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Healthcare Reform Expands False Claims Liability



The recent healthcare reform law passed by Congress in March now allows for more whistleblower lawsuits to be filed against corporations under the False Claims Act.

The False Claims Act has narrowed the definition of publicly disclosed information, in turn, expanding the range of cases whistleblowers can bring to the government’s attention.

The False Claims Act is the main tool used by the Federal Government to combat fraud in government contracting. Originally passed during the Civil War, the False Claims Act was not used until 1986 when private citizens were given the ability to file Qui Tam suits on behalf of the government. Since the 1986 changes the Federal Government has been able to recover more than $24 billion, majority of which were recoveries made through Qui Tam suits.

A key defense against Qui Tam suits is the strategy of arguing that the whistleblower’s complaint is based on publicly available information, not making it “whistleblowing” per se. However, narrowing the definition of publicly available information has made it much harder to use that defense in court.

“The changes open the floodgates to more qui tam plaintiffs,” says Peter Hutt, a partner in the law firm Akin Gump Strauss Hauer & Feld.

These changes to the definition of “publicly disclosed information” include:

(1) Any information disclosed in litigation between private parties can now be used in Qui Tam suits under the False Claims Act;

(2) Information disclosed in state hearings, audits, reports, or investigations can also be used in Qui Tam Suits;

(3) The Government now has veto power over whether a False Claims Act suit is dismissed under the public disclosure defense – the statue only allows the dismissal of a case on non-jurisdictional grounds if the government doesn’t oppose the dismissal;

(4) More whistleblowers will qualify as an “original source” now that the amendments no longer require people to have “direct and independent knowledge.”

These changes will not apply to any litigation pending before the reform went into effect.

The recent changes to the False Claims Act went into effect March 23rd with additional amendments providing $250 million in funding over the next ten years to investigate and prosecute healthcare fraud.

“I’d expect to see a steady increase in FCA case filings as the increased resources and statutory changes work their way through the system,” Levin says.




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