Qui Tam and Healthcare Fraud: U.S. Ex Rel. Michaels v. Agape, et al, Fourth Circuit Court of Appeals, Filed February 14, 2017

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Qui Tam and Healthcare Fraud: U.S. Ex Rel. Michaels v. Agape, et al, Fourth Circuit Court of Appeals, Filed February 14, 2017

Can you file a Qui Tam action if you are aware of healthcare fraud against the government?

I’ve written previously about the False Claims Act – if you are aware of fraud against the government, you can file a “Qui Tam” action to recover the funds and keep a portion of the recovery as a reward:

It’s also called a Qui Tam lawsuit – Qui Tam is short for “qui tam pro domino rege quam pro se ipso in hac parte sequitur,” which is Latin for, “[he] who sues in this matter for the king as well as for himself.”

The king, in this case, is the US government. Anyone who has knowledge of fraud against the government can sue the person or business responsible for the fraud, recover the funds on behalf of the government, and keep a percentage of the recovery as a reward.

Qui Tam actions can be filed in any case where an individual or company knowingly defrauds the US government, and that includes healthcare fraud.

Below, I’ll discuss how to file a Qui Tam action based on healthcare fraud, and we will take a look at a 2017 Fourth Circuit Court of Appeals opinion that discusses the procedure for filing a Qui Tam action based on healthcare fraud.

What is the Procedure for Filing a Qui Tam Action Based on Healthcare Fraud?

U.S. Ex Rel. Michaels v. Agape, et al was an interlocutory appeal (the parties appealed before a final judgment had been issued) where the Fourth Circuit held that 1) the US Attorney General has an unreviewable veto power over any settlement of a private Qui Tam action, and 2) the trial court’s decision not to allow statistical sampling at the trial of the case was not appropriate for an interlocutory appeal.

The Court also engaged in a lengthy discussion of the procedure for filing a Qui Tam action based on healthcare fraud.

First, the False Claims Act allows anyone to file a lawsuit on behalf of the US government to recover funds that were obtained through fraud against the government or a government contractor:

The FCA, codified at 31 U.S.C. §§ 3729-3733, authorizes a private individual (i.e., a relator) to initiate and pursue an action in the name of the United States Government (a qui tam action) to seek civil remedies for fraud against the Government. See 31 U.S.C. § 3730(b)(1).

When we file a Qui Tam action, the Complaint must first be served on the government – not the defendants who committed the fraud – and kept under seal for at least 60 days. We cannot serve the complaint on the defendant until the court authorizes service:

At the outset of the qui tam action, the relator’s complaint must be served on the Government, filed in camera, and kept under seal for at least sixty days, with no service of process on the defendant until the court so orders. See 31 U.S.C. § 3730(b)(2).

The reason for keeping the Complaint under seal is to allow the government enough time to review the Complaint and decide if they will “intervene” in the lawsuit:

During the sixty-day period after it receives the complaint, the Government may elect to intervene in the qui tam action. Id. Specifically, before the expiration of the sixty-day period —or any extension thereof under § 3730(b)(3) — the Government must either (A) “proceed with the action” by assuming primary responsibility for the action’s prosecution, or (B) “notify the court that it declines to take over the action” from the relator, who will then “have the right to conduct the action.” Id. § 3730(b)(4)(A)-(B).

What Happens if the Government Intervenes in a Healthcare Fraud Qui Tam Action?

If the government intervenes in a Qui Tam action, you (the whistleblower) remain a party to the action and are still entitled to a portion of any settlement or verdict, but the government takes over prosecution of the Qui Tam action, including the authority to settle the case.

What Happens if the Government Does not Intervene in a Healthcare Fraud Qui Tam Action?

If the government does not intervene in the Qui Tam action, then we serve the Complaint on the defendants and we retain control of the lawsuit. The whistleblower’s portion of the recovery is greater when the government does not intervene, should be between 25 and 30% of the total recovery, and must be approved by the Court:

The amount of the relator’s share depends on whether the Government intervened in the action. If the Government did not intervene, “the person bringing the action or settling the claim shall receive an amount which the court decides is reasonable for collecting the civil penalty and damages.” Id. § 3730(d)(2) (specifying that such “amount shall be not less than 25 percent and not more than 30 percent of the proceeds of the action or settlement”).

But what happens if you, your attorney, and the defendants reach a proposed settlement and the government objects? Even though the government chose not to intervene, can the Attorney General veto the settlement?

Can the Government Veto a Settlement of a Healthcare Fraud Qui Tam Action Even if They Have Not Intervened in the Action?

The parties in the Agape case were faced with a dilemma.

First, the government chose not to intervene in the case, so the whistleblower went forward with the lawsuit. Then, to determine the actual losses in the case, they requested permission from the Court to use statistical sampling.

Why? Because, to have experts review the files of more than 10,000 patients with a total of over 50,000 potentially fraudulent claims that had been submitted would cost over $36,000,000, while the estimated potential recovery was less than $25,000,000.

The Court denied permission for the plaintiffs to use statistical sampling. Then the Attorney General objected to settlement of the case, ironically using statistical sampling to justify its objection to the settlement…

The plaintiffs and Agape asked the Court to overrule the Attorney General’s objection, but the Court declined, finding that the Attorney General has an absolute, unreviewable right to object to settlement even when they have not formally intervened in the action:

Pursuant to § 3730(b)(1), the qui tam “action may be dismissed only if the court and the Attorney General give written consent to the dismissal and their reasons for consenting.”

Although the District Court noted that the Attorney General’s objection was not reasonable under the circumstances, the District Court and the Fourth Circuit held that the Attorney General’s decision was unreviewable:

Nevertheless, the district court noted that, if it “did have the authority to review an objection by the Attorney General for reasonableness in a case of this nature, a compelling case could be made here that the Government’s position is not, in fact, reasonable.” See June 2015 Order 10. Such a compelling case would include that the relators “could be looking at an expenditure of between $16.2 million and $36.5 million in pretrial preparation alone for a case that the Government values at $25 million.” Id. at 11. Moreover, as the court observed, although “the Government has admitted that statistical sampling of the entire universe of claims played a major part in its calculation of the value of this case,” it resisted (with the court’s reluctant approval) discovery requests seeking specific details about its calculation. Id. at 12.

The result?

In the Fourth Circuit, as in the Fifth and Sixth Circuit Courts of Appeal, the Attorney General’s decision to object to a settlement is unreviewable regardless of how unreasonable it is. In some other areas of the country (the Ninth Circuit, for one), the Attorney General’s decision to object is subject to a reasonableness review by the courts.

Federal Qui Tam and Healthcare Fraud Attorney in Columbia, SC

Elizabeth Franklin-Best is a federal white collar criminal defense and federal appeals lawyer located in Columbia, SC.

For more information, call us at (803) 331-3421 or send us an email to set up a consultation about your case.

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