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False Claims Act: Can the Falsity Claim be Enhanced by Numbers?

By Eileen K. Leslie, CPA, CFE

November 23rd, 2016


The requirement to establish falsity under the False Claims Act (“FCA”) is drawing increased scrutiny in recent court cases. A number of matters involve “false certification” claims, which can be more difficult to address than “factually false” or “direct fraud” FCA claims. 

Several elements to falsity are, of course, considered within the scope of the FCA. The person submitting the false claim may have express knowledge of the falsity, or a claim could be implicitly false even if it is not false on its face. The omission of a material fact may also cause a claim to be categorized as false, fictitious, or fraudulent. 

The element of falsity was central to the case U.S. ex rel. Paradies, et. al., v. GGNSC Administrative Services, which is now the subject of an amicus curiae brief filed in September by the Taxpayers Against Fraud Education Fund (“TAFEF”). The dispute centers on hospice services funded by federal Medicare dollars. 

The matter is on appeal from the U.S. District Court for the Northern District of Alabama, Southern Division (Case. No. 2:12-CV-245-KOB). Defendants named in the litigation include AseraCare Inc., GGNSC Administrative Services, Hospice Preferred Choice, Inc., and Hospice of Eastern Carolina, Inc. (collectively “AseraCare”). 

Golden Gate Ancillary LLC, the parent company operating under the name AseraCare Hospice, offers hospice services in 19 states. Hospice care is typically prescribed when a patient is diagnosed with a life-threatening illness or condition that gives the patient six months or less to live. The diagnosis is supported by medical records and the professional opinion of trained doctors or other medical professionals. 

The original complaint alleged that AseraCare violated the FCA by submitting false claims to Medicare for hospice care provided to patients who did not meet the requirements for hospice diagnoses. 

The U.S. District Court bifurcated the case, requiring separate trials for the elements of falsity and knowledge. 

The jury in the falsity phase found in favor of the government, after determining that 104 of 121 hospice claims presented as evidence were false. The court nevertheless decided to set the jury verdict aside and granted summary judgment for AseraCare. 

The district court determined that “a difference of opinion between physicians and medical experts about which reasonable minds could differ” was insufficient to prove that a claim is false. 

TAFEF takes the position that the FCA was interpreted incorrectly by the U.S. District Court. It asks that the appellate court not adopt the lower court’s ruling on falsity. Further, TAFEF seeks to overturn the lower court’s invalidation of a jury verdict based in part on expert opinion presented during the trial. 

This brings into question whether falsity can be proven outside of subject matter expert opinion. A fraud examiner, working in conjunction with a subject matter expert, may help prove falsity by statistically analyzing the raw data associated with the claim.

In this and future cases of a similar nature, the government or relator’s counsel might apply data analytics to massive amounts of original healthcare claims data to go beyond statistical sampling and actually enhance the objective analysis of potentially fraudulent claims. For example, the statistical analysis of the raw data of hospice patient diagnoses, age of patients and length of life after diagnosis may provide a tangible understanding of the practices of the hospice entity. It could even be possible to generate comparative statistics across a universe of healthcare service providers.

We will continue to watch and report on the AseraCare case as the appeal proceeds. 

Click on the link to read more information about the
TAFEF AseraCare amicus curiae brief.

About The False Claims Act

The False Claims Act (“FCA”) is a federal law that permits the U.S. government to prosecute fraudulent transactions targeting Medicare, Medicaid, military spending, securities, tax payments, and other government programs. The FCA has a long history dating back to its passage in 1863 during the American Civil War. 

Amendments to the False Claims Act, passed in 1986, 2009 and 2010, increased incentives for whistleblowers to file lawsuits on behalf of the government, leading to more investigations and greater recoveries.  

False claims actions are filed under the FCA’s whistleblower, or qui tam, provisions, which allow private citizens to file suits alleging false claims on behalf of the government.

A False Claims Act case must be filed following strict requirements. Federal cases are first filed with a court under seal. At the same time, the Department of Justice (“DOJ”) is also served and allowed a period of time to determine if it will intervene in the case. The defendant is not served until a later date. Every FCA case must be fully documented with in-depth written analysis outlining the facts and preliminary evidence in the case. 

If the government prevails in a qui tam FCA action, the whistleblower, known as a relator, could receive between 10 to 30 percent of the recovery. 

In fiscal year 2015, the U.S. Justice Department collected $3.5 billion in settlements and judgments from 638 qui tam lawsuits alleging fraud and false claims. Of this total, $1.9 billion originated in fraudulent Medicare and Medicaid claims within the healthcare industry. Government contracts represented the second largest category of false claims, accounting for $1.1 billion in settlement actions. Housing and mortgage fraud generated $365 million in recoveries. 

About Investigative CPA, LLC

Investigative CPA, LLC, founded by
Eileen K. Leslie, specializes in False Claims Act (FCA) investigations on a national basis. 

Ms. Leslie is a Certified Public Accountant (CPA, 2004), a Certified Fraud Examiner (CFE, 2007), and holds a Master of Taxation (2003). She worked for the Department of Justice in both the United States Attorney’s Office (2010 to 2014) and the Federal Bureau of Investigation (FBI, 2004 to 2007). Additionally, she has held positions in public, private and forensic accounting firms. She is also a proud United States Air Force veteran.

She works closely with qui tam attorneys and government agencies nationwide to investigate FCA claims, uncover fraud, calculate damages, and provide forensic financial consulting services. She focuses on ensuring maximum recovery of damages to the government and other injured parties.

Beyond FCA investigations, Ms. Leslie has performed a variety of criminal fraud investigations and non-government civil fraud examinations and fraud assessments. She has also investigated violations of the Anti-Kickback statute and the Stark Law.

Contact Ms. Leslie to discuss a potential whistleblower case or other fraud matter. 

Disclaimer

This article is provided for educational purposes only. It is not intended to provide legal advice or an opinion in regard to any topic discussed. The blog should not be used as a substitute for legal advice from a licensed attorney in your state.

Material for this article was taken from a collection of industry sources relating to the subject. Every case is different and circumstances vary widely depending on the governing state or federal law, policy provisions, and related considerations.