South Florida Hospital News
Sunday August 25, 2019
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June 2008 - Volume 4 - Issue 12

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Legal Update - Negotiation Strategies in False Claims Act Cases

Health care organizations are being forced to develop creative new strategies for defense against United States False Claims Act ("FCA") claims due to the ever increasing number of civil actions being filed. Claims include those initiated by a whistleblower or filed directly by the Federal or state government. The option to litigate these claims is severely curtailed by a number of threats, including catastrophic monetary penalties, potential exclusion from Federal and state health care programs, and the prospect that discovery and civil litigation might unearth facts that spark even greater civil and/or criminal liability and public embarrassment.

Legal counsel in cases like this have several defense strategies:

Internal Investigation

The most effective defense to an FCA claim begins by determining the facts that underlie the whistleblower’s and or the government’s allegations. This may seem like a fundamental element of any defense strategy, but its significance cannot be overstated. A thorough understanding of the facts can put the defendant in a stronger negotiating position. Because the government has already had a head start once a complaint is filed under the FCA, it is essential that the defendant becomes as informed as possible about the nature of the allegations.

Negotiation Strategies

The development of the facts underlying the FCA claim provides a sound basis for the FCA defendant to judge for himself whether the facts support a finding of knowing and willful conduct or even conduct in deliberate disregard or deliberate ignorance of the requirements of the law. If the defendant can persuade the government that the facts do not support the FCA requirements for liability, i.e. mere mistake, instead of acting in "deliberate ignorance" or "knowingly and willfully", then the defendant has already succeeded in reducing liability to double damages, or mere recovery of overpayment amounts, instead of triple damages and penalties. Clearly, this is one of the most important positions to stake out during negotiations under the FCA.

Compliance Issues and Administrative Sanctions

When determining settlement options in FCA cases, health care providers must take into consideration the possibility of exclusion from Federal health care programs (e.g. Medicare, Medicaid, Champus). At the outset, it is necessary to determine if the government will agree to waive exclusion from Federal health care programs if a settlement on damages and penalties can be reached. However, this waiver of sanctions is often in return for a commitment by the defendant organization to agree to, what is commonly referred to as, a corporate integrity agreement ("CIA"). These agreements have additional reporting, monitoring and auditing requirements which are much more specific and onerous than a standard voluntary compliance program.

Minimizing Damages and Limiting Parallel Liability

Finally, the most important aspect of negotiating the resolution of a FCA case is the amount which the defendant will have to pay in order to achieve a settlement with the United States or any state government.

The FCA provides for triple damages, plus a penalty of up to $11,500 per false claim. Therefore, it is not unusual for the government’s claim, at least in theory, to appear quite substantial. However, in many cases the Department of Justice ("DOJ") will consider a settlement based on double the amount of Medicare, Medicaid or other Federal health care program loss. Accordingly, during the negotiation process, it is important to come to an agreement with the government about what will constitute single damages or single program loss. Even in cases when the government will not agree to double damages, the amount of single damages can be successfully determined to facilitate a quick resolution of the negotiations.

If the parties remain too far apart on a settlement amount, the defendant may consider alternative dispute resolution ("ADR").

Whatever the legal strategy selected, a sound strategy for negotiating a resolution of a FCA case is a must given the scope of collateral liability for a health care organization.

Gabriel L. Imperato is the Managing Partner of the Fort Lauderdale office of Broad and Cassel. He is board certified as a specialist in health law and is Certified in Healthcare Compliance by the Health Care Compliance Association. He can be reached by calling (954) 745-5223 or by e-ail at gimperato@broadandcassel.com.
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