OIG Issues Proposed Rules on Exclusion Authority and Civil Monetary Penalties

Posted by Scott Stein and Brenna Jenny

In May, the Department of Health and Human Services’ Office of Inspector General (“OIG”) published two proposed rules, one expanding its exclusion authority (“Proposed Exclusion Rule”) and the other broadening and strengthening the availability of civil monetary penalties (“Proposed CMP Rule“). Some of these proposals merely codify provisions of the Affordable Care Act (“ACA”), whereas others are a product of the OIG’s own initiative, but interwoven within both are changes reflecting the influence of the False Claims Act on the enforcement landscape.

For example, in the Proposed Exclusion Rule, the OIG is proposing to add a provision expressly stating that there is no time limitation for the conduct that can form the basis for exclusion, regardless of whether the conduct is based on the violation of a statute with a statute of limitations. 79 Fed. Reg. 26810, 26815 (May 9, 2014). Much of the OIG’s rationale reflected its desire to be able to match the time lag often associated with FCA litigation. The OIG explained that with a time limitation, it might feel compelled to file a notice of proposed exclusion against a defendant in a pending FCA suit to avoid losing its window of opportunity, even where it might subsequently decide against exclusion with a fuller understanding of the allegations.

The OIG also proposes to borrow definitional terms from the FCA for its own enforcement purposes. As a consequence of being excluded, individuals and entities cannot receive payment “for any item or service furnished” to a federal healthcare program (“FHCP”). The OIG’s new definition would expand the meaning of “furnish” to encompass not only individuals and entities who “submit claims to” FHCPs, but also those who “request or receive payment from” FHCPs, such as organizations that receive block grants from FHCPs. While this definition generally makes explicit the government’s pre-existing enforcement approach, the OIG specifically notes that this “revised wording would be consistent with the False Claims Act’s broad definition of ‘claim'” and “would appropriately encompass all current and future payment methodologies.” Similarly, in the Proposed CMP Rule, the OIG plans to codify the ACA’s new source of CMP liability, based on “any false statement, omission, or misrepresentation of a material fact in any application, bid, or contract to participate or enroll as a provider of services or a supplier under a Federal healthcare program.” The ACA did not define “material,” and the OIG proposes to define the word so as to “mirror[] the False Claims Act definition.”

New York Proposes Law to Improve Incentives for Financial Industry Whistleblowers

New York lawmakers have sought to fill a perceived gap in the New York State False Claims Act by providing a bounty and legal protections to whistleblowers who provide information for successful claims involving financial wrongs prohibited by state law. NYS Bill No. 4362, which is modeled in part on the New York State False Claims Act, provides new incentives to employees of financial services providers who report employer violations of New York State’s banking, insurance, and financial services laws. Currently, the New York Financial Services Law does not address monetary rewards or legal protection from employer retaliation for whistleblowers who report employer misconduct. Sponsored by New York State Senators James Seward and Joseph Griffo, S4362 would strengthen the current Financial Services Law in two significant ways: (1) by providing financial rewards for employees who disclose employer violations of New York State’s banking, insurance, and financial services laws to the Department of Financial Services (“DFS”); and (2) by including a provision for legal protection against employer retaliation for employees who report such misconduct.

If enacted, S4362 would allow a whistleblower who reports original information to receive between 10 and 30 percent of the total monetary sanctions received by DFS in a successful action against defendant based on the whistleblower’s information. The bill also creates legal protections for whistleblower employees against employer retaliation that mirror the remedies provided by the New York False Claims Act. According to the bill, a whistleblower employee may seek an injunction, reinstatement, backpay, and/or special damages where an employer retaliates against the employer by demoting, suspending, terminating, or harassing the employee. The full text of S4362 can be found here.

Sixth Circuit Finds That “Claims” Means “Case” In FERA Provision

Posted by Kristin Graham Koehler and Lauren Roth

In the continuing drama of the Allison Engine case, the Sixth Circuit, last week, revived relators’ “claims” by overturning the District Court decision and further deepening a circuit split on the issue of how to interpret the word “claims” in section 4(f)(1) of the Fraud Enforcement and Recovery Act of 2009 (FERA). Roger Sanders v. Allison Engine Company, Inc. et al., Nos. 10-3818 (6th Cir. Nov. 2, 2012).

History

Readers will recall that this case began its journey in 1995 with relators’ filing a False Claims Act complaint against several Navy subcontractors. The case went to trial and, at the close of relators’ case, defendants filed a motion for judgment as a matter of law, arguing that relators had failed to produce evidence that any false claim was presented to the Navy. Without evidence of presentment, defendants argued, no reasonable jury could find a False Claims Act violation. The district court agreed. On appeal, however, the Sixth Circuit held that 31 U.S.C. section 3729(a)(2) did not require presentment of a claim to the government. In a unanimous decision, the Supreme Court disagreed, and it held that a person must have intended to get a false or fraudulent claim “paid or approved by the Government” in order to be liable. Dissatisfied with this outcome, Congress revised the statute itself, removing the language from section 3729(a)(2) on which the Court had based its decision and making its revision retroactive for “all claims under the False Claims Act . . . that [were] pending on or after” June 7, 2008 (i.e., two days before the Supreme Court’s Allison Engine decision).

Current Dispute

After FERA’s passage, the Allison Engine defendants filed a motion to preclude retroactive application of the amended provisions of False Claims Act section 3729. The district court granted the motion, finding that the retroactivity language in FERA section 4(f)(1)—which arguably had been enacted to address this very case—did not apply. The court’s rationale was grounded in an inconsistent use of terms between FERA section 4(f)(1) and 4(f)(2)—the first provision relating to pending “claims” under the False Claims Act, the second relating to pending “cases.” Among other things, the court reasoned that the differences in terminology between the two sections suggested a Congressional intent to assign different meanings to them. Interpreting “claim” to mean “any request or demand . . . for money or property” (i.e., the definition for False Claims Act section 3729, to which FERA section 4(f)(1) applies), the district court found that although the Allison Engine “case” may have been pending in June 2008, no “claims” were pending. Further, the court reasoned, even if section 4(f)(1) could be read to apply to the pending case, such application would violate the Ex Post Facto clause of the Constitution.

Sixth Circuit Decision

Back to the Sixth Circuit on appeal, the case has taken yet another turn. In its decision last week, the court reversed the district court ruling, holding that “claim” in section 4(f)(1) does mean “case.” (It also held that such application does not violate the Constitution.) While crediting the presumption that Congress uses different words to convey different meanings, the court nevertheless determined that such an argument was undermined in this case. In particular, the court was persuaded by the facts of the FERA drafting process (namely, that the two section 4(f) provisions were drafted by different chambers of Congress at different times) and the fact that other places in the False Claims Act plainly use the term “claim” to mean “civil action or case.” Because the court’s decision put it squarely on one side of a circuit split with the Second and Seventh Circuits—while the Ninth and Eleventh circuits, as well as many district courts, take the opposite view—it remains to be seen whether Allison Engine will take another ride to the Supreme Court before its journey ends.

California Expands Whistleblowers’ Rights To Bring <i>Qui Tam</i> Actions Under The State’s False Claims Act

Posted by Doug Axel, Tomislav Joksimovic and Ellyce Cooper

The Federal False Claims Act (“FCA”) has undergone significant amendments in recent years, through the Fraud Enforcement and Recovery Act (“FERA”) in 2009 and the Patient Protection and Affordable Care Act (“PPACA”) in 2010. For states to remain eligible to receive a 10% bonus on Medicaid-related false claims recoveries, federal law requires in part that “the [state] law contains provisions that are at least as effective in rewarding and facilitating qui tam actions for false or fraudulent claims” as the FCA. 42 U.S.C. § 1396(h) (2012). On September 29, 2012, California Governor Jerry Brown signed into law Assembly Bill 2492, which aims to further align the California False Claims Act (“CFCA”) with the FCA and thus preserve bonuses for the state in connection with Medicaid-related false claims recoveries.

Among the new key provisions of the amended CFCA are the following:

1. Scope of Potential Whistleblowers: The previous version of the CFCA barred suits by a whistleblower based on publicly disclosed allegations, unless the whistleblower had “direct and independent” knowledge of the allegations and had provided the information that led to the public disclosure. The amended CFCA allows a whistleblower to proceed with a lawsuit based on allegations that had been publicly disclosed if the Attorney General opposes dismissal of the whistleblower’s claims, if the whistleblower had disclosed to the state or relevant political subdivision the information on which the lawsuit is based prior to the public disclosure, or if the whistleblower’s knowledge is independent of and “materially adds” to the public information and he or she voluntarily provided the information to the state or political subdivision before filing suit.

2. Involvement in Wrongful Conduct: The amended CFCA no longer bars recovery for whistleblowers who “actively participated in the fraudulent activity.” Instead, it now provides for a more lenient standard by granting a court discretion to determine whether to reduce recovery and then only for persons who “planned and initiated” the fraudulent conduct. Even a whistleblower who “planned and initiated” the scheme may receive up to 33% or 50% of the recovery, depending on whether the state intervenes in the action. The import of this change is best illustrated (albeit under a different statutory scheme) by Bradley Birkenfeld, a former UBS banker who provided information to the government that led to UBS entering into a deferred prosecution agreement for tax fraud charges and paying $780 million in penalties. As a result, Mr. Birkenfeld received a $104 million award under the IRS whistleblower program despite his participation in the underlying fraudulent conduct. Under the previous version of the CFCA, a whistleblower involved in the fraud would have been barred from any recovery and therefore without any monetary incentive to report fraudulent activity. Now, individuals who are actual participants in fraudulent activity have a considerable incentive to report false claims under the amended CFCA.

3. Enhanced Whistleblower Protections: The amended CFCA now provides for reinstatement of employment as an additional remedy for employees who suffered retaliation by their employers. Moreover, this protection now extends to employees who “engaged in efforts to stop one or more [false claims] violations” in addition to employees who acted “in furtherance” of a false claims action.

4. Increased Penalties: The amended CFCA increases the low and high end of the civil penalty range by $500, i.e. from $5000 – $10,500 to $5,500 – $11,000.

Supreme Court Upholds Affordable Care Act; FCA And AKS Provisions Remain Standing

The Supreme Court this morning announced that the so-called “individual mandate,” the centerpiece of the Patient Protection and Affordable Care Act (PPACA), which requires most individuals to maintain a minimum level of health insurance, is a constitutional exercise of Congress’s power to tax. Separately, the Court held that a provision of PPACA that would penalize States that elected not to participate in the expansion of the Medicaid program by withdrawing their existing federal Medicaid funding is unconstitutional. However, the Court concluded that this violation can be cured by severing this provision from the rest of the law, leaving the remainder of PPACA standing.

Thus, those False Claims Act and Anti-Kickback Statute-related amendments enacted as part of PPACA, briefly listed here, remain standing: (1) the amendment to the AKS establishing that claims “resulting from” AKS violations that are submitted to the federal healthcare programs give rise to FCA liability (PPACA § 4204(f)(1)); (2) the further AKS amendment, clarifying that knowledge of and specific intent to violate the AKS are not necessary to establish a violation (PPACA § 6402(f)(2)); (3) amendments to the FCA’s “public disclosure bar” provision that convert it from a jurisdictional bar to an affirmative defense that can be raised by a defendant in a motion to dismiss but rejected by the government, precluding judicial resolution of the issue, and significantly limiting the types of disclosures that can give rise to the defense (PPACA § 10104(j)(2)); (4) requiring recipients of “overpayments” to report and return them, and making the failure to do so the basis of a “reverse false claim” cause of action under the FCA (PPACA § 6402(a)); and (5) creating additional civil monetary penalties that may be applied to conduct that violates the FCA (PPACA §§ 6402(d)(2), 6408(a)).

HHS OIG Seeks Comment on Revising Provider Self-Disclosure Protocol

On June 18, the Department of Health and Human Services Office of the Inspector General (“OIG”) announced plans to revise its Provider Self-Disclosure Protocol (“SDP”) and asked for public comment and recommendations on potential changes. The SDP, originally adopted in 1998, allows healthcare providers to disclose actual or potential fraud to the OIG in effort to expedite the resolution of any potential claims and conserve the OIG’s limited investigative resources. The SDP provides healthcare entities with guidance not only on the proper disclosure procedure, but on conducting an internal investigation, estimating the financial impact and liability, and cooperating with the OIG throughout the process.

According to the OIG, it has settled over 800 matters in the past 14 years through the SDP process, resulting in more than $280 million in recovery to the federal healthcare programs. These matters often involved healthcare entities reporting the employment of individuals excluded from the federal healthcare programs or disclosing potential kickbacks. For healthcare entities, the possible benefits of the SDP include avoiding an enforcement action under the False Claims Act, the Anti-Kickback Statute, or other relevant law; the presumption against Corporate Integrity Agreements that accompanies the SDP; and settling claims for less than may otherwise occur through civil litigation.

The OIG now hopes to revise the SDP to “address relevant issues” and “provide useful guidance to the healthcare industry.” To similar ends, the OIG previously issued three open letters in 2006, 2008, and 2009 to encourage use of the SDP, clarify its requirements, and expedite the process. This, however, will be the first revision to the SDP itself.

A copy of the OIG’s announcement can be found here. Comments are due by August 17, 2012.

Obama Budget Reflects Renewed Emphasis on Healthcare Fraud

The U.S . Department of Health and Human Services has released its Fiscal Year 2013 “Budget in Brief,” an overview of how HHS proposes to spend the close to $1 billion in budget authority for HHS requested in President Obama’s 2013 budget request. Program integrity is a top priority, with HHS noting that over the last three years, Health Care Fraud and Abuse Control (which comprises $610 million of the budget request) has produced a “return on investment” of $7.20 for every dollar spent. Among the key initiatives these funds will support are a continued emphasis on improper fee-for-service payments by Medicare, expansion of the Health Care Fraud Prevention and Enforcement Action Team (HEAT) task forces, and “an increased focused on civil fraud, such as off-label marketing and pharmaceutical fraud.” (page 62).

CMS Issues Guidance on Reporting and Refunding of Overpayments Actionable Under the FCA

Posted by Scott SteinBarbara Cammarata and Catherine Starks

On February 16, 2012, the Centers for Medicare and Medicaid Services (“CMS”) released a long-awaited proposed rule (“Proposed Rule“) to implement the overpayment reporting and refund provisions of the Patient Protection and Affordable Care Act (“PPACA”), which are enforceable in a “reverse false claims” action under the False Claims Act.

Under section 6402 of PPACA, providers and suppliers who have been overpaid by Medicare or Medicaid must report and return the overpayment within the later of: (1) 60 days of the date on which the overpayment is “identified;” or (2) the date any corresponding cost report is due, if applicable, or face reverse false claims liability under the FCA. Although the duty to report and return an overpayment is triggered, in the alternative, from the date the overpayment is “identified,” Congress did not define “identified.” The Proposed Rule defines the term by reference to the FCA’s scienter provisions. Specifically, the Proposed Rule would deem an overpayment to be “identified” when the person has actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment, which is how the FCA defines a “knowing” violation of the Act. This standard mirrors that provided in the CMS’ Physician Payment Sunshine Act proposed rule whereby an applicable manufacturer must report payments or transfers of value to a covered recipient when the applicable manufacturer has actual knowledge of or acts in reckless disregard or deliberate ignorance of the identity of the covered recipient.

According to CMS, it incorporated the FCA’s mens rea standard to incentivize providers and suppliers “to exercise reasonable diligence to determine whether an overpayment exists.” In particular, CMS stated that the provision is designed to prevent providers and suppliers from avoiding their obligation to identify potential billing issues through, e.g., self-audits or compliance checks. The Proposed Rule does not otherwise provide guidance as to what steps providers should take to uncover potential billing issues, beyond the requirement to exercise “reasonable diligence,” and that investigations, once initiated, should be conducted “with all deliberate speed.” As evidenced by the case law interpreting the FCA’s “knowingly” standard , there is ample room for CMS and providers and suppliers to disagree regarding whether providers and suppliers have exercised “reasonable diligence” to identify potential overpayments.

Increasing the stakes for providers and suppliers in the event that they fail properly to “identify” an overpayment is the Proposed Rule’s adoption of an FCA-like 10-year “look-back” period. This provision requires providers and suppliers (and allows CMS and qui tam relators) to review any potential overpayments in the prior 10-year period (in contrast to the existing four year CMS reopening period and the three year Recovery Audit Contractor “look back” period). The 10 year look-back period obviously raises the spectre of significant financial liability for providers and suppliers.

As for how overpayments are to be reported, the Proposed Rule adopts CMS’ existing process for voluntary refunds, renamed the “self-reported overpayment refund process” set forth in Publication 100-06, Chapter 4 of the Medicare Financial Management Manual. CMS states that it intends to publish a new form specifically for reporting overpayments under PPACA.

The Proposed Rule also clarifies the relationship between the government’s various self-reporting mechanisms. First, if a provider or supplier reports a violation of the Stark Law through the Medicare Self-Referral Disclosure Protocol, this suspends the obligation to return overpayments, but not to report. In contrast, a provider’s or supplier’s report of potential fraud through the OIG Self-Disclosure Protocol1 both suspends the obligation to return overpayments once the OIG has acknowledged receipt of the submission,2 and constitutes a report for purposes of the Proposed Rule, provided such notification is consistent with the proposed deadlines.

CMS also offers guidance on what constitutes “overpayments” in the context of an alleged violation of the Federal Anti-Kickback Statute (“AKS”). The Proposed Rule notes that that while some overpayments may arise from potential violations of the AKS, third parties to the kickback arrangement do not have a duty to report or return such overpayments unless they have “sufficient knowledge of the arrangement to have identified the resulting overpayment.” In that case, the third party must report the overpayment to CMS, but only the parties to the kickback scheme would be expected to return the overpayment and not the innocent third-party provider or supplier, “except in the most extraordinary circumstances.” While the rule does not expressly apply to manufacturers, this proposed interpretation seems to establish a clear link between claims “tainted” by manufacturer kickbacks and “overpayment” liability. A separate post on this topic will be forthcoming.

While the Proposed Rule expressly applies only to Medicare Part A and B providers and suppliers, and is not final, CMS “remind[s] all stakeholders that even without a final regulation,” they “could face potential False Claims Act liability . . . for failure to report and return an overpayment.”

Comments on the Proposed Rule are due by April 16, 2012.


1 Id. at 9,182.

2 Id. at 9,183.

Justice Department Celebrates the 25th Anniversary of Key Amendments to the False Claims Act

Posted by Patrick E. Kennell III and Ellyce R. Cooper

On January 31, 2012, the Department of Justice celebrated the 25th anniversary of the 1986 Amendments to the False Claims Act with speeches by Attorney General Eric Holder, Assistant Attorney General Tony West, and Members of Congress. The celebration also included a panel discussion entitled “$30 Billion, 25 Years: The False Claims Act in Review.” The DOJ used the occasion to celebrate its recent accomplishments and to describe its future enforcement efforts.

In press releases sent out to mark the occasion, the DOJ noted the following successes:

  • “Since [the 1986] changes were enacted, the Justice Department has recovered more than $30 billion under the act.”1
  • “Since January 2009, the department has recovered $8.8 billion under the False Claims Act – the largest three-year total in the Justice Department’s history, and 28 percent of all recoveries since the False Claims Act was amended in 1986.”2
  • $6.6 billion of the amounts recovered since January 2009 have been from healthcare fraud recoveries.3
  • “[F]or every dollar Congress has provided for healthcare enforcement over the past three years, the Departments of Justice and Health and Human Services have recovered nearly seven.”4
  • “In FY 2011 alone, the Department of Justice secured more than $3 billion in settlements and judgments in civil cases involving fraud against the government.”5
  • “Whistleblowers have filed nearly 8,000 actions – including a record high of 638 in the past year alone.”6

The DOJ also noted a series of key settlements including:

  • $2.3 billion – Pfizer Inc. (2010);
  • $1.7 billion – Columbia/HCA I & II (2000 and 2003);
  • $1.415 billion – Eli Lilly and Company (2009);
  • $950 million – Merck Sharp & Dohme (2011);
  • $923 million – Tenet Healthcare Corporation (2006);
  • $875 million – TAP Pharmaceuticals (2002);
  • $750 million – GlaxoSmithKline (2010);
  • $704 million – Serono, S.A. (2005).
  • $650 million – Merck (2008); and
  • $634 million – Purdue Pharma (2007).7

In his speech, Attorney General Eric Holder stated that the DOJ is committed to “aggressively utilizing” the FCA to combat fraud and that the past successes of the DOJ “represent[] a wide-ranging effort to eradicate the scourge of fraud from some of government’s most critical programs.”8 Attorney General Holder also noted that “in these challenging economic times” the DOJ’s mandate to “aggressively pursue those who would take advantage of their fellow citizens – has never been more clear or more urgent.”9 Finally, Attorney General Holder stated that “the strength of our resolve is equal to the breadth of our mandate.”10 Likewise, Assistant Attorney General for the Civil Division, Tony West indicated that “Attorney General Eric Holder, has made fighting fraud – particularly healthcare fraud – a top priority.”11

It is clear from the remarks at this celebration that the recent increase in civil and criminal FCA actions will continue for the foreseeable future.12 It also remains evident that the healthcare sector continues to be a focus of the DOJ’s enforcement efforts, although it also continues to pursue other industries. The increase of whistleblower FCA cases during this past year also evidences the increased awareness of the FCA by employees of companies that deal with government funding in some way. Corporations and individuals should continue to have extensive compliance programs in place to ensure that the DOJ does not target them as part of the DOJ’s “aggressive[] pursu[it]” of government fraud related actions using the DOJ’s broad mandate.


1 Press Release, United States Department of Justice, Justice Department Celebrates 25th Anniversary of False Claims Act Amendments of 1986 (Jan. 31, 2012), available at http://www.justice.gov/opa/pr/2012/January/12-ag-142.html.

2 Id.

3 Press Release, United States Department of Justice, Assistant Attorney General Tony West Speaks at the 25th Anniversary of the False Claims Act Amendments of 1986 (Jan. 31, 2012), available at http://www.justice.gov/iso/opa/civil/speeches/2012/civ-speech-120131.html.

4 Id.

5 Press Release, United States Department of Justice, Justice Department Celebrates 25th Anniversary of False Claims Act Amendments of 1986 .

6 Press Release, United States Department of Justice, Attorney General Eric Holder Speaks at the 25th Anniversary of the False Claims Act Amendments of 1986 (Jan. 31, 2012), available at http://www.justice.gov/iso/opa/ag/speeches/2012/ag-speech-120131.html.

7 Press Release, United States Department of Justice, Justice Department Celebrates 25th Anniversary of False Claims Act Amendments of 1986.

8 Press Release, United States Department of Justice, Attorney General Eric Holder Speaks at the 25th Anniversary of the False Claims Act Amendments of 1986.

9 Id.

10 Id.

11 Press Release, United States Department of Justice, Assistant Attorney General Tony West Speaks at the 25th Anniversary of the False Claims Act Amendments of 1986.

12 For a detailed accounting of DOJ Fraud Statistics, see Department of Justice, Fraud Statistics Overview (Dec. 7, 2011, 2:47 PM), http://www.justice.gov/civil/docs_forms/C-FRAUDS_FCA_Statistics.pdf.

Supreme Court’s Ruling On The Affordable Care Act Could Undo Key FCA Amendments

Posted by Ellyce Cooper and Stephanie Hales

On March 26–28, 2012, the Supreme Court will hear oral argument on various challenges to the Affordable Care Act (ACA), the federal health reform legislation enacted in March 2010. Two laws comprise the ACA: the Patient Protection and Affordable Care Act (PPACA) and the Health Care and Education Reconciliation Act of 2010. While the vast bulk of the political debate surrounding the ACA involves the individual health insurance mandate and Medicaid expansion provisions, these are only two components of a law that the Eleventh Circuit Court of Appeals described in its underlying opinion as “contain[ing] hundreds of new laws about hundreds of different areas of health insurance and health care.” Florida v. DHHS, Nos. 11-11021 & 11-11067, Slip Op. at 22 (11th Cir. Aug. 12, 2011). In this light, one of the most significant issues before the Supreme Court is whether the remainder of the ACA’s provisions are severable from any provisions that may be deemed unconstitutional.

Of particular import to companies affected by the False Claims Act (FCA) and the Anti-Kickback Statute (AKS), among the ACA’s hundreds of provisions are amendments to the FCA and the AKS that expand the scope of liability and restrict the “public disclosure” defense under the FCA. For example, the ACA:

  • Amends the AKS to provide that any claim submitted to a federal healthcare program for items or services “resulting from” a violation of the AKS constitutes a “false or fraudulent claim” under the FCA. PPACA § 6402(f)(1) (adding a new subsection (g) to 42 U.S.C. § 1320a-7b).
  • Eliminates the need to prove specific intent and actual knowledge to establish an AKS violation. PPACA § 6402(f)(2) (adding a new subsection (h) to 42 U.S.C. § 1320a-7b).
  • Limits the public disclosure bar by (a) restricting the scope of materials that qualify as public disclosure, (b) making it easier for relators to qualify as an “original source,” and (c) eliminating public disclosure as a subject-matter-jurisdictional bar and instead giving the Government veto power over any motion to dismiss based on public disclosure. PPACA § 10104(j)(2) (amending 31 U.S.C. § 3730(e)).
  • Imposes an affirmative obligation on recipients of overpayments to report and return those overpayments or face liability for “reverse false claims.” PPACA § 6402(a) (adding 42 U.S.C. § 1320a-7k, including subsection (d) regarding overpayments).
  • Establishes new civil monetary penalties of up to $50,000 per violation for conduct that is also actionable under the FCA. PPACA §§ 6402(d)(2) and 6408(a) (adding new CMPs under 42 U.S.C. § 1320a-7a(a)).

In the Eleventh Circuit’s 2-1 decision, the appeals court ruled that the ACA’s individual mandate is unconstitutional. Crucially, however, the court found this provision severable from the rest of the law. In so ruling, the Eleventh Circuit stated that “the lion’s share of the [ACA] has nothing to do with private insurance, much less the mandate that individuals buy insurance.” See Slip Op. at 192. Accordingly, under the Eleventh Circuit’s analysis, the rest of the ACA’s provisions could remain intact even if the individual mandate component falls.

The law’s challengers, including 26 states, do not agree; they have told the Supreme Court that the entire law must be struck if the individual mandate is held unconstitutional. Likewise, the federal government does not completely agree with the Eleventh Circuit’s view of severability, either. In its Supreme Court brief responding to the severability question, filed January 27, 2012, the federal government makes two arguments—neither of which asserts that the individual mandate provision is severable from all of the ACA’s other provisions. First, the federal government argues that the Supreme Court should not address the merits of the severability issue in this case, because the petitioners lack standing to challenge the validity of most of the law’s provisions. Should the Justices reach the merits of this issue, however, the federal government further argues that, if the individual mandate falls, so must two particular insurance reform provisions: (1) guaranteed issue, which requires insurers to provide coverage to all comers and prohibits discrimination based on preexisting medical conditions; and (2) community rating, which prohibits plans from charging higher premiums based on applicants’ experiences or characteristics, except for limited variances based on the applicant’s age, where the applicant resides, whether the applicant uses tobacco, and whether the policy covers individuals or families. Under the federal government’s position, only these two provisions—not the entire law—should be struck if the individual mandate is found unconstitutional.

To ensure that the arguments in favor of “full” severability get a full hearing, the Supreme Court appointed an attorney, who does not represent either of the parties to the case, to argue the position that the rest the ACA provisions (including guaranteed issue and community rating) can survive even if the individual mandate does not. (Another appointed attorney will address yet another question: whether the entire case is premature for judicial consideration under the Anti-Injunction Act (26 U.S.C. § 7421(a)).)

If the Supreme Court ultimately agrees with the Eleventh Circuit that the individual mandate is unconstitutional, but holds that the provision is not severable, the entire law would be struck down as unconstitutional. Such a ruling would “undo” the multitude of corollary provisions, which have received less public attention. While it also is possible that the Supreme Court will not reach the severability question in its decision later this year on the fate of the ACA, entities subject to the FCA—and, indeed, anyone affected by the ACA’s “hundreds of provisions”—should appreciate just how much is at stake in the pending decision beyond the provisions at focus in current media coverage.