The False Claims Act has been one of the federal government’s most powerful weapons in its effort to combat fraud in the health care industry, as discussed in the preceding article in this issue of Health Law Vantage Point. More recently, the federal government has determined that its enforcement efforts could be more effective, and that more money could be saved and/or recovered if states increased the intensity with which they pursue actions against those who may be defrauding Medicaid programs.

In furtherance of this goal, the 2005 Deficit Reduction Act includes incentives designed to induce the states to pass their own False Claims Acts that would allow private citizens to bring lawsuits in the name of the state when they are aware of conduct under which health care providers receive payments from state Medicaid programs by submitting false claims. At least twenty states have enacted such legislation, and Wisconsin may be soon to follow. Passage of such legislation could have wide-ranging implications for Wisconsin’s health care industry.

Section 6032 of the Deficit Reduction Act, provides incentives for states to pass their own False Claims Acts. According to this section, states that enact a False Claims Act satisfying certain requirements will receive a 10% increase in their share of Medicaid recoveries.

Before a state is awarded this special treatment, its False Claims Act must meet four conditions. First, the statute must establish liability to the state for false or fraudulent claims. Second, it must be at least as rewarding for qui tam actions as its federal counterpart. Specifically, it must contain a qui tam provision, or in other words create a process by which relators may file suit on behalf of the government and be awarded a portion of the proceeds of any recoveries. Third, it must require that the action be filed under seal for sixty (60) days to be reviewed by the State Attorney General. Finally, the civil penalty must not be less than the amount of the civil penalty authorized in the Federal False Claims Act. Currently, twenty states have passed False Claims Acts which satisfy these requirements.

In states where false claims acts have been adopted, the results have, at times, been significant. For example, in 1996, the state of Florida entered a judgment in the amount of $1.75 million against CareFlorida Health Plan Inc. for submitting fraudulent Medicaid enrollments in violation of Florida’s False Claims Act. www.taf.org. Similarly, in Texas in 2001, Driscoll Children’s Hospital Foundation was fined $14.5 million for filing false expense reports, reporting inflated charity work, and engaging in kick backs. www.taf.org. Also in Texas, Roxane Laboratories, Dey Inc., and Schering-Plough Inc. were charged $10 million, $18.5 million, and $27 million, respectively, for marketing the spread providers could earn by falsely reporting their wholesale drug prices to the Medicaid program. www.taf.org. These are just a few of the millions of claims brought under state False Claims Acts each year.

In April 2006, former Wisconsin Attorney General Peg Lautenschlager and State Senator Jeff Plale announced plans to develop a False Claims Act for Wisconsin. The proposed legislation was officially included in Wisconsin’s Executive Budget Bill of 2007. Currently, Wisconsin receives 42.5% of False Claims Act recoveries. If the proposed legislation passes, that percentage will increase to 52.5%, a 23% increase.

We will advise our clients on the potential impact of this legislation and how they might prepare for the new regulatory and enforcement challenges. If you have any questions regarding a possible new Wisconsin False Claims Act or related false claims concerns, please contact a member of our Godfrey & Kahn Health Law Team.