Pennsylvania Record

Tuesday, February 18, 2020

Business leaders say AG Shapiro's proposed False Claims Act comes at taxpayers' expense

Attorneys & Judges

By Nicholas Malfitano | Jan 15, 2020

Pennsylvania Attorney General Josh Shapiro

HARRISBURG – A five-bill effort to reduce Medicaid fraud in Pennsylvania through a state False Claims Act is already meeting with opposition from business groups, health care providers and civil justice reformers who say the state’s proposed method will be at the expense of patients and taxpayers and mostly benefit lawyers and whistleblowers.

Rep. Seth Grove (R-York) and other lawmakers, along with state Attorney General Josh Shapiro, addressed the legislation at a press conference held in the Capitol building’s rotunda on Monday. A federal False Claims Act already exists to punish companies that submit false claims for reimbursement from the federal government. This usually happens in the health care industry when providers seek reimbursement for treatment costs from Medicaid and Medicare.

Often, those cases are brought through a whistleblower in the company, called a "relator," who is then entitled to a percentage of any recovery. This award can be millions of dollars for the relator and their attorneys.

Andy Carter, the president and CEO of Hospital and Healthsystem Association of Pennsylvania, said hospitals and government share a common interest in protecting taxpayer dollars.

“(H)owever, an unnecessary and duplicative state false claims act could threaten care for Pennsylvania patients,” Carter said.

“Take, for example, rural hospitals which already are operating on razor-thin margins. One frivolous suit could cause an entire community’s source of health care to disappear, jeopardizing the area’s economy at the same time. The only true winners under a state false claims act are the trial attorneys – and our patients stand to lose the most.”

When lawsuits are filed under the False Claims Act by whistleblowers, the federal government and the affected states have the option to join the litigation, regardless of whether that state has its own corresponding FCA law. Having a state FCA law entitles to a bit higher percentage, though.

“I applaud Attorney General Shapiro for bringing to light the glaring problems our Medicaid program faces. Every misspent or fraudulently used dollar is another dollar hard-working taxpayers have to make up for. It is now up to the Legislature to get to work and fix these problems,” Rep. Grove said.

The bills call for greater oversight of Medicaid claims by state authorities and stricter penalties for those discovered to have been making fraudulent claims. All five bills in the legislation are expected to be introduced by the end of the week.

In the proposed Pennsylvania version, the state would be allowed to financially recover 10 percent more from false claims submitted to its Medicaid program, in addition to the funds it can secure under the federal False Claims Act alone.

Which means the state would receive about 57 percent of a hypothetical settlement in a given case.

Furthermore, the proposed bill would grant Shapiro’s office, or a district attorney chosen by the attorney general, the authority to investigate other potential cases of false claims made against the state. He's asking for his own antitrust law, too.

State Sen. Lindsay Williams (D-Allegheny) is simultaneously introducing similar legislation in the Senate.

The legislation package comes in the wake of a November report on Medicaid fraud from the House Government Oversight Committee, chaired by Grove – a study which itself was spurred by a grand jury report from Shapiro’s office last year to amend and reform the state’s Medicaid law.

“As one of the top eight Medicaid spending states, Pennsylvania is the only one without a False Claims Act, which means we cannot comprehensively combat Medicaid fraud and recoup money lost,” Shapiro said.

“A state False Claims Act and the reforms recommended by the grand jury that are being put forth today offer a dynamic, multi-faceted approach to fixing these problems.”

Pennsylvania’s Medicaid program currently serves nearly 3 million people statewide at a total cost of $33 billion, about 2/3 of which is funded by the federal government.

Pa. Business Leader Oppose Legislation, Say It Incentivizes Plaintiff Attorneys

However, the bills for which Grove and Shapiro have advocated leave business leaders, health care providers and civil reform advocates in the state concerned.

Pennsylvania Chamber of Business and Industry President and CEO Gene Barr issued a statement regarding the matter:

“The PA Chamber fully supports eliminating waste, fraud and abuse of state tax dollars. However, doing so through a False Claims Act would create an unbalanced litigation environment. False Claims incentivizes private individuals and plaintiffs lawyers to file lawsuits on behalf of the Commonwealth for alleged Medicaid fraud, by increasing the percentage of the recovery. This leads to the plaintiff lawyers’ recovery increasing, while the Commonwealth’s portion of the recovery decreases,” Barr said.

“Pennsylvania’s legal climate already creates a challenging environment for job creators. In fact, the Philadelphia County Court of Common Pleas was just ranked the number one judicial hellhole in the country. 

"Enacting an FCA will exacerbate this situation by further bogging down the state’s already cumbersome and overly-crowded court system – which in turn will negatively impact the state’s overall business climate and economy. We urge lawmakers to oppose the creation of a False Claims Act and instead focus on proposals that will bring stability and fairness to Pennsylvania’s civil justice system.”

Curt Schroder, executive director of the Pennsylvania Coalition for Civil Justice Reform, indicated the proposed legislation was unnecessary and that ultimately, after a qui tam or relator plaintiff secures their portion of a financial award, Pennsylvania will recover less money in a state False Claims Act case than it would if it continues to allow cases to be brought under the federal False Claims Act.

“With a state-based False Claims Act, the ‘bounty-hunter’ plaintiff receives a double recovery by taking a contingency fee from both the state share of the recovery and the federal government’s share,” Schroder said.

“The only ones benefiting from this scheme are the plaintiff attorneys who bring these suits and their cadre of well-placed ‘bounty hunters’ who report alleged abuse for the purpose of filing suit under a state False Claims Act. Pennsylvania taxpayers are left with less funds recovered due to the massive payouts to the ‘bounty hunter’ under a state False Claims Act.”

Schroder also critiqued the House of Representatives report which paved the way for the proposed legislation at issue.

“A recent report from the House Government Oversight Committee advocating passage of a state False Claims Act is flawed in several respects. Nowhere in the report is the payout to the ‘bounty hunter’ discussed that would cause Pennsylvania to lose money,” Schroder said.

“The report also fails to mention the increased funding that would need to be provided to the attorney general who, under a state False Claims Act, is required to review EVERY case filed by ‘bounty hunting’ plaintiffs (potentially thousands each year) to determine if the Office of Attorney General will take the case.”

Schroder and the PCCJR suggested hearings be conducted to ascertain the full impact of the legislation before any further action is taken.

“Legislators need to understand the full impact of what they are being asked to enact and not rely on plaintiff lawyers and their allies promoting another get rich scheme at taxpayers’ expense,” Schroder said.

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at

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Organizations in this Story

Pennsylvania Office of the Attorney GeneralThe Pennsylvania LegislaturePennsylvania Chamber of Business and IndustryThe Hospital & Healthsystem Association of PennsylvaniaPennsylvania Coalition For Civil Justice Reform

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