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The False Claims Act: It Benefits More than Just the Government

Posted  March 5, 2021

The False Claims Act, a Civil War-era law, encourages private individuals, such as whistleblowers, to come forward and file suit against unscrupulous government contractors, and share in the government’s recovery. The passage of the law was inspired by contractors selling the Union Army bags of sand as flour, lame mules as cavalry horses, and glued-together rags as uniforms.

The main purpose of the law is, of course, to encourage private individuals with knowledge of fraud to help the government recover ill-gotten money from fraudsters. The government recovers billions under the law annually. But the law benefits more than just taxpayers and the public—it could also help keep patients safe, help keep workers from being exploited, and help stave off environmental degradation.

The False Claims Act Helps Keep Patients Safe

Generally, defrauding the Medicare or Medicaid programs, because they are both publicly funded, is also a violation of the False Claims Act. Indeed, in most years, over 80% of FCA recoveries are in the healthcare space.

Many dishonest, yet profitable, schemes such as upcoding, unbundling, and billing for services not provided, are designed to simply bilk Medicare or Medicaid, and have little to do with patients. But other frauds, such as providing medically unnecessary services or dosage fraud, have the potential to wreak havoc on the health of Medicare and Medicaid beneficiaries.

An especially horrific example of fraud that had negative consequences for patients is that of Dr. Farid Fata, a Detroit-area oncologist who massively profited by providing, and billing for, chemotherapy services to patients that did not have cancer. Chemotherapy is, of course, a painful, difficult, and extremely dangerous set of procedures that should not be performed on healthy people. Fata performed these unnecessary treatments on over 500 patients. His conduct was eventually revealed and stopped by a whistleblower that filed their suit under the FCA. Fata was forced to pay back millions and was sentenced to 45 years in prison in a related criminal case. Though especially horrific, Dr. Fata is not alone- there are dozens of settlements each year where physicians perform procedures and surgeries that patients do not need, for the financial gain of the physician.

Another common scheme that puts patients at risk is dosage fraud, which most commonly involves providers using the contents of single-use vials on multiple patients. The CDC and FDA have both decried the practice, arguing that it risks cross-contamination and infections that can result in catastrophic health outcomes. A recent, cringe-worthy example is a settlement coming out of Florida that involved medications injected into (multiple) patients’ eyes.

The False Claims Act Helps Keep Wages Fair

Another positive externality of FCA cases is the fairer treatment of workers who work for government contractors. Government contracts often specify how much a contractor must pay certain classes of workers certain wages. Paying workers less than those wages can be the basis for an FCA violation.

The most recent FCA settlement in this space came earlier this week. A Veterans Affairs construction contractor agreed to pay over $500k to resolve allegations that they did not pay workers their prevailing wages as specified by the contract ($57 to $91 per hour), while still billing the government as if they were doing so. The fraud was revealed by a whistleblower who will share in the recovery. Hence, this was a fraud against both the government and the company’s workers. Much like cases of healthcare fraud, this is not a one-off.

The False Claims Act Can Help Prevent Environmental Degradation

Another area where both the FCA and whistleblowers can do good for more than just America’s bottom line is in the area of fraud concerning the environment. Improperly disposing of toxic waste, degrading the environment when promising to comply with various environmental laws, and many other, creative schemes that can all be the basis for an FCA violation.

A recent example of an FCA case benefiting the environment is the settlement the Omega Protein Company, a fish oil company, reached with the government in 2019. There, the company received a loan from the Department of Energy. In its loan application, the company certified that it would comply with all relevant environmental laws. In reality, the company was illegally dumping various pollutants into Southern Louisiana rivers. A whistleblower brought suit which led to the ceasing of the practice and recovery of over $1 million to the government.

The Upshot

Patient harm, wage theft, and environmental causes are just some of the areas where the FCA can do good outside of its main goal of recovery government money, there are countless others. The government dips its toe into many more fields than it did in 1863. Many of those fields are also complex, opaque, and require the view of an insider to spot frauds. Whistleblowers need to come forward, for the sake of taxpayer dollars, and many, many other reasons.

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Tagged in: Dosage Fraud, Environmental Fraud, FCA Federal, Government Procurement Fraud, Healthcare Fraud, Importance of Whistleblowers, Lack of Medical Necessity, Medicaid, Medical Billing Fraud, Medicare, Prevailing Wage,