Michael W. Peregrine & Joshua T. Buchman, Partners, McDermott Will & Emery, LLP
In connection with its compliance plan oversight obligations, the board (and especially the compliance committee) should be familiar with, and address, the organizational implications of the new amendments to the False Claims Act, signed into law by President Obama on May 20, 2009.
Need to Know:
1. The amendments are significant in that they expand False Claim Act liability exposure and enhance the government's investigative powers related thereto. The False Claims Act has historically been a traditional source of liability concern to the hospital industry from the federal government and whistleblowers.
2. The specific False Claims Act compliance focus for hospitals is on the return of government overpayments.
3. While the new law does not create any new obligation to return government overpayments in the absence of an "established duty" to do so, it does expand the situations in which such an obligation may arise and lead to False Claims Act liability.
4. The new law eliminates the requirement that the obligation to return funds must be a "fixed" amount, and clarifies that any "knowing and improper" failure to return overpayments is a potential basis for False Claims Act liability.
5. The new law may create particular compliance challenges with respect to potential Stark "anti-self referral" Act violations.
Considerations for the Board:
1. Recognize that the current recessionary economy creates unique organizational temptations to "hold on” to government payments such as Medicare overpayments, in order to offset pressures from declining revenues.
2. Expand internal compliance plan education to incorporate a review of the new law.
3. Direct executive staff to establish new (or enhance existing) internal controls intended to (a) indentify, monitor, and return Medicare overpayments when there is an obligation to do so; and (b) contemporaneously document the organization's good faith efforts to quantify and process any such overpayments for refund to the government.
4. Consider expanding whistleblower protection to the organization’s contractors and agents.
5. Review the sufficiency of existing internal compliance reporting mechanisms from the compliance officer and general counsel, to the compliance committee and the full board.
This article was reprinted with permission from McDermott Will & Emery, LLP © 2009. For further information, please contact Michael W. Peregrine at (312) 984-6933 or mperegrine@mwe.com, or Joshua T. Buchman at (312) 984-7600 or jbuchman@mwe.com.