact, the term qui tam is an abbreviation of the Latin phrase qui tam pro domino rege quam pro seipse, meaning he who sues for the king as for himself.
False claims perpetrated by healthcare providers include charging for services not performed; billing more than once for the same service; upcoding, in which the provider changes or falsifies billing codes on services performed to maximize Medicare/Medicaid reimbursement; performing medically unnecessary testing; and falsifying documents that certify a patient’s need for treatment.
Pharmaceutical manufacturers and their sales reps also contribute to healthcare fraud by (1) marketing off-label uses for their drugs that fall outside the FDA approved uses (and thus have not been proven safe and effective); (2) inflating the price of drugs for Medicare/Medicaid claims while giving deep discounts or free samples to practitioners, encouraging them to prescribe that particular drug over another (this practice is also known as “marketing the spread”); and (3) suppressing reports of a drug’s adverse effects.
Complaint Process
The acts have a precise protocol that a whistleblower (or relator) must follow in order to preserve her whistleblower claim to a future share of any recovery, and negotiating these steps can be complicated. Generally, the claim develops as follows:

1. The whistleblower discovers fraud in the course of her employment or business interactions and consults with a qualified whistleblower attorney.

2. Together, the relator and her attorney research the alleged fraud and, if the evidence is sufficient to support the claim, file a complaint under seal. Filing under seal is mandatory because it gives the government an opportunity to evaluate the claims without alerting the defendant to the potential suit.

3. The relevant attorney general’s office is notified of the fraud and supplied all documentation (this may be federal, state, or both depending on where the fraud occurred and where the claim was filed).

4. The government has 60 days to investigate the claim and decide whether to intervene in the case. This is typically far too short a period for an adequate investigation; therefore, extensions are often granted.

5. Upon completion of its investigation, the government may intervene or the relator may pursue the case individually should the government decline intervention. The government, however, may intervene in a case at any time, even if it previously declined intervention.

6. After the decision for or against intervention is made, the case is unsealed. The defendant is served with a copy of the complaint and any disclosure materials the relator has to support her claims. The case follows the normal course of litigation from this point forward.

If a whistleblower’s suit alleging fraud is proven and damages are awarded (or if the case is settled), the relator is entitled to 15 to 30 percent of the government’s total recovery. This total is based on the total amount of materials and services fraudulently billed, trebled (multiplied by 3), plus $5,500 to a maximum $11,000 in penalties per false claim, depending on where the claim is filed.
In recent years, suits brought under the acts have produced staggering settlements and jury awards. In 2001 Tap Pharmaceuticals agreed to a $560 million settlement for allegedly marketing the spread and concealing its best price for its cancer drug, Lupron, from Medicare/Medicaid. (Government programs require manufacturers to report their lowest or “best” price to ensure the government gets the same deal others do.) In 2004, Pfizer agreed to pay $430 million to settle federal and state whistleblower suits alleging its subsidiary, Warner-Lambert, encouraged physicians to prescribe the company’s antiseizure drug, Neurontin, for various non-approved, off-label uses. In October 2006, a jury found the managed care organization Amerigroup liable for at least $144 million (penalties are still being calculated) for refusing to enroll women in their third trimester of pregnancy because the women’s medical needs typically conflicted with Amerigroup’s cost-saving directives. These examples illustrate the power of whistleblower acts from a public insurance perspective—i.e., the recoveries are primarily a result of overpayment by federal and state Medicare and Medicaid services.
And there’s more. Plaintiffs in a recent Illinois case employed the Illinois Insurance Claims Fraud Prevention Act, 740 ILCS 92/1 et seq., to combat the medically unnecessary use of electrodiagnostic testing by untrained, unsupervised technicians. This act allows a relator to file claims on behalf of private insurance companies, just as a whistleblower would file on behalf of the government. Check to see if your state has an equivalent provision.
READY RESOURCES
• Health Care Fraud and Abuse, with 2006 Cumulative Supplement. PC # 1620214P9578. Health Law Section.
• Sarbanes-Oxley: Update on Recent Decisions. 2006. PC # CEL06SOUC. ABA Center for CLE, Section of Litigation.

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