Pennsylvania False Claims Act deemed fiscal risk by opposition

By Mark Powell | May 25, 2016

HARRISBURG – Pennsylvania's legislature may consider passing a False Claims Act (FCA) aimed at preventing Medicare and Medicaid fraud.

Proponents of the bill say it will hold health care organizations accountable for their services and provide employers with specific requirements they must reach when supplying health care.

Opponents of the bill argue that although it has good intentions, it will hurt health care companies and employers, as well as create an incentive for employees to seek out unnecessary legal action when their issues could just as easily be solved in the office.

The bill includes a qui tam provision, which awards “whistleblowers” who report fraud against the government, typically involving Medicaid and illegal spending.

“At its core, a False Claims Act with a qui tam provision creates a perverse incentive for employees to sue their employers, rather than encourage those employees to identify and inform employers of a potential false claim before it is submitted,” Peter Gleason, a partner at K&L Gates who focuses his practice on federal legislation and regulatory policy counsel, recently told the Pennsylvania Record.

“This is why a large coalition of business and employer organizations oppose the enactment of a state FCA.”

Many have issues with the FCA due to the amount of power it can give one whistleblowers, who would file lawsuits on behalf of the federal government. The feds then have the option to intervene in the case.

The whistleblower earns a percentage of any settlement or award.

“Bottom line – since the federal False Claims Act already applies to all state programs that use federal money, Medicaid in particular, it is unnecessary for any state to enact a state False Claims/Qui Tam Act.” Gleason said. “There is already plenty of incentive for whistleblowers to identify false claims under the federal act and states are always entitled to recover their portion of funds recovered.”

Opponents of the bill argue that a state False Claims Act would play into the hands of private legal practices who specialize in whistleblower cases. 

It's these private legal practices that represent whistleblowers.

"Law firms that represent qui tam relators against employers that provide Medicaid services and supplies will see their fees double if the Pennsylvania General Assembly enacts a False Claims Act with qui tam provisions," Gleason said.

Multiple state FCAs have been on the table for the state legislature since 2010, but none of them have passed, largely due to special interest controversy.

The current federal False Claims Act spends federal money, just as a state FCA would spend state tax dollars. While those in favor of a state FCA argue that they will net a profit from the claims, they fail to take into account staff costs and legal fees. When those are factored in, an independent study found the state would net a maximum of $80,000, and could even lead to a deficit.

“There is no evidence that Pennsylvania would recover more than it currently does from federal FCA recoveries,” Gleason said. “The state shouldn’t have to double down on that incentive when, at best, it would break even on recoveries.”

With the state legislature currently focused on Pennsylvania's budget crisis, It's not sure when the bill will be addressed. 

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