The signs are everywhere these days—whistleblowers are being lionized for coming forward to report alleged bad acts. Time Magazine named three whistleblowers as its “Persons of the Year”—an FBI attorney who questioned September 11th activities, a former Enron executive, and a former WorldCom executive.

Whistleblowers also remain prominent players in the federal government's health care fraud enforcement efforts. Over the last 5 years, whistleblower or qui tam suits filed under the federal False Claims Act (FCA) have accounted for the majority of civil fraud cases pursued by the government. All of the major health care civil settlements for the fiscal year ending in September 30, 2002, were the result, in part, of whistleblower suits, including:

• TAP Pharmaceuticals ($568 million);
• PacifiCare Health Systems ($87.3 million);
• General American Life Insurance Company - a Medicare FI ($76 million); and
• LifeMark Hospitals, a Tenet hospital ($29 million)

Additionally, the on-going pneumonia-upcoding and investigational device hospital investigations, which have resulted in sizeable FCA recoveries this past year with more on the way, are the result of whistleblower lawsuits.

FCA recoveries have topped $1 billion for each of the last three years. The U.S. Department of Justice (DOJ) noted in its December 16th press release that recoveries since the FCA’s 1986 amendment strengthening the law’s whistleblower provisions, have totaled over $6 billion. Of the more than $1.2 billion recovered under the FCA for the fiscal year ending September 30, 2002, almost $1.1 billion was derived from whistleblower lawsuits, and more than $980 million came from health care fraud settlements and judgments.

Not all of the news is good for whistleblowers, however. Although FCA recoveries are at a record high, the number of qui tam suits filed seems to have leveled off. Further, in the past year, several federal courts have handed down setbacks to whistleblower efforts to expand the FCA's use to pursue alleged Anti-Kickback, Stark and quality of care violations.

However, other federal courts have sanctioned the use of the FCA to pursue alleged violations of the Anti-Kickback and Stark Laws, including an opinion issued just last week by the federal district court in the District of Columbia (U.S. ex rel. Pogue v. Diabetes Treatment Centers of America, Inc., Case No. 99cv3298 (D.DC - Memorandum Opinion of Judge Lamberth, Dec. 2002)). Moreover, DOJ and the FCA’s principal supporter in Congress, Senator Charles Grassley of Iowa, have squared off over the last few years regarding FCA enforcement. DOJ Civil Chief Robert McCallum has sought to assuage Senator Grassley's concerns over lax FCA enforcement, especially with regard to Anti-Kickback Law issues.

The extension of the olive branch by DOJ to staunch supporters of the FCA was evident yet again in DOJ’s December 16th press release when it stated that “[t]he success of this statute is a tribute to the vision of its sponsors, Senator Charles Grassley of Iowa and Representative Howard L. Berman of California, as well as the thousands of private citizens who have reported fraud by filing suit under the Act.”

What the press release did not tout, however, is the number of qui tam lawsuits filed but which were not pursued by the DOJ. The monetary and emotional cost of these declined qui tam suits, many of which are dismissed when litigated, is quite high in the health care industry. Nonetheless, with the significant monetary incentive afforded by the FCA to whistleblowers, and DOJ's interest in encouraging whistleblowers to come forward (most of DOJ’s cases stem from such complaints), it is unlikely that the health care community will receive any sympathy from Congress or the enforcement community. Thus, a proactive compliance plan may be a health care provider's best defense against qui tam suits.

If you have any questions or if you would like more information, please contact:

Connie A. Raffa
212.484.3926
raffa.connie@arentfox.com