Lessons from the private enforcement of health care fraud.

• Author: Levy, Joshua A.
• Position: Symposium on Private Justice and Enforcement

INTRODUCTION

As American Criminal Law Review (".ACLR") symposium commentators contemplate whether Congress should create a right for private citizens to help enforce the anti-bribery provisions of the Foreign Corrupt Practices Act ("FCPA",1) this article imparts lessons from the private enforcement of health care fraud under the False Claims Act ("FCA"). (2) The FCA, which established a private right of action to sue individuals and entities who have defrauded the U.S. government, cannot be used to enforce the FCPA because bribing foreign officials, while illegal, does not by itself defraud the U.S. government. The FCA, however, provides a workable example to help evaluate how a private right of action could aid the enforcement of the FCPA's anti-bribery provisions, and whether it would be prudent create one.

Although violations of the FCPA's anti-bribery provisions can be a crime, the government is also authorized to enforce the same provisions through civil suits. To wit, the Securities and Exchange Commission ("SEC") is authorized to sue issuers of U.S. securities (and their officers, directors, employees, and agents) for violating the FCPA's anti-bribery provisions and does so, (3) often in parallel with Department of Justice ("DOJ") criminal investigations of the same conduct. (4) Meanwhile, the Department of Justice is responsible for prosecuting civil suits against non-issuers for violating the FCPA's anti-bribery provisions. (5)

Private litigants may bring cases that allege violations of the FCPA, even though Congress has not created a private right of action under the statute. (6) For example, courts have permitted a variety of civil suits alleging violations of the FCPA's anti-bribery provisions as predicates for other established claims such as shareholder derivative suits, (7) state and federal anti-racketeering lawsuits, (8) state unfair competition lawsuits, (9) tortious interference suits, (10) and professional malpractice suits. (11) Additionally, Congress more recently enacted the Dodd-Frank Act's whistleblower provisions, which permit individuals to inform the SEC of alleged violations of the FCPA's anti-bribery provisions, but do not create a private right of action for individuals to sue others for having violated the FCPA. (12) In all events, this Article will not be discussing any of those civil enforcement mechanisms, but rather will focus on whether Congress should create a private right of action to enforce the FCPA based on how the private right of action established in the FCA has been used to enforce health care fraud laws.

Although the FCA has become the primary legislative tool used by whistleblowers to help the government enforce health care fraud laws, it was not enacted with health care in mind at all. In fact, Congress enacted the FCA over a century before the Great Society created Medicare and the other government programs designed to cover the cost of basic health care for the country's elderly, disabled, veterans, and poor. The FCA became law during the Civil War as a mechanism to deputize individuals as private attorneys general who could help the Union Army identify and recoup fraudulent dollars from its contractors. (13) As this Article will detail, the use of the FCA grew along with the expansion of the military industrial complex to help the government reduce defense contractor fraud on the U.S. Treasury. Since Congress created Medicare, and as it expanded into the $500 billion program it is today, whistleblowers at doctors' offices, hospitals, labs, hospices, ambulance companies, pharmaceutical companies, medical device manufacturers, and a host of other companies participating in Medicare have used the FCA to help the government recover billions of fraudulently spent Medicare dollars.

This Article will apply lessons from the private enforcement of the FCA in the context of health care fraud litigation and investigations to the question of whether Congress should create a private right of action to enforce the FCPA's anti-bribery provisions.

Section I of the Article will contrast the harms that the FCPA and health care fraud laws seek to prevent. This Article will demonstrate why the FCA cannot be used to enforce the FCPA because bribing foreign officials does not directly cheat the federal government out of money.

Section II will discuss the frontline fraud detection challenges at the Center for Medicare and Medicaid Services ("CMS"), which reimburses Medicare participants for covered health care costs. The discussion will show why the FCA is critical to the government's efforts to recoup fraudulently spent Medicare funds. It will contrast the aggressive approach to fraud prevention adopted by private health insurance companies with CMS' passive approach to the same task, and it will discuss the ultimate regulatory capture failure: corrupt foreign governments.

Section III will examine how the private enforcement of health care fraud laws has aided, and has been aided by, criminal and administrative investigations of the same conduct. This Section will then probe the possible impact of a right of private action against companies and individuals accused of bribing foreign officials on criminal investigations of the same conduct.

Section IV will highlight the limitations of the FCA (e.g., public disclosure bar, the first-to-file rule, and declination) and discuss how those limitations may solve some, but not all, of the questions regarding the prudence of private enforcement of the FCPA's anti-bribery provisions.

1. THE FCA CANNOT BE USED TO ENFORCE THE FCPA

   Historically, Congress has created private rights of action to help the U.S. government enforce its laws when the harm prohibited by those laws is particularly acute. For example, President Lincoln and the Congress wanted to ensure a Union victory in the Civil War and together enacted the False Claims Act ("FCA"), which financially incentivized individuals to stand in the place of attorneys general and bring cases under seal against those who defrauded the U.S. government. (14) Fraudsters found liable under the FCA could be responsible for double damages (now treble damages) and a $2000 penalty for each false claim. (15) With a nation of interested citizens monetarily empowered to identify fraud, Union contractors would be on notice that delivery of sawdust (instead of gunpowder), busted horse saddles, or non-firing cannons would be done at their peril. Whistleblowers bringing cases under the FCA would help the Union stay solvent, win the war, reverse secession, and end slavery.

   Today, the government has prominently used the FCA as a weapon to help the government identify, recover, and deter fraudulently spent dollars from the government's health care programs. Medicare, created in the 1960s, has jumped from a $64 million program to a $500 billion program. (16) Experts have indicated that anywhere from three to ten percent of that program is fraudulently spent. (17) This amounts to Medicare fraud in the range of roughly $15 billion to $50 billion each year.

   Sometimes, those cases of fraud do not only wound the Treasury, but also patients. (18) For example, in some "medical necessity" cases brought under the FCA, whistleblowers have identified, as follows, false claims submitted to the government for services so poor or absent that they have hurt people:

   A long-term care facility should not have billed CMS for services rendered to patients, whom the facility abused and neglected. (19)

   Failure to provide transports for dialysis patients, while nevertheless billing for their care, could prove fatal. (20)

   Although the FCA does not create a private right of action for individuals to sue companies for having hurt or killed people, the evidence produced in qui tam actions can frequently be used by the government to discover the ill-effects of fraudulent health care, out of which criminal indictments can grow. For example, months after returning an indictment against the owner of an imaging company for defrauding Medicare and Medicaid of over $7.5 million, a grand jury returned a second indictment against him because he directed unqualified employees to read x-rays and failed to diagnose certain medical conditions, such as pneumonia and masses, for patients who died within weeks of being x-rayed. (21)

   Although the statute has endured a series of amendments, the FCA today creates civil liability for any defendant who, inter alia, knowingly makes or conspires to make a false statement or claim that would be material to a false or fraudulent claim for a government benefit or payment. (22) The simplest kind of health care case under the FCA is the insider at a doctor's office who blows the whistle on the medical practice for billing CMS for services never rendered or patients who never existed.

   Congress has enacted a number of laws regulating and, in some cases, criminalizing fraud on government health care programs. (23) However, the evidence brought forward by FCA whistleblowers has--probably more so than any other tool in the government's toolbox to date--been critical to the government's enforcement of those health care fraud statutes, such as the Anti-Kickback Statute ("AKS"), the Stark Laws, and the Food, Drug, and Cosmetics Act. (24) Nevertheless, courts disagreed for decades about whether violations of the AKS (a criminal statute) violated the FCA, (25) thereby dissuading whistleblowers and their lawyers from bringing AKS cases under the FCA. To make matters easier for whistleblowers, the government, and the courts, Congress amended the FCA in 2010 such that a violation of the AKS automatically violated the FCA. (26) Congress would not have put forward the amendment without resounding support from the Department of Justice, which openly asked for the new authority in an effort to stop, deter, and recover funds from healthcare kickbacks. (27)

   The American Criminal Law Review has thus posed a similar...